Becoming a Platform Business

Becoming a Platform Business

Posted | Updated by Insights team:
Dr. Evangelo Damigos; PhD | Head of Digital Futures Research Desk
  • Connected Intelligence
  • Sustainable Growth and Tech Trends

Publication | Update: Sep 2020

The recent global pandemic has accelerated digital transformation and the need to reinvent the business as digital-first, operating within an ecosystem rather than through a traditional supply chain.

Savannah Group hosted the Leading Edge Forum (LEF) to discuss how technology can enable businesses to operate in the ecosystem environment.

To truly disrupt an industry CIOs need to look for digital gamechangers, new models and entrants, new industry platforms and ways to continually improve the customer journey through technology. This level of transformation shouldn’t be confused with the modernising of an IT infrastructure. True digital transformation means that the end goal is to create a fundamentally different business.

According to Cathy Holley, Partner in Savannah Group’s Digital and Technology Leaders Practice, modern ecosystems orchestrated by platform businesses are so powerful because they can construct customer centric combinations that traditional firms cannot.

What is a platform business model?

The smart home app and platform-based business HIVE,  has evolved from digital start-up to a household name. However, in its early days HIVE had its fair share of hurdles to overcome. How could the founders explain their offering to investors when it was so far removed from a conventional business model? Ten years later and almost every market shows signs of these new and more complex ecosystems.

More recently, Toyota invested more than $ 400m in autonomous vehicle technology innovator pony.ai. Why would a global automotive giant invest in a two-year old start-up?  To gain access to planning and control software, HD mapping, infrastructure, vehicle platforms and more, from the 120 companies in pony.ai’s ecosystem. In a uniquely defensive move, Toyota has bought into a proposition that reengineers the customer journey through technology.

Looking to the future, Amazon Care, a virtual  in-person healthcare offering for employees, provides an app, dashboard, and logistics system for the delivery of medication. Through Amazon Care, Amazon is building a new two-sided marketplace purely through a platform-based ecosystem.

How does the nature of a platform business differ from that of a traditional supply chain organisation?

  1. They’re agile. And they want to work with supply chain partners who can move just as quickly. Platform businesses don’t partner with bureaucratic slow-moving traditional suppliers and neither do they want to incorporate any sluggish players into their ecosystem.
  2. Power is shared. Even when a start-up platform partners with a multi-national (think pony.ai and Toyota) the start-up has an equal share of the power. Everyone has to work together to co-evolve a shaping strategy. There is no top-down hierarchy in the ecosystem.
  3. They’re tearing up the traditional contract. Platform businesses strike up very different commercial contracts to traditional supply chains. Contracts with partners are more likely to be for 12 months rather than for five years. Contract details differ too and are more often built around gainshare or guaranteed subscription levels rather than adherence to cost.
  4. Churn is the norm. Participants in the ecosystem of a platform business typically have a short lifespan. Participants will exchange data, materials, products or people in a systematic fashion but for a short period of time. There is a 30 – 40% churn of participants in an ecosystem compared to 5 – 10% churn in traditional supply chains.
  5. Competition is a blurred line. Contracts between partners in the ecosystem frequently combine aspects of both competition and collaboration. These unconventional relationships can provide access to complementary products and capabilities.
  6. They let go of control. A platform business isn’t set up to manage the supply chain and proposition all the way through the customer journey. The platform business mindset enables others to add to your proposition to customers by letting go of some of the control.
  7. They’re in search of excellence. Take Tesla for example. It’s clear from their mode of operating that Tesla is more passionate about developing autonomous driving systems than it is in selling cars.
  8. Their intellectual property (IP) is no secret. Think of Tesla; its IP is available, but competitors just can’t keep up with the pace which is how the business maintains its edge. Tesla is now bringing more of its ecosystem in house to maintain the speed of innovation.
  9. Speed creates value. Platform businesses know that there is mutual value if you can move quickly enough. The processes and layers of traditional pipeline businesses are at odds with the velocity of technology and consumer behaviour. Platforms use their speed to quickly create competitive advantage.
  10. And of course, technology is key to their success. Operating in the ecosystem of the platform business means being forward looking when it comes to tech. The Leading Edge Forum estimates that these businesses are placing bets on the next 10 years of tech development.

“The challenge for traditional system integrators is to adapt their existing culture and processes.”

Leading your business into the new ecosystem

“Traditional businesses have no choice. They must, at the very least, extend their pipeline business model to participate in new platform ecosystems.”

If you’re leading business transformation in a traditional pipeline business, then the platform model may feel at odds with your strategy. How can you transform the business while keeping business as usual running? How can you extend the business digitally to reach more of the customer journey without having to orchestrate a new and complex operating ecosystem? Whilst operational and commercial challenges exist, many traditional businesses are venturing into the new territory of the platform world, led by their CIO or CDO.

But not every organisation aspires to becoming, or acquiring, a platform. For some businesses, partnerships and joint ventures provide the best route to access ecosystems created by others. For organisations that do see a platform-based future, some ‘digital-second’ firms are entering the platform world by working with digital-first start-ups, including their own internal ventures. This has advantages for both parties. Despite wanting the agility of a start-up environment, tech start-ups can benefit from the scale, brand, data and loyal customer base of a more established business.

Cathy Holley, Partner in Savannah Group’s Digital and Technology Leaders Practice hosted the Leading Edge Forum (LEF) for this discussion. She is co-creator of the Savannah CIO Development and CIO mentoring programmes.

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Objectives and Study Scope

This study has assimilated knowledge and insight from business and subject-matter experts, and from a broad spectrum of market initiatives. Building on this research, the objectives of this market research report is to provide actionable intelligence on opportunities alongside the market size of various segments, as well as fact-based information on key factors influencing the market- growth drivers, industry-specific challenges and other critical issues in terms of detailed analysis and impact.

The report in its entirety provides a comprehensive overview of the current global condition, as well as notable opportunities and challenges. The analysis reflects market size, latest trends, growth drivers, threats, opportunities, as well as key market segments. The study addresses market dynamics in several geographic segments along with market analysis for the current market environment and future scenario over the forecast period. The report also segments the market into various categories based on the product, end user, application, type, and region.
The report also studies various growth drivers and restraints impacting the  market, plus a comprehensive market and vendor landscape in addition to a SWOT analysis of the key players.  This analysis also examines the competitive landscape within each market. Market factors are assessed by examining barriers to entry and market opportunities. Strategies adopted by key players including recent developments, new product launches, merger and acquisitions, and other insightful updates are provided.

Research Process & Methodology


We leverage extensive primary research, our contact database, knowledge of companies and industry relationships, patent and academic journal searches, and Institutes and University associate links to frame a strong visibility in the markets and technologies we cover.

We draw on available data sources and methods to profile developments. We use computerised data mining methods and analytical techniques, including cluster and regression modelling, to identify patterns from publicly available online information on enterprise web sites.
Historical, qualitative and quantitative information is obtained principally from confidential and proprietary sources, professional network, annual reports, investor relationship presentations, and expert interviews, about key factors, such as recent trends in industry performance and identify factors underlying those trends - drivers, restraints, opportunities, and challenges influencing the growth of the market, for both, the supply and demand sides.
In addition to our own desk research, various secondary sources, such as Hoovers, Dun & Bradstreet, Bloomberg BusinessWeek, Statista, are referred to identify key players in the industry, supply chain and market size, percentage shares, splits, and breakdowns into segments and subsegments with respect to individual growth trends, prospects, and contribution to the total market.

Research Portfolio Sources:

  • BBC Monitoring

  • BMI Research: Company Reports, Industry Reports, Special Reports, Industry Forecast Scenario

  • CIMB: Company Reports, Daily Market News, Economic Reports, Industry Reports, Strategy Reports, and Yearbooks

  • Dun & Bradstreet: Country Reports, Country Riskline Reports, Economic Indicators 5yr Forecast, and Industry Reports

  • EMIS: EMIS Insight and EMIS Dealwatch

  • Enerdata: Energy Data Set, Energy Market Report, Energy Prices, LNG Trade Data and World Refineries Data

  • Euromoney: China Law and Practice, Emerging Markets, International Tax Review, Latin Finance, Managing Intellectual Property, Petroleum Economist, Project Finance, and Euromoney Magazine

  • Euromonitor International: Industry Capsules, Local Company Profiles, Sector Capsules

  • Fitch Ratings: Criteria Reports, Outlook Report, Presale Report, Press Releases, Special Reports, Transition Default Study Report

  • FocusEconomics: Consensus Forecast Country Reports

  • Ken Research: Industry Reports, Regional Industry Reports and Global Industry Reports

  • MarketLine: Company Profiles and Industry Profiles

  • OECD: Economic Outlook, Economic Surveys, Energy Prices and Taxes, Main Economic Indicators, Main Science and Technology Indicators, National Accounts, Quarterly International Trade Statistics

  • Oxford Economics: Global Industry Forecasts, Country Economic Forecasts, Industry Forecast Data, and Monthly Industry Briefings

  • Progressive Digital Media: Industry Snapshots, News, Company Profiles, Energy Business Review

  • Project Syndicate: News Commentary

  • Technavio: Global Market Assessment Reports, Regional Market Assessment Reports, and Market Assessment Country Reports

  • The Economist Intelligence Unit: Country Summaries, Industry Briefings, Industry Reports and Industry Statistics

Global Business Reviews, Research Papers, Commentary & Strategy Reports

  • World Bank

  • World Trade Organization

  • The Financial Times

  • The Wall Street Journal

  • The Wall Street Transcript

  • Bloomberg

  • Standard & Poor’s Industry Surveys

  • Thomson Research

  • Thomson Street Events

  • Reuter 3000 Xtra

  • OneSource Business

  • Hoover’s

  • MGI

  • LSE

  • MIT

  • ERA

  • BBVA

  • IDC

  • IdExec

  • Moody’s

  • Factiva

  • Forrester Research

  • Computer Economics

  • Voice and Data

  • SIA / SSIR

  • Kiplinger Forecasts

  • Dialog PRO

  • LexisNexis

  • ISI Emerging Markets

  • McKinsey

  • Deloitte

  • Oliver Wyman

  • Faulkner Information Services

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  • EY

  • PwC

  • Berg Insight

  • ABI research

  • Pyramid Research

  • Gartner Group

  • Juniper Research

  • MarketsandMarkets

  • GSA

  • Frost and Sullivan Analysis

  • McKinsey Global Institute

  • European Mobile and Mobility Alliance

  • Open Europe

M&A and Risk Management | Regulation

  • Thomson Mergers & Acquisitions

  • MergerStat

  • Profound

  • DDAR

  • ISS Corporate Governance

  • BoardEx

  • Board Analyst

  • Securities Mosaic

  • Varonis

  • International Tax and Business Guides

  • CoreCompensation

  • CCH Research Network

Forecast methodology

The future outlook “forecast” is based on a set of statistical methods such as regression analysis, industry specific drivers as well as analyst evaluations, as well as analysis of the trends that influence economic outcomes and business decision making.
The Global Economic Model is covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure. We aim update our market forecast to include the latest market developments and trends.

Forecasts, Data modelling and indicator normalisation

Review of independent forecasts for the main macroeconomic variables by the following organizations provide a holistic overview of the range of alternative opinions:

  • Cambridge Econometrics (CE)

  • The Centre for Economic and Business Research (CEBR)

  • Experian Economics (EE)

  • Oxford Economics (OE)

As a result, the reported forecasts derive from different forecasters and may not represent the view of any one forecaster over the whole of the forecast period. These projections provide an indication of what is, in our view most likely to happen, not what it will definitely happen.

Short- and medium-term forecasts are based on a “demand-side” forecasting framework, under the assumption that supply adjusts to meet demand either directly through changes in output or through the depletion of inventories.
Long-term projections rely on a supply-side framework, in which output is determined by the availability of labour and capital equipment and the growth in productivity.
Long-term growth prospects, are impacted by factors including the workforce capabilities, the openness of the economy to trade, the legal framework, fiscal policy, the degree of government regulation.

Direct contribution to GDP
The method for calculating the direct contribution of an industry to GDP, is to measure its ‘gross value added’ (GVA); that is, to calculate the difference between the industry’s total pre­tax revenue and its total bought­in costs (costs excluding wages and salaries).

Forecasts of GDP growth: GDP = CN+IN+GS+NEX

GDP growth estimates take into account:

  • Consumption, expressed as a function of income, wealth, prices and interest rates;

  • Investment as a function of the return on capital and changes in capacity utilization; Government spending as a function of intervention initiatives and state of the economy;

  • Net exports as a function of global economic conditions.


Market Quantification
All relevant markets are quantified utilizing revenue figures for the forecast period. The Compound Annual Growth Rate (CAGR) within each segment is used to measure growth and to extrapolate data when figures are not publicly available.


Our market segments reflect major categories and subcategories of the global market, followed by an analysis of statistical data covering national spending and international trade relations and patterns. Market values reflect revenues paid by the final customer / end user to vendors and service providers either directly or through distribution channels, excluding VAT. Local currencies are converted to USD using the yearly average exchange rates of local currencies to the USD for the respective year as provided by the IMF World Economic Outlook Database.

Industry Life Cycle Market Phase

Market phase is determined using factors in the Industry Life Cycle model. The adapted market phase definitions are as follows:

  • Nascent: New market need not yet determined; growth begins increasing toward end of cycle

  • Growth: Growth trajectory picks up; high growth rates

  • Mature: Typically fewer firms than growth phase, as dominant solutions continue to capture the majority of market share and market consolidation occurs, displaying lower growth rates that are typically on par with the general economy

  • Decline: Further market consolidation, rapidly declining growth rates


The Global Economic Model
The Global Economic Model brings together macroeconomic and sectoral forecasts for quantifying the key relationships.

The model is a hybrid statistical model that uses macroeconomic variables and inter-industry linkages to forecast sectoral output. The model is used to forecast not just output, but prices, wages, employment and investment. The principal variables driving the industry model are the components of final demand, which directly or indirectly determine the demand facing each industry. However, other macroeconomic assumptions — in particular exchange rates, as well as world commodity prices — also enter into the equation, as well as other industry specific factors that have been or are expected to impact.

  • Vector Auto Regression (VAR) statistical models capturing the linear interdependencies among multiple time series, are best used for short-term forecasting, whereby shocks to demand will generate economic cycles that can be influenced by fiscal and monetary policy.

  • Dynamic-Stochastic Equilibrium (DSE) models replicate the behaviour of the economy by analyzing the interaction of economic variables, whereby output is determined by supply side factors, such as investment, demographics, labour participation and productivity.

  • Dynamic Econometric Error Correction (DEEC) modelling combines VAR and DSE models by estimating the speed at which a dependent variable returns to its equilibrium after a shock, as well as assessing the impact of a company, industry, new technology, regulation, or market change. DEEC modelling is best suited for forecasting.

Forecasts of GDP growth per capita based on these factors can then be combined with demographic projections to give forecasts for overall GDP growth.
Wherever possible, publicly available data from official sources are used for the latest available year. Qualitative indicators are normalised (on the basis of: Normalised x = (x - Min(x)) / (Max(x) - Min(x)) where Min(x) and Max(x) are, the lowest and highest values for any given indicator respectively) and then aggregated across categories to enable an overall comparison. The normalised value is then transformed into a positive number on a scale of 0 to 100. The weighting assigned to each indicator can be changed to reflect different assumptions about their relative importance.


The principal explanatory variable in each industry’s output equation is the Total Demand variable, encompassing exogenous macroeconomic assumptions, consumer spending and investment, and intermediate demand for goods and services by sectors of the economy for use as inputs in the production of their own goods and services.

Elasticity measures the response of one economic variable to a change in another economic variable, whether the good or service is demanded as an input into a final product or whether it is the final product, and provides insight into the proportional impact of different economic actions and policy decisions.
Demand elasticities measure the change in the quantity demanded of a particular good or service as a result of changes to other economic variables, such as its own price, the price of competing or complementary goods and services, income levels, taxes.
Demand elasticities can be influenced by several factors. Each of these factors, along with the specific characteristics of the product, will interact to determine its overall responsiveness of demand to changes in prices and incomes.
The individual characteristics of a good or service will have an impact, but there are also a number of general factors that will typically affect the sensitivity of demand, such as the availability of substitutes, whereby the elasticity is typically higher the greater the number of available substitutes, as consumers can easily switch between different products.
The degree of necessity. Luxury products and habit forming ones, typically have a higher elasticity.
Proportion of the budget consumed by the item. Products that consume a large portion of the consumer’s budget tend to have greater elasticity.
Elasticities tend to be greater over the long run because consumers have more time to adjust their behaviour.
Finally, if the product or service is an input into a final product then the price elasticity will depend on the price elasticity of the final product, its cost share in the production costs, and the availability of substitutes for that good or service.

Prices are also forecast using an input-output framework. Input costs have two components; labour costs are driven by wages, while intermediate costs are computed as an input-output weighted aggregate of input sectors’ prices. Employment is a function of output and real sectoral wages, that are forecast as a function of whole economy growth in wages. Investment is forecast as a function of output and aggregate level business investment.