Trust and the 'Platform Economy' – Part 3

Posted on 23rd May 2017

Welcome to the Business Empathy Forum and thank you for your visit. In this post I wrap up my discussion of on-line platforms and make several predictions about their eventual impact on trust and empathy in business.

What Does The Model Mean for Trust in Business?

In an earlier post I briefly described these digital platforms and mentioned four distinct types that have emerged: data platforms that gather and analyze data and then offer the results to other companies; e-commerce sites like Amazon, eBay, Uber and Airbnb; platforms based on operating systems such as Android, Windows and iOS; and the ubiquitous social networks like Facebook, LinkedIn, Twitter, and WeChat in China.

I also cited a column from ‘The Economist’ that describes the substantial economic advantages the large platforms have accrued over smaller competitors: “These modern platforms have three things in common. They are ‘multi-sided’, meaning they have more than one group of customers. They exhibit strong ‘network effects’: a growing group of one sort of customer attracts more of the other, which again draws in more of the first and so on. And they are controlled by one company, which can dictate the terms of trade, such as what type of businesses are allowed on its digital property and what they have to pay for the privilege.”

Probing deeper into the concepts mentioned in the quote, I described ‘network effect’ as the idea that the more people use a particular good or service, the more valuable it becomes. Two evident examples would be Amazon and Facebook, which continue to grow rapidly. I also sought to present a simple definition of ‘digital property’ and explained that it is often broken down into three sub-categories: personal digital property, personal digital property with monetary value, and digital business property (my italics).

This concept of digital business property is of great interest, particularly with regard to the quote from ‘The Economist’, that “… they (the platforms) are controlled by one company, which can dictate the terms of trade, such as what type of businesses are allowed on its digital property and what they have to pay for the privilege.” It would seem that the explosive expansion of on-line commerce and digital business property – and within that the burgeoning importance of the largest platforms – has conferred upon these ‘digital landlords’ considerable economic leverage, to the extent that they can ‘dictate’ the rules and rents.

What does this growing system of powerful on-line platforms imply for trust and empathy in business? I will hazard three predictions: first, on-line platforms will continue to grow in commercial importance and market power. Second, the relationships of digital ‘tenants’ with their digital ‘landlords’ will be almost purely transactional; contracts will play a central role. And third, clever businesspeople and astute enterprises will continue to leverage trust and empathy as important differentiators, winning by staying human in a digital age.

Good luck, and until next time…