We are witnessing the rise of platform disruption. Companies that redefine the relationship between producer, consumer and employee. These companies, the new digital competitors, form the heart of the platform economy. They derive their success from the network effect.
It is clear that very few organizations are in a position to become a platform themselves. They can, however, embed themselves in existing ecosystems or just connect a specific part of the organization to a network. This takes us to the important question regarding the design principles for digital platform organizations. I wanted to share 5 of the 10 we present in our second Design to Disrupt report in this post.
1. Access goes beyond ownership
Access is the key word: access to a car, access to a work space or access to hands. It is a trend that started in the entertainment industry. Netflix and Spotify rendered the possession of your own CDs unnecessary. In this case, access to music goes beyond the ownership of physical media carriers. Not only does this apply to digital products, but also to people and cars. TaskRabbit offers tens of thousands of hands without employing the people themselves. These companies provide access to skills without having anyone on the payroll. A change in course or optimization is a matter of a software update. A platform company does not run many risks, it requires little in the way of starting or growth capital and the enterprise grows faster than a traditional company. The model of many transactions combined with low operational costs is attractive to investors.
2. Unbundle your organization processes
Stripping of layers from a product or service until only the real customer needs are left. This is what we call unbundling. Evidently, a core design principle of many digital platform players is the exposure of friction in a customer interaction process. Uber is a taxi firm minus calls to the control center, the necessity of cash or credit cards and the uncertainty as to the driver’s skills. Airbnb is a hotel room without a reception, someone to hold the door for you and a cleaner. Lending Club is a lender without consultants and waiting times. It is all about simplicity for the end users. At the end of the day, this comes down to the service pure and simple, plus an access interface, e.g., an app.
3. Frictionless transactions
The so-called end-to-end philosophy that traditional organizations would like to introduce, is a must for the new digital competitors. The thing is that for the role of intermediary to be fulfilled satisfactorily, a smooth proceeding of the transactions is required. This causes less fuss for suppliers and customers alike: lower costs for finding someone who can do the job, finding out more quickly what the quality of a service is, etc. –a quality that will rise as the hidden costs of a transaction are going down. Clearly, within organizations transaction costs are not a trivial matter. As early as 1937, Nobel Prize winner Ronald Coase stated that they are the rationale of organizations.
APIs have an enormous impact on the scalability and distribution of platforms and their services. APIs enable a company to extend the business model cross sectoral- and cross partner-wise, and to be placed up front in the distribution chain. This way the Uber API can link the logistic arsenal of drivers to travelers, but also to any app focusing on the delivery of goods. The distribution of data determines the flexibility of the business model. APIs are the integrating link between platforms, apps and services of third parties.
5. Trust with social systems
People are more likely to trust one another than they do institutions. This is something platforms like to capitalize on, deploying new systems based on online signals and evaluations of co-users. To some extent, software has made trust scalable. The individual’s reputation is gradually becoming the new currency. Companies such as Lending Club and Uber facilitate reputation management based on assessment systems that are transparent to all and that are mutual at the same time: you can appraise the party that gives money and the party that asks for it, you can assess the driver of a vehicle as well as the passenger. Organizations that do not use direct communication between persons in the network, are missing opportunities and can expect competition.
Check out the other 5 design tricks in our new report.
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