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AUTHOR

George Achillias

CDO

2017-06-14

| George Achillias

INSIGHT

Digital economy is all about running platforms

Is Digitalization another meaning to creating platforms?

The digital world – and that includes its various industries – differs in multiple dimensions from the physical world and its industries. For instance in the areas of marginal costs in production, transport, and storage, in transport and production speeds, and in the ability to abstract and simulate.

The resolution of the control circuit that Google uses to manage its digital advertising is many times higher than in the physical world, where a unidirectional medium like television or a billboard sends a static message to an unknown mass of potential customers.

Finely grained control offers huge advantages that have allowed the digital advertising market to become much more dynamic than the physical one. For years now, advertising budgets have been flowing from the physical to the digital world. Digitalization leads to high-resolution management because the marginal costs of measuring (in the control process) and the actuating elements (in the controller) are almost zero, while interventions can be made with almost the speed of light. At the same time, digitalization or the digital transformation creates the need to platform everything if a brand or an organization wants to be competitive.

As a prominent representative of the digital world, Google has put these characteristics (location, context, data, mobility, search trends, digital trends) to good use and in the process revolutionized the advertising market. Google analyses questions put in its search engine and collects clicks on web pages to measure its users’ behaviours. Based on this more precise – because it is high resolution – performance data, the company presents each user with an individual, profit-optimizing advertising message.

Then, with the aid of user reactions, Google measures in real time the effectiveness of its banner ads, optimizes their allocation model, and uses the same data to invoice its advertising customers.

Google understood really early on that what really matters is not just a product but a well designed easy to scale platform. It confirmed that by creating Alphabet in order to give ground and stand-alone but well-connected existence to all the element of its business.

Lego and Philips are additional examples of multi layer platforms creation. They both took two simple physical elements (bricks in case of Lego and lights bulbs in case of Philips) as the ingredients to create complex platforms in order to not only serve a need but an ecosystem. Therefore we come to the point to say that digital transformation in not to serve an isolated or unique need (gaming in Lego case, lighting in the Philips one) but by creating well-oiled platforms to serve multi-layer ecosystems and the shift from something local to something global.

In case of Philips we can explain the different layers.

Layer 1 – Physical thing: The physical element, which in this solution is the LED light bulb, forms the first layer of the value-creation model. It supplies the first direct, physical benefit to the user – in the form of comfort supplied by the light. Because the light bulb is a physical entity, it is always tethered to a location and can supply benefits at this layer only in its immediate environment, for example in a room.

Layer 2 - Sensor/actuator. In layer 2, the physical thing is equipped with a minicomputer with sensor technology and actuating elements. The sensor technology measures local data, while the actuating elements deliver local services and thus generate local benefits. In the example of the LED light bulb, the microwave sensor continuously measures whether people are present in the space – reliably and at a low cost. The actuator turns the light on automatically when human presence is detected and off again when not, thereby supplying local benefits – including because the smart LED light bulb functions without separate, wired motion detector to discern presence.

Layer 3 - Connectivity: In layer 3, the previous layer, in particular the sensor technology and actuator elements, is connected to the Internet so they become globally accessible. In our example, the light bulb can be addressed through an embedded radio module and transmit its status to authorized subscribers anywhere in the world at negligible marginal costs

Layer 4 - Analytics: Connectivity per se does not deliver any added value. In layer 4, sensor data is collected, stored, checked for plausibility, and classified. Then the findings of other Web services are integrated with them to arrive at consequences for the actuator elements – typically in a Cloud-based backend system. In our LED example, in layer 4 the on-and-off times in a household are collected, motion patterns are discerned, and the operating hours of individual light bulbs are recorded as well.

Layer 5 - Digital service. At this, the final layer, the options provided by the previous layers are structured in digital services, packaged in a suitable form – for instance, as a Web service or mobile application – and made available globally. The characteristics of digital business model patterns apply to these digital services, which are inseparable from the smart things that generate the data.

At the end of the day digital economy is all about creating a scalable platform with a well designed customer journey to serve it or able to predict customers needs. It becomes really important to focus on how this platform can serve customers needs and not company stakeholders’ requests. Only then, it would be something customers will use and get engaged with it.

Moreover, the most important is for a platform to be able to deliver value really soon to its users but also to create the field so users can create value for each other.

In Alite, we have developed a really unique technology able not only to accelerate the innovation and disruption delivery to our clients but also to be the bed for our clients to create marketplaces for their services where the industry can really step towards future in a fast pace

 

 

Read next: Context Marketing is the Next Step in the Evolution

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