Stepping up: The rise of the platform economy


The rapid growth of the digital economy has put it on course to account for 25 percent of the world’s entire economy by 2020. Platform business models represent a large proportion of the overall total but what do we mean by platform? MIT Professor Michael Cusumano defines it as follows: “A platform or complement strategy differs from a product strategy in that it requires an external ecosystem to generate complementary product or service innovations and build positive feedback between the complements and the platform.”

The platform economy has transformed the way goods and services are produced, shared and delivered. Gone are the days where individual firms are competing for customers. A newer, flatter and more participatory model has emerged, whereby customers engage directly with each other.

Quid pro quoMobileApp

There are stark differences between the traditional business model, where value creation is linear and one-way, and the platform model. The platform-driven business model demands efficiency, is two-way and continuous.

Take for example, Uber, a company that's thriving in the new digital economy. An Uber driver creates value by announcing their availability and sharing their location. Sharing this information helps match them with the right user. When a user accesses their phone and requests a driver, the user shares his location and is then paired with the driver who's closest to the user’s location when the request is submitted. The platform business model represents a great opportunity to create growth in the digital economy. According to Harvard Business Review: “With a platform model, the critical asset is the community and resources of its members.” There's a clear shift from the control of resources to orchestrating them. Essentially then, Uber is really just a transaction broker.

Disruptive innovation

In December, Uber was valued at $68 billion, having taken only five-and-a-half years to surpass the valuation of 107-year-old General Motors. Uber has clearly disrupted the taxi industry. There are now as many Uber drivers in London as taxis.

Likewise, Airbnb with a valuation over $25 billion, has shaken up the global hospitality industry. It's now the world’s largest hotel chain.

What do these Unicorns have in common? They're network orchestrators and transaction brokers. They create a network of peers in which the participants interact and share in the value creation. They provide a service, build relationships, share advice, give reviews, collaborate and co-create. Network orchestrators receive valuations two to four times higher, on average, then companies with varying business models.

What else do the likes of Airbnb and Uber have in common? Both companies have extremely light balance sheets. Uber doesn’t own a fleet of vehicles or employ any drivers. Airbnb doesn’t own any houses. Classified as ‘no-ownership companies,’ they're disrupting decades-old industries and rendering old notions of asset ownership obsolete. Instead, both companies are simply allowing users to connect to complete a transaction.

In the technology world of  today where a developer can conceive, build and publish a new idea in a few weeks at minimal cost, companies want to host less themselves, and don’t want be anchored to costly, inflexible hardware or have to license and maintain multiple, siloed software solutions.

Instead they want to leverage best in breed platforms and combine the outputs of these together as and when needed to quickly provide the best solutions to ever more complex, evolving business challenges.

In this innovative new world, the annual license fee is dead and consumption-based pricing is the new king.

SAS, as you might expect, has been working in this space for a while, with offerings ranging from secure hosting to fully serviced Cloud and SAAS capabilities. And with the release this year of our brand new analytics architecture, we're ushering in a new era of open and flexible access to our analytics.

SAS Viya is not 'open source,' but is open in that it takes full advantage of open source storage, communications protocols and API capabilities that are firmly established in the platform economy -- all critical for today’s asset-light businesses. Using SAS Viya, developers can build the best applications for their customers, while leveraging any tools that suit their value goal the most.

Unlike many of the open-source analytics platforms SAS Viya competes with, you won’t need to hire an army of experts to implement and use it, because SAS has already done (and will continue to do) that for you. So all you’ll need to embed machine learning and advanced SAS analytics capabilities is a credit card, a login account and of course, a creative idea to take to market.

SAS Viya is ideal for working with huge volumes of data, often associated with The Internet of Things. It has built-in capabilities to instantly scale up or down its Cloud Analytics Service (CAS) to handle whatever throughput or computative challenges you want to send it, in the timescales you need. You could be talking minutes or fractions of a second, using SAS Viya and open source in seamlessly integrated harmony.

At a recent event I was speaking at, IGNITE June 2016, another presenter mentioned that having analysed the lifecycles of many of the most famous companies that exist today, they were able to predict that the biggest, most successful company trading in 2026 (the Google or Apple of the future), hasn’t even been formed yet.

With the advent of the platform economy and the capability of bringing powerful, established analytics capabilities into the front end, the developers of the future will be able to imbue all their applications with the power to know while providing and focusing their efforts on the value their proposition brings, rather than the infrastructure that it sits upon.

Find out more about why organisations still turn to SAS even though open source is growing.

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About Author

Peter Pugh-Jones

Peter Pugh-Jones is Head of Technology, SAS UK & Ireland. During his 25 year career, he has been lucky enough to have worked all over the world in diverse sectors of the IT and Software Industries. A passionate contributor to several well-known and established open source projects (in his spare time), Peter firmly holds the belief of utilising the right tools and technology to meet the data and analytical challenges of business today, while ensuring his customers derive the very best ROI. With the convergence of robotics, analytics, artificial intelligence and IoT on the cusp of this fourth industrial revolution, Peter firmly believes there has never been a more exciting time to be working in advanced analytics.

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