The assessment of external environment is not enough when changing the operations and pursuing the path of integrating a digital platform business. As also discussed in the literature review strategy and business model go hand in hand. The opportunities will eventually lead to a changed strategy and in turn, the strategy will influence the operations and how company does business and creates value i.e. what is company’s business model. The findings suggest a
relationship between strategy and business model. The interviewees were asked about company’s internal environment’s influence on the platform, where some of the interviewees pointed out strategy. On the other hand, strategy and strategy related matters appeared in the discussions randomly. Business model was discussed mainly when asking the interviewees about how company creates value with the digital platform.
Business model vs. strategy
It is inevitable that changes in business model and the creation of a digital platform business does not happen without strategy. The findings indicate that the wide guidelines resulting in platform integration derive from strategic level. On the other hand, strategies do not dictate that the company should integrate a new business model or digital platform. The strategy will guide the company to differentiate by focusing on customers and users in the development (KONE 2019). Or, the strategy will state that emphasis should be on customer experience and establishing digital services, that are customer centric (Posti 2019). Strategic fit is seen important in the digital platform development. The decisions that are made follow the strategic guidelines, but it is worthwhile to note that strategy should not create constraints in the execution. The interviewees describe strategy’s involvement in the process:
“What you need is absolute basic, you need to have a strong management vision based on a clear strategy which can be explained and cascaded throughout the organization.”
“We have made decisions on what to develop, product decision, that has been on the strategy level, so this is what we want to do”
”It was a strategic move, exactly from the top strategy. There is this co-operative innovation as one of our strategic themes.”
”In a way, we have been given top level guidelines from the strategy but there has not really been restrictions in the grass-level realization.”
”It has been strategically important all the time, that we want to offer the services in mobile”
Management’s role
Additional to strategy, the execution and management’s vision as well as support are important.
The strategy is useless if the execution does not support it. On the other hand, the integration of digital platform needs strong management people who are able to give mandate but also to share responsibility based on the vision. Management’s support in the process is vital in order for the focal team to be able to focus on their tasks regarding the platform. The interviewees describe this:
“And everyone can understand we are heading and why. So that is critical. But then you also need to make sure that the umm the strategy execution cascades throughout the organization and then, that necessarily is the key point that people are able to execute or teams are able to execute then on building of this digital platform, commercializing what digital platform enables so on, yeah.”
”It has started from the top in that way that the top organization enabled focusing to this. … It started from the top level, I would say, absolutely.”
Prioritization
As much as strategy gives guidelines and support the process of integration. Strategic prioritizing is important. When building a digital platform and integrating it into existing operations, the company need to prioritize. New business might have an effect on the old business and even partly disrupt it. The analysis of how to balance between different business models is important to avoid the negative effect emerged from new business model. The findings indicate that connected to strategy, prioritizing of actions is a important skill to possess.
Few interviewees explain this:
”It is very important that none of the new things are not necessarily effecting negatively on the old.”
”How to so to say prioritize the old doing and the new doing, which can disrupt the old.”
”How to and what to prioritize and on a what time frame is more of the question.”
Once the company has decided their strategic direction, the company has to re-think their business model. Compared to case companies’ traditional business, digital platform requires more speed in actions, which can create need for certain strategic decision to be made. The findings indicate that strategy and business model interact with each other this way as well. An interviewee concentrating on APIs describes:
”Now that we go digital and to services, we have to be very fast.”
The change of business model creates also challenges for the company and its’ existing operations. On issue to tackle is timing and reaction time. An interviewee points out:
”How can we be faster in reaction time within this area (digital) where it is important.”
Concentration on value creation
The findings indicate that companies concentrate more on value creation rather than how they do business. The base for the business model is the value created, which is naturally followed by how the business is done and organized. Value creation is related to opportunities proposed by external environment, which has been discussed in previous chapter, and changing customer demands, which will be explained in more detail in next chapter. The technological advancements propose new streams and possibilities for value and customers demand new value based on their changing expectations. In the integration of digital platform business, the company will re-organize their value creation process and how it is realized. Interviewees point this out:
”We think about the value creation from a new point of view.”
”The value creation is very multi-directed in a way, so it is not just between two actors but specifically between three or more actors.”
“Then there might also be many other new types of value, which can be created through the platform thinking and as a result of technological developments.”
As described before, the case companies differ from each other in various ways. Moreover, the platform type is different, which has an effect on business model, i.e. how company does business and how value is created. In this section, I will present the findings related to platform type when it is essential to understand the context. Kone’s platform is innovative platform whereas Posti’s platform is transaction platform. In Kone’s platform there can be identified value creation by novelty, efficiency and complementarities. On the other hand, in Posti’s platform the value creation stems mostly from efficiency. Later with Posti’s platform, it will be also possible to create value with complementarities.
Creating value with novelty
Novelty value emerges when there are new activities how the business is done. Specifically, in the most traditional industries with decades of history, novelty emerges when digital platform is being introduced. An interviewee focusing on innovation platform explains the phenomenon:
“So, each of you are used to the ease of using uber to get from A to B, the old model is how to take a bus or fight with a taxi driver, hail over the taxi driver. Those type of expectations are also, the upgrading of expectations of the customer experience are changing our business as well. So, it is no longer good enough if we, if a customer has got an enquiry of their invoicing that we would ask them to fax the request. You know, they want to see real-time live or on a portal or so. We don’t even have a portal in the first place because we have got a great back-end system and forecasting master data to manage all of this.”
Additionally, as novelty emerges from the birth of the platform. In the innovation platform, the novelty continues to exist as more innovation continues to be added to the platform. An interviewee explains this:
”We want to enable to our customers that their elevator is so to say future proof.”
”We can integrate it easily as a service whenever time-wise. So, it is maybe one of the most important values and it is what strongly resonates with our customers today.”
Creating value with complementarities
Complementarities create value in the case of an innovative platform. The goal is to solve as many problems as possible from the customer point of view and create additional value. The platform owner might not possess needed competence for developing solutions for problems outside of their focal business, thus opening the interface for partners to join the platform the potential value to be created increases. An interviewee working with innovation platform declares:
”By grouping together these components, we now get more value compared to what any individual thing could bring.”
Platform thinking changes the way of doing business and existing operations. The complementary value shifts the concentration from individual products and services to solving problems and offering solutions outside of the platform owner’s business. An interviewee focusing on APIs to innovation platform state:
”We talk about solutions instead of developing one individual product for one individual problem.”
The complementary products and services are not limited to third parties. Naturally, the focal customer of the platform can also innovate complementary product or services to the platform, which will benefit their industry. An interviewee working with innovation platform says:
”By using our platform and interfaces, the customer can make their own solutions, precisely their own applications, own services.”
Creating value with efficiency
In both of the cases, efficiency yields value in the digital platform. In the innovation platform the complementary products or services enable the customer to perform its actions more effectively and ”operative advantages” are created, as one interviewee describes. The operative advantages emerge both in the platform owner and customer side, as the complementary product enabled by the platform increase the effectiveness of internal
operations. In the transaction platform the efficiency value yields as the customer can proactively use the service rather than passively wait as well as acquire information easily. An interviewee focused on transaction platform describes this by stating that:
”It creates value so that the users, who use the service, they actively receive information that the package can now be fetched.”
These findings provide answers to RQ3: How does a successful integration enhance the firm’s competitiveness through building of new value creation opportunities? The integration of a digital platform business provides B2B companies possibilities to create value in new ways.
Through operating in digital environment, the focal company can better serve the customers but also make their internal operations more efficient and thus, enhance the competitiveness.
The concrete actions that lead to enhanced competitiveness are related to specific value creation methods. Firstly, by creating value with novelty, platform owner can disrupt their own industry and be the first to acquire the benefit of it. The novelty introduces the possibility to be the Uber of their respective industry and change the dynamics to enhance the competitiveness. Secondly, by introducing complementarities companies can reach far higher value creation levels than it could achieve on their own. Their value increases with additional products and services and hence, enhanced competitiveness emerges. Thirdly, the efficiency value can enhance the competitiveness both internal to the focal company and possibly lower the costs, but it also offers customers increased efficiency, which will create additional value for their purchase. It is worthwhile to note, that the value creation is useful only when there is demand for it.
Therefore, the successful integration will not necessarily enhance the competitiveness if the value created does not respond to a need. To conclude, these traditional companies create competitive advantage by focusing on novelty, complementarities and efficiency, which cannot be acquired by doing the business the old way. In order to reach the point, where value creation is discussed, company must have a clear strategy and goals, which are realized and reached by a suitable business model. Therefore, strategy dictates the business model, which defines company’s value creation, capture and delivery, which in the end can create competitive advantage.