The need for this study emerged from both personal interest and the lack of academic research focusing on B2B companies and their emerging digital platform businesses. Technological disruption has influenced many industries but most of its effect has been on B2C side of the business. The objective of this study was to explore through a qualitative study the integration of digital platform business and its effects on competitive advantage with real-life B2B case companies and moreover, to provide answers to research problem “How can traditional companies create competitive advantage through building of digital platform business?” The case companies were KONE Oyj and Posti Group Oyj, which present two very different cases, one being an innovation platform and the other being transaction platform. The study explored the phenomenon of platforms in B2B context, which has not been done before due to scarcity of such companies. The new knowledge produced can offer advice for traditional B2B companies to pursue their path on building and integrating a digital platform business into their existing operations and to connect.
The conceptual framework was formed based on the previous literature focusing on the themes of this study, although, many of the theoretical concepts of this study have not gained a common consensus among academics. Eventually, the framework formed an interplay between strategy, dynamic capabilities and business model, which in this study was digital platform business model. The conceptual framework was utilized further in the empirical part of this study when forming the interview questions. The research questions, which aim to help solving the research problem were:
RQ1: What resources and capabilities are needed to integrate digital platform business into the firm’s existing operations?
RQ2: How do dynamic capabilities support the integration of digital platform business?
RQ3: How does a successful integration enhance the firm’s competitiveness through building of new value creation opportunities?
In the context of B2B companies, the findings of this study support previous literature of business models and dynamic capabilities and also propose new views on the phenomenon focusing on digital platform business models, dynamic capabilities and competitiveness. I will now discuss the answers to the research problem and research questions in coherence with previous literature.
Although this study is not focusing on the focal companies’ specific products or services, the findings support Porter and Heppelmann’s (2015) view, that when a company is moving towards digital platform business, company’s products should be smart and data-producing.
The findings suggest that in case of a physical product, which enables the platform, the connectivity is the key to move forward in building of a platform. Connecting the products or devices creates a path for digital platform development. This proposes an interesting view how decision in the past can either increase or decrease the speed of change in pursuing digital platform business.
The findings of this study support many academics (Teece 2010; Zott et al. 2011; Tallman et al. 2018) on the view that new technological innovations are key in driving transformation in company’s business models. Technological disruption and digitalization are seen as the main reasons why the change occurs in business models. Additionally, in the context of B2B companies, this study suggests the changing customer expectations resulting from technological disruption and platforms emerging in B2C drive the transformation in business models. The findings of this study are aligned with Teece and Linden (2017) by suggesting that company needs in-depth knowledge of its customers in order to build a good business model.
Furthermore, customers are in a focal role when building a digital platform business model both in designing the value creation methods and in the development phase. It should be noted that technological advancements and changing customer needs can also propose threats, not just
opportunities. Therefore, this study supports Saebi et al. (2017) and argues that threats in the external business environment can forecast changes in the business model applied currently.
Additionally, the study suggests that companies need capabilities to turn the external opportunities into industry or business opportunities.
The building of a digital platform is seen strongly as an end result of a top-level strategic decision. However, the strategic decision does not dictate that platform should be built, but the findings of this study suggest digital platform business model is a tool to realize the strategy.
If a company wishes to pursue a path to better serve the customers based on their needs and solve their problems on a wider scale, a digital platform could be a way to realize it. The view developed earlier in the literature remains the same in this study, that strategy will influence the choice of a business model and is aligned with Shafer et al. (2005). Shafer et al. (2005) suggest that strategic changes can lead to various business models that a company has to choose from.
An important view, that this study points out is that applying multiple different business models creates strategic challenge in prioritization and the new model must not negatively effect on the old and still existing business model. Additionally, aligned with Zott et al. (2011), this study suggests that business model involves more customer-centric approach compared to strategy.
Teece et al. (1997) originally suggested that dynamic capabilities apply to companies operating in high-paced environment experiencing high-paced technological changes. Contradictory to the earlier views, the findings of this study suggest that dynamic capabilities can be identified, be applied and beneficial also in slower-paced business environment. The technological changes and therefore changed customer needs affect companies also in slow-paced environment. Thus, this study supports Pavlou and Sawy (2011) and Fainshmidt et al. (2016) and argues that dynamic capabilities have a positive effect regardless of turbulence in the external environment.
This study identifies few dynamic capabilities that are integral in the process of building of digital platform business. The dynamic capabilities are the strongest in specific functions such as top management, research and development, information technology, marketing and sales.
First, aligned with Teece’s (2007) definition of dynamic capabilities, the findings suggest that sensing capabilities have been vital in the process. The sensing capabilities have emerged mostly in terms of technology. The capability to sense the opportunity the technology offers and consequently the capability to shape the opportunity for the focal industry and business.
Secondly, similarly aligned with Teece (2007) definition, the findings suggest that company pursuing a digital platform must possess sufficient managerial and organizational processes to seize the opportunity of building of a digital platform. The seizing capabilities have emerged in testing and experimenting models to find the suitable one. Thirdly, aligned with Teece (2007) definition, the findings suggest that it is essential to possess capabilities to enhance, combine, protect and reconfigure intangible and tangible assets. This has emerged in product configurations, which is tangible but mostly in intangible assets such as people, processes and methods. Overall, the findings support Teece and Linden (2007) and Rachinger et al. (2018) in the argument that business model design and implementation demand strong dynamic capabilities.
The findings suggest that when building of a digital platform, company should reorganize its assets both existing and new. It is seen important that the development team is multi-disciplinary and organizational functions are mixed and silos are being avoided. Most importantly, in case of an innovation platform where products are in the core when building of the platform, the R&D and IT functions should be brought together. Building of a platform cannot be regarded as a pure technology project. These findings support Teece (2018), who claims that company might need a specific unit for the new business model to be realized. The capability to re-organize the assets to maintain competitiveness is seen of the main concepts of dynamic capabilities (Teece 2007). The development of a digital platform and reorganizing the previous development processes seem to be one of the most significant capabilities company needs to possess when pursuing a digital platform. Start-up themed agile methods are seen more suitable than for example waterfall method, which is used in more traditional product development. Testing and experimenting with real customers are vital in the process, which is not as common in traditional product development.
Customer interaction is seen as a vital condition in the process of building a digital platform both before pursuing the path and in the entire development process. This study introduces new knowledge on how customer interaction emerges during digital platform creation and brings together dynamic capabilities and business model in terms of customer-centricity. The findings of this study are able to propose a more concrete vocalization of Zott et al. (2011) view that business model has customer-centric features. Co-creation with customers and in-depth study of customers’ overall problem help the company to better offer wide-scale solutions to them.
This can be acquired with close customer interaction, involving customers in the development process, building real-life case studies and experimentations.
The findings of enhanced competitiveness are fairly sporadic in this study and offer delicate arguments regarding of the possibilities how companies can enhance their competitiveness through building of digital platform. The enhanced competitiveness is suggested to emerge when the company is able to realize its strategy through building of digital platform and thus, reach the its strategic objectives. On the other hand, the new value creation methods enabled by digital platform are seen to propose opportunities to enhance competitiveness if the company is able to offer its customers more and better overall value compared to its customers. And most of all, if the company is able to better respond to customer’s needs in the present and future.
From the dynamic capabilities’ perspective, this study suggests that conscious and unconscious use of dynamic capabilities enhance company’s competitive advantage. Company can have suitable strategic and organizational processes to have dynamic capabilities regardless of having made a strategic decision to have them or not. Therefore, this study also proposes that dynamic capabilities can be unconscious. The findings of this study are aligned with Ambrosini and Bowman (2009) by stating that competitiveness emerges from the end result of using dynamic capabilities. By creating valuable resources, such as digital platform, with use of dynamic capabilities competitive advantage can be created. The cases involved in this study had started building the platform before their rivals and the need for the platform didn’t emerge from competition. Thus, this study support Teece (2018) on the argue that when company has strong dynamic capabilities, it can redesign its business model rapidly ahead of its competition.
An integral part of dynamic capabilities is people. According to Teece (2017b) dynamic capabilities are strongest within few people but it is vital that they exist within different organizational levels and functions. The findings suggest similarly. A company should have the right type of people in the right places and dynamic capabilities should exist from the grass level organization all the way to the top management. The capabilities that such people should possess are related to sensing opportunities and seizing them. Few personal characteristics are also seen important. People who are innovative, have resilience and courage and who master internal sales are seen key people in the process.
This study suggests that management is in the key role in every step of the process of building of a digital platform. First of all, management’s positive attitude towards change and emerging opportunities enable the change to occur. Secondly, management should involve people, who are able to spot the opportunities presented at them and then act upon them. Thirdly, management’s support is vital in the development phase. Additionally, the organizational culture towards innovation and change matters. The culture should enable innovation and it should be seen as possible for everyone. This views support Teece (2017), who claims that leadership and management are important when creating an environment where dynamic capabilities can thrive and Lessard et al. (2016), who suggest key factors in successful dynamic capabilities are top management skills and systems embedded deep in organization.
When viewing business model on its own this study proposes few interesting findings. The decisions made with the business model derive from strategy as stated before. The change to integrate digital platform business model is a sum of internal and external environment, mostly resulting from the latter. If the external opportunities presented at the company are seen to fit the strategy, the change will occur. As Saebi et al. (2017) has proposed adaptation in business model occur when management is proactive to meet the challenges of external opportunities and threats with the business model. The findings also suggest that building of a digital platform needs strong management support and mandate to execute.
This study applied activity system perspective in business model introduced by Amit and Zott (2001), and the concentration was on the design themes i.e. how company creates value. The value creation methods novelty, lock-in, complementarities and efficiency exist in the traditional companies’ B2B digital platform similarly than in popular B2C platforms. The enhanced competitiveness stems from these design themes. Consequently, the value creation with digital platform business offers new ways to serve customers’ changing needs and improve customer experience. Novelty emerges because the digital platform business offers completely new parties to the previous supplier-customer equation. Additionally, novelty yields from introducing new type ways to do business within the industry. Complementarities are maybe the most important value creation theme when considering innovation platform. The majority of the value created to the customer yields from solving customers overall problems with external partners. This yields to platform owners’ efficiency as well. A single company can rarely possess enough skills to offer a wide range of products and services on their own, thus complementing partners improve the overall value that customer can receive. The digital
platform creates efficiency both internally to the company and externally to the customer. The internal operational efficiency can increase company’s competitiveness and on the other hand, the efficiency customer receives creates additional value. The findings of this study suggest that value is created on multiple sides, which effects on the enhanced competitiveness, which cannot be acquired by traditional value chain by linearly selling products or services. Thus, the study agrees with Massa et al. (2016) that competitive advantage can be based on multiple sides, and with Fehrer et al. (2018) and Zott et al. (2011), that value creation occurs in sync with other parties.
Lastly, the findings of the study suggest an integral part of partner network in the process.
Naturally, the partner network is a major part of digital platform business and the value creation process. However, the role of the partners is emphasized in the development process and companies’ capabilities to configure the assets, which might be also external to the focal company. Including partners both from resource and complementary perspective suggest that the value creation increases when company is willing to share its project with external expertise.
Figure 6. Conceptual framework revised based on empirical findings
To conclude the findings of this study, Figure 6 presents the revised conceptual framework based on the empirical findings. The strategy is influenced by company’s external environment and dynamic capabilities derived from internal environment. The strategy will influence the integration of a new business model. Digital platform business is formed based on the external environment, dynamic capabilities and value creation elements of business model. The process of building of a digital platform is enhanced with partner network, multi-disciplinary team, new development methods and customer interaction, of which all are influenced by internal dynamic capabilities. In the end, the competitive advantage is seen to derive from new type of value creation, which previously was not possible but responds to customer needs and overall improves the customer experience.