New ECC Köln study highlights options for action for German companies

The term “platform” is undisputedly one of the most common buzzwords currently used. Hardly any discussion about digital business models can do without a look at the seemingly ubiquitous platform economy. After all, companies such as Google, Amazon or Apple have not only turned entire industries upside down with their platform strategy, but have also simultaneously developed into the companies with the world’s largest brand value.[1] German companies, on the other hand, are not found in the list of the most successful platform operators. A current study by the ECC Köln deals with the question of why this is so and what options for action remain for German organisations in the platform economy.

Amazon, Booking, Airbnb or Spotify – digital platforms are well established in the lives of many people. While the solutions and applications of these companies are already established in numerous industries and are cementing their market position, many market participants and observers continue to have difficulties naming the success factors of this disruptive business model. In January 2018, for example, the digital association Bitkom found out that more than 50 percent of German managing directors and board members do not understand the term “platform economy”.[2] According to the current ECC study “Digital platforms – Germany on the sidetrack?”, the term “platform” is often mistakenly equated with the phrase “online marketplace”.[3]

Platforms reflect the desire of many consumers to orient themselves quickly and easily in the ever more inscrutable variety of offerings.

Platforms are by no means limited to the mediation of commercial transactions. Rather, the success factor of platforms is to be seen in “efficiently shaping the mediation between service providers (providers on a platform) and service recipients (customers or business partners) within the framework of a comprehensive ecosystem”[4]. Platforms thus reflect the desire of many consumers to orient themselves quickly and easily in the ever more inscrutable variety of offerings.

A customer looking for a hotel room on Booking.com, for example, does not have to dig through the websites of numerous travel companies, but will find an extensive range of different providers on the platform – supplemented by numerous services that further increase the customer’s loyalty to the platform. Due to this high customer loyalty, platforms are also attractive for providers because they enable the addressing of many customers with comparatively little effort. In this way, potentiating network effects are created, which increase the relevance of the platforms further and further and turn them into “digital gatekeepers”[5] of customer access.

Although digital platforms are increasingly assuming this dominant role in Germany as well, German companies – despite some successful platform concepts such as Zalando – are not among the international pioneers of the platform economy. Instead, US companies such as the Google holding company Alphabet, Apple, Amazon and Microsoft as well as Asian organisations such as Tencent, Alibaba and Samsung are setting the pace. According to the ECC study, there are many reasons for this status quo. On the one hand, the German market is much more fragmented than the American market. The German economy consists to a greater extent of small and medium-sized enterprises than the American economy. By comparison, these generate less turnover. Companies set up in this way would thus have to invest a higher proportion of their turnover in digitisation and therefore logically shy away from such decisions more frequently.

According to an ECC survey, only about half of the companies surveyed said that they had already invested in platforms.

On the other hand, the necessity of a reorientation has not yet been recognized in many German companies. For example, approaches to open up their own solutions to competitors in order to create a customer-oriented platform continue to cause irritation in many German management levels. As a result, not all organizations are dealing with this topic for a long time. According to an ECC survey, only about half of the companies surveyed said that they had already invested in platforms.[6] But passivity is usually not an option due to changed consumer behaviour. The danger of losing customer access to the rapidly growing platform operators is too great.

Instead, there are other options for action in order to benefit from the platform economy as a German company as well. For example, it is possible to set up a separate platform. In particular, niche providers with their specialized know-how and their large network are able to establish solutions which, due to their focus on the needs of a specific target group, can also assert themselves against established platform companies. Another possible option is to use existing platform solutions in order to position one’s own offering there as perfectly as possible. One thing is certain: there is no recipe for success that is beyond all doubt. Instead, companies must individually analyze the status quo of their company and their industry in order to develop a platform strategy on this basis.

[1] http://brandz.com/charting/54

[2] https://www.bitkom.org/Presse/Presseinformation/Mehrheit-hat-noch-nie-etwas-von-digitalen-Plattformen-gehoert.html

[3] ECC Köln, Digital platforms – Germany on the sidetrack?, p. 9.

[4] ECC Köln, Digital platforms – Germany on the sidetrack?, p. 14.

[5] ECC Köln, Digital platforms – Germany on the sidetrack?, p. 25.

[6] ECC Köln, Digital platforms – Germany on the sidetrack?, p. 36.

This article was first published on LinkedIn.

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