The economics of the operation of a platform whether at the level of companies or at the macrolevel of regions and countries is largely rooted in the network effects as well as positive network externalities. Network effects involve increases in the value of services emanating from the rise in the number of users/customers/members. This in turn incentivises new entrants/participants to join the network to benefit from the rising optionality and access to services and members. The optionality in the range of services is advanced via the formation of a diversified ecosystem that also seeks to mutually reinforce the various segments of the network’s operation.
At the corporate level, the technology of the platform business model has clearly passed the first stages of innovation and is now actively proceeding to the stage of replication across industries and geographies. According to McKinsey, more than 30% of global corporate revenue could be mediated by digital platforms by 2025. A significant part of the activism in platform creation is concentrated not only in the B2C, but also the B2B segment, whereby the use of a platform allows corporates to focus on core activity, while allowing the partnership with the technological companies to alleviate the costs associated with building own data centres. According to Launchworks’ Laure Claire Reillier, for a platform-based company such as Apple “the beauty of a platform-powered ecosystem is that the combination of businesses – phone and app store – is worth more than the sum of its parts. In fact this is the rationale behind Apple’s decision to stop reporting hardware sales. They want analysts to start assessing them on the health of their ecosystem – and the margin generated – rather than the number of products sold”.
Given the trends in the corporate world, platform strategies are becoming increasingly relevant at the macro-level of countries and regions. As noted by Sangeet Paul Choudary, Founder of Platformation Labs
, “in a world dominated by platform companies that offers ways for customers and companies to connect, countries that want to act as global trade hubs must think like a platform nation”. In other words, in order to win the “platform race” national economies will need to exhibit such platform features as openness, benign regulatory environment, innovation and flexibility – this involves sufficient scope for launching start-ups, attracting talent, access to data, retraining the labour force, benefiting from regional growth poles, including in areas such as R&D. In many ways all this may involve the transformation of national economies and their regions into analogues of open platforms that favour innovation.
In many ways with the progression of globalisation the operation of national economies is based on platform/network effects related to competition for attracting investment, trade and technologies as well as talent. Across countries, some of the best conditions for building a platform economy are observed in Singapore, which enjoys a favourable environment for businesses – the country ranks at the top of the Government as a platform index.
Out of the 16 G20 countries in Accenture’s Platform readiness index the top five positions
were occupied by the US, China, UK, India and Germany. The index is based on factors that provide favourable conditions for digital-platform adoption, such as the “maturity of the digital population and market based on its size, savviness, culture and spirit of collaborative innovation” as well as “the quality of each country’s technology infrastructure and … market regulation
Beyond the level of national economies country alliances formed on the basis of regional integration arrangements as well as cross-regional partnerships also involved platform strategies. At the level of regional integration arrangements some of the examples of such strategies include the EU’s Digital Single Market (DSM)
strategy as well as the Digital Agenda of the Eurasian Economic Union
. The use of platforms is progressing also to the level of “integration of integrations” that brings together not only individual countries, but also regional integration blocks. The EU that is particularly active on that front is actively pursuing economic cooperation with ASEAN in the digital sphere
, while the Eurasian Economic Union has been exploring the possibility of launching digital alliances with key partners to promote greater connectivity in the sphere of transportation and infrastructure development.
The building of platforms that are meant to engender strong network effects and drive a cumulative increase in the weight of the network’s ecosystem is starting to reach a scale that has important implications for the global governance framework and its future development. Indeed, at this stage all of the main centres of the world economy are coming up with their own platforms that are imbued with a certain vision of how the globalisation process is to unfold. In the case of the EU it is the Alliance for Multilateralism (launched in April 2019), in the case of the US apart from the Trans-Pacific and the Trance-Atlantic projects that have lost some of the lustre in the past 3-4 years, it is the Quad/Quad+ that is gaining increasing momentum in building a framework for cooperation in the Indo-Pacific, in the case of China it is the Belt and Road Initiative (BRI) as well as the BRICS+ platform launched in 2017