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A digital platform as a means to becoming sustainable

04/11/20

By opting for a digital platform strategy you will gain new opportunities to generate revenue

Digital business models can contribute to speeding up the sustainability agenda within organisations. Interweaving the sustainability agenda with a digital platform strategy can become a win-win situation for both the organisation and its customers and employees. PwC professionals Ron Martinek, Daniel van Norren, Joris van Gelder and Rens van Mens share their views.

The rise of digital platforms and the platform economy

Digital platforms are now intertwined with our society and we are increasingly living in what we call the 'platform economy'. Technology giants such as Google, Amazon, Facebook, Apple and Microsoft feature in the global top 10 companies based on market capitalisation. The continuous growth of these companies and their platforms is inextricably linked to the technological developments surrounding the ever faster internet, smarter algorithms and hyper-automation. Various studies show an exponential growth in the number of digital platforms. The number of platforms currently available is unclear, but the global market value was estimated at $4.3 trillion in 2019. Whereas in 2000 only eight percent of CEOs were of the opinion that platforms would have an impact on their business, by 2018 this increased to 81 percent, and this percentage continues to increase every year.

It is often thought that only start-ups focus on platform technology, but existing organisations are also entering this playing field. In the private sector, temping and secondment organisations are building digital temping agencies and smart digital matching platforms, allowing more emphasis to be placed on personal and social interaction and sustainable relationships with candidates and clients. In the mobility sector, many companies are further developing digital services, such as organising transport at any time (Mobility as a Service) or orienting on and purchasing, transporting and insuring (electric) means of transport, such as cars, bicycles and motorbikes, via a digital platform. Public organisations (governments, health care and educational institutions) are also increasingly profiling themselves as a platform. Think of universities with a fully digital learning environment, physiotherapists with a treatment platform or the digital pharmacist.

The definition of a digital platform

Although in practice there are many different definitions of what is a platform. The essence of a digital platform boils down to value creation based on interaction between supply and demand. The match between supply and demand consists of the exchange of products, services, information or money.

The trick is to make the platform work in such a way the user demand creates a pull effect. This attracts suppliers who ensure an ever increasing, competitive and diverse supply, which in turn can lead to more potential users. If the increase of supply and demand reinforces each other, this can create exponential value. This network effect is what distinguishes a platform from the traditional value chain (see figure). 

The network effect and the associated value creation are often reinforced by the deployment of smart technologies. Smart matching algorithms ensure that demand finds the right supplier faster and vice versa.

Figure: The transition of value creation within business models
The transition of value creation within business models

The value of a business model is increasingly being created outside the company itself. Within the product economy, the value lies within the products produced by the company itself. Within the service economy, this value shifted to the interaction between user and company, in which the product was given a supporting role. Ultimately, the value of a platform is created entirely outside the company itself by the power of the network of producers and consumers. The value of a platform increases as the network grows.

Platforms contributing to a sustainable society

Jan Willem Velthuijsen, chief economist at PwC, describes various strategies for achieving circularity within an organisation in the article 'Circular business models are very possible'. One of the strategies he mentions is maximising the use of a physical product. A platform can achieve this sustainability aspect in three different ways: 

  • the sharing of products (partial economy), 
  • optimising use, 
  • the optimisation of re-use.

A good example of such a platform as a tool for sustainability is Peerby. Within this digital sub platform, tools can be lent out within the network of users and providers. As a result, the product is used optimally, fewer tools need to be produced and the product life cycle can be extended. Other examples of platforms that facilitate sustainability are 'second-hand platforms' such as Vinted and Marktplaats, which optimise the reuse of products and also extend their lifespan. Other platforms focus on the re-use of unused office and/or parking capacity (such as Parksharing and Seat2Meet); something that currently may have become even more relevant, with a different perspective on office space and commuting.

A platform strategy starts with vision, guts and iterative experimentation

In the coming years, digital platforms will play an even more important role in creating a more sustainable society. Organisations would do well to start thinking about how they can make use of platforms to sell their products and services. By opting for a digital platform strategy, an organisation is given new opportunities to generate revenue with a new business model. At the same time, a digital platform can be used directly to achieve sustainability objectives. There is no 'one size fits all' strategy for creating a successful sustainability platform. A strategy starts with vision, guts and iterative experimentation to determine what is the best approach for the organisation, its customers and society.

Contact

Ron Martinek

Digital Leader Private Business, PwC Netherlands

Tel: +31 (0)62 243 92 72

Daniël van Norren

Senior Manager, PwC Netherlands

Tel: +31 (0)62 210 46 75

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