New research released by Accenture reveals that despite the potential for traditional businesses to become successful digital platform companies, as few as 10 percent of start-ups focused on digital platform business models will become profitable independent entities in the coming years.
The analysis also revealed that China, India and the U.S. will dominate the global platform economy by 2020, and that the gulf between these countries and the rest of the world will increase. Accenture's report anticipates that the UK and Germany will join China, India and the U.S. among the global leaders, while emerging markets and other European countries will continue to lag.
"When you think of digital platforms -- China and India and the U.S. -- these economies are using the power of platforms to create large scale markets very rapidly," said Paul Daugherty, chief technology officer, Accenture. "Many European economies are in danger of missing out in the platform economy."
Accenture's analysis shows $20 billion was invested in digital platforms between 2010 and 2015 in 1,053 publicly announced deals. More than half of this investment took place between 2014 and 2015.
Governments should advance policies that create a breeding ground for digital platforms by doing the following:
- Prioritizing data protection standards: Harmonize of data privacy and data security regulations and make cross-border data transfers smoother
- Adopting regulations with digital platforms in mind: Change laws to keep pace with new technologies and business models.
- Encouraging cross-border electronic trade: Create standards for taxes, consumer protection, contract laws and logistical infrastructure.
- Investing in digital infrastructure: For example, the E.U.'s Payment Services Directive (PSD2) will empower start-ups to expand customer reach and encourage innovative business models.
- Thinking small, acting big: Educate small business owners on alternative funding, peer-to-peer and marketplace lending. Banks are not the only sources of capital in the 21st century. Embrace technology that makes mobile transactions possible.
Meanwhile, digital platforms will proliferate as small businesses and traditional industries follow the lead of digital-born platform companies. Several factors are critical to creating large scale markets:
Proposition: Create platform services that extend beyond the point of transaction. For instance, be sure to have customer support.
Personalization: Target customers through tailored experiences across all channels, Use customer data to anticipate needs and target them with tailored offers.
Price: Offer different pricing options. In the 21st century buyers increasingly want customized pricing, such as pay-as-you-go and subscription pricing.
Protection: Take measures to make sure the site is secure.
Partners: Align with digital partners, such as payment service providers and app developers, who can enhance the platform experience and service customer needs.
You don't have to be a technology company to think like one. Even a traditional brick-and-mortar business, such as a pizzeria, can develop an app that makes it easier for customers to order and pay via their phones. At my company, Biz2Credit, roughly half of the online applications from small business owners looking to secure financing comes via a smart phone or a tablet. Less than a decade ago, entrepreneurs were forced to go from bank-to-bank filling out applications with no idea whether they could find funding. Digital technology has changed all that and the process is now swift, secure and efficient.
Any company that makes it easier and faster to buy their products or use their services quickly and efficiently via mobile technology has put itself in position for growth. This is not going to change. Tech-savvy economies, such as the U.S., UK, India and China, have embraced technology. Others would be wise to follow their lead. To enjoy high rates of growth, companies and economies need to transform everything from hiring to product sourcing to ordering, payment processing and shipping.