Livemint: October 06, 2016
New Delhi: The US, China and India will dominate the digital platform economy by 2020, while much of Europe will lag behind according to a new research released by Accenture. The report assesses the digitalization maturity of several countries, and finds that not all countries provide an environment that is conducive to platform success.
Accenture’s Platform Readiness Index shows that the United States, China, the United Kingdom, India and Germany top the rankings and have the biggest opportunity to grow and scale digital platforms—and will retain their top five ranking in 2020.
Further, the research reveals that China and India clearly benefit from their large base of digital users and high level of user savviness, particularly smartphone usage and thus have the biggest opportunity to grow and scale digital platforms.
Both countries are likely to show the greatest improvement by 2020, due mainly to increases in the online population and the improvement in supportive public policies. India also scored high on digital users and savviness with 236 million Internet users and is seen to benefit from strongly increasing customer base and usage because of early adoption of new devices and services and frequency of accessing digital content. While India ranked 4th in the overall analysis, the country topped the charts when it came to an open innovation culture.
The report, titled Five Ways to Win with Digital Platforms, published in collaboration with the G20 Young Entrepreneurs’ Alliance, assesses the ability of 16 G20 economies to support the flourishing of digital platforms. It reveals that despite the potential for small and traditional businesses to become successful digital platform companies, as few as 10% of new start-ups focused on digital platform business models will become profitable independent entities in the coming years. The analysis also reveals that the gulf between countries will increase. To help bridge this gap, the report outlines five critical steps businesses and governments can take to succeed.
“When you think of digital platforms, think of China and India as much as the US. 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. Multi-stakeholder cooperation is required to address the fragmented digital markets and to support the greater levels of digital enterprise and consumption that successful platform businesses need.”
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. It also shows that rankings on the Platform Readiness Index strongly correlate to the levels of digital platform activity and investment in G20 countries.
Five dimensions critical to enable the development of platforms.
1. Prioritize data protection standards and rules: Drive the harmonization of data privacy and data security legislation. Smooth cross-border data transfers
2. Design regulations with digital platforms in mind: Experiment with regulations alongside new technologies and business models.
3. Encourage cross-border electronic trade. Harmonize taxes and standards, consumer protection, contract laws and logistics infrastructure.
4. Invest in digital infrastructure: For example, the Digital India program launched by the government in 2015 drives rural high-speed internet development, the delivery of digital services and digital literacy.
5. Think small, act big: Educate SMEs on alternative funding, such as crowdfunding and peer-to-peer lending; and on data privacy and consumer protection. Support SMEs with digital economic zones to support e-commerce.
Accenture notes that only 15% of Fortune 100 companies have developed digital platform business models to date. Successful digital platforms will proliferate as small businesses and traditional industries follow the lead set by digital-born platform companies. Accenture identifies five factors critical to sustaining critical mass in digital platforms, which use new technologies to create large scale markets of customers and service providers:
Proposition: Create differentiated platform services that extend beyond the point of transaction; and that support both customers on the demand side and service providers on the supply side.
Personalization: Target customers through tailored experiences across all channels, using customer data to anticipate needs and offer bespoke experiences.
Price: Apply new pricing models, such as pay-as-you-go, ‘freemiums’, and subscription pricing to respond to peak demand.
Protection: Embed trust at the heart of the platform, using both prevention and compensation techniques to attract customers and differentiate the platform.
Partners: Scale the platform rapidly by identifying digital partners—such as app developers and payment service providers—who can enrich the platform experience and fulfil customer needs.
“Digital platforms are not just the preserve of digital born companies, like Airbnb and Alibaba, but are now becoming a default business model in most industry sectors, both B2B and B2C,” said Francis Hintermann, managing director, Accenture Research.
“To enjoy efficiencies and high rates of growth, companies will need to transform everything from the way they co-create goods and services with third parties, tailor their offerings to customers, and price them dynamically. Crucially, they will only sustain critical mass by working with digital partners who can deliver the range of functional services that complete the customer experience.”
About the Accenture Platform Readiness Index
The Accenture Platform Readiness Index measures 16 G20 countries by a number of factors including the size and savviness of their digital population, the extent of its digital talent and the strength of its wider entrepreneurship culture. Accenture also measured degrees to which companies are willing to share intellectual property and ideas in a spirit of open innovation, the quality of their technology infrastructure and their ability to support home-grown technologies. The agility and flexibility of market regulation on issues such as data privacy, data portability and cyber security was also measured.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.