Digital platforms: How can they support the next economy?
Here’s a challenge for you: Think about your online behavior and try to name a few of the digital platforms you use in your day-to-day. Google? LinkedIn? Amazon? Wikipedia? It’s not much of a challenge really, is it? Surely, the list goes on.
Digital platforms, for a large part at least, shape what we do online every day.
“We use them on a regular basis – search, payment, e-commerce, knowledge, social media platforms,” says Lars Crama, Private Lead at Up!Rotterdam. Yet, the term digital platform stands for more than just these individual tools. It has become an umbrella term for business models, propositions and technologies, too, he adds.
Essentially, platforms have become a mindset; a basis which many companies are now built on. According to McKinsey, “platform-based organizations […] owe much of their success to the agility with which they are able to innovate and reconfigure themselves to go after new opportunities with apparent shape-shifting ease.”
Digital platforms are agile, scalable, and collaborative. They bring people, organizations, and resources together, and make it possible for big networks to thrive. The potential is immense. So it only makes sense to ask: What is the future of digital platforms and how can they support the next economy?
The second episode of this year’s Upstream Talks was dedicated to answering exactly that question. Upstream Talks is a series of talk shows, featuring entrepreneurs, investors, and other experts from the local innovation ecosystem, and leading up to Upstream Festival, which took place at the end of September.
For this second episode, seven guests – entrepreneurs, scale-up founders, and investors, came together at 42workspace in Rotterdam to discuss the future of digital platforms in the Netherlands.
The potential of platforms – across borders and markets
New technologies are a key enabler of the platform economy and it’s up to innovative companies to find their application to meet specific market needs. Four of the participants in this Upstream Talk had done just that – identified a gap in the market and created an innovative business proposition to fill it.
Juuve, for example – a car sharing platform, is there to enable shared mobility in cities and to make it easy, convenient, and attractive for people to rent a car before considering buying their own. hundo.careers is building a data-driven SaaS platform that connects employers with Gen Z talent in the effort to minimize youth unemployment, while Moonback is looking to make hotel bookings more transparent and fair. HousingAnywhere, a rental accommodation marketplace, was set up as a matchmaking service between international students and landlords before it grew to be one of Europe’s leading rental platforms.
All four companies solve a different challenge in a different market, but they have all embraced the platform model to further build their business on. And while they all see the potential platforms hold for the future, each of them has their own take on the advantages and disadvantages that come with them.
How do platforms fit within the current status quo?
For one, most of the participants agreed that platforms can often compete unfairly with local businesses and distort the playing field.
For Esther O’Callaghan, principal co-founder at hundo.careers, it is personal experience that gets her to agree. “It’s very difficult for local businesses to compete. I had a record shop in Manchester a long time ago and [when online stores started to pop up], the only way to compete was to build a website. But we didn’t have the resources.”
Niels Meijssen, founder and CEO of Moonback (formerly BeterBoeken), shares a similar opinion. The way platforms distort the playing field is not in the product but in the business model behind it. “If you look at rankings, a lot of platforms show those businesses at the top that pay a higher commission. This is an example of how local businesses are harmed, because other businesses have deeper pockets.”
Naturally, the emergence of new platforms results in more competition and in the fight for preserving or gaining market share. But that is not necessarily a new thing. “When you look at it on a very abstract level, platforms have been around for decades,” says Niki Sie, co-founder and CEO of Juuve. “Car rental companies, for example, used to have a very local reach and then the phone book came. That was one of the first platforms. They then had to negotiate with the phone book to advertise.”
Today, instead of the phone book, there are websites and apps. Yes, new platforms can be a threat, he says, but the game didn’t change: Existing companies and new platforms have always had to work together.
There is no doubt that newly emerging platforms can disrupt the status quo, sometimes at the expense of smaller businesses. Djordy Seelmann, CEO of HousingAnywhere, agrees that platforms should be transparent and fair in the way they operate, but he offers another point of view, too. “Digital platforms are able to push boundaries. They are able to cause that innovation that makes even record stores rethink their business model.”
Still, that doesn’t mean that new and traditional business models cannot co-exist. “I don’t think current business models have to go,” Djordy continues. “Some of them work very well and you sometimes see a platform version of that business model being launched.”
What’s more, network effects do not occur everywhere, so not all businesses can be turned into platforms, he adds.
Competing in the platform economy – is there room for everyone?
Starting a platform-based business may sound appealing, with all its flexibility and collaborative nature, but turning it into a success may be more difficult than expected. For some companies, in fact, success is defined by becoming the biggest or second biggest player in their market.
For Djordy, a successful platform is based on a ‘winner takes most’ strategy. And why? “Because building a platform is very expensive. We have raised about 35 million in funding and most of it has gone into R&D. You need to get to position 1 or 2 in the market where you can capture enough of the revenues to make up for all the costs.”
Hans Scheffer, founder and CEO of Helloprint, a leading e-commerce platform for printing products, can only agree with how resource- and capital intensive it is to develop a platform. “The biggest challenge is in how to sustainably build your infrastructure and technology,” he says. “It is very complex to build both the supply and demand sides of a platform and we ended up overengineering the technology we thought we needed for this phase of the company.”
His tip for any entrepreneur looking to develop a digital platform is to critically look at the goals they want to achieve and based on that, decide how far they need to go with their technology in that specific moment. Also, make sure to have the right team for the phase the company is in.
“In the early days, we thought that we only needed developers,” Hans continues. “But it was more than that. It was about having structure, about investing in a team to manage the ones building the technology and to keep track of not overengineering the technology.”
Working with the right team is something Jan Andriessen, Associate Partner at henQ, a VC for European B2B software startups, strongly believes in as well. As “investors in people”, as he puts it, the first thing they look at before making a new investment is the potential of the team in front of them.
“For us, what defines being an entrepreneur is someone who gets things done before they even go for money,” he says. “Funding is a tool, but I don’t think it should be the driver behind growth.”
At the end of the day, it is great teams that build great solutions in (but not limited to) the platform economy. There is still a lot of unexplored potential locally – both in terms of technology and different market segments, and participants in this Upstream Talk agreed that there is a need for more collaboration to make new innovations successful. There’s more work to be done, but the goal is clear:
“In the Netherlands, we want to be a guiding light when it comes to digital platforms.”