Leveraging Value Creation to Drive the Growth of B2B Platforms

Networks, the Internet, and Cloud Computing, Internet, Media and Content, Privacy and Security and Innovation and Economic Growth

Article Snapshot

Author(s)

Edward G. Anderson, Jr., Jose Lopez and Geoffrey Parker

Source

Production and Operations Management Special Issue Article, 2022 (forthcoming)

Summary

Some assume that Business-to-Business (B2B) platforms are similar to Business-to-Consumer (B2C) platforms. However, the needs of B2B consumers are more complex. B2B platforms create value differently than B2C platforms.

Policy Relevance

B2B platforms operate on different principles than B2C platforms.

Main Points

  • Platforms often serve as intermediaries in matching markets, enabling interactions between two sides of a market (such as producers and consumers, providers and clients, or developers and customers) by providing an open infrastructure and governance.
     
  • Platforms create three types of value, as follows:
     
    • Standalone value, the value of the platform without network effects.
       
    • Same-side value, the value created by participants on one side for others on that side.
       
    • Cross-side value, value created for participants by third-party offerings such as apps.
       
  • For B2C platforms, both suppliers and consumers generally gain more benefits as more participants joint the platform, but B2B platforms do not enjoy the same returns to scale; B2B firms are substantially different from B2C firms.
     
  • B2B firms tend to be specialized in narrow fields such as aviation.
     
    • 72 percent create standalone value, and 23 percent create only standalone value.
       
    • 72 percent create cross-side value.
       
    • 14 percent create same-side value.
       
  • Generally, the needs of a B2B platform’s customers are complex and their relationships are intricate; the more complex the customer’s needs, the more likely the B2B platform will create standalone value.
     
  • The customers of the B2B are sophisticated and less easily swayed by advertising; the more sophisticated a platform’s customer, the more likely the platform will be industry-specific.
     
  • Business customers are sensitive about data privacy, and might ask to be compensated for use of their data; over time, more B2B platforms are likely to be sponsored by trusted business consortia.
     
  • As B2B platforms mature, they might put greater emphasis on cross-side value generated by standardized information flows, which make it easier for businesses to switch suppliers.
     
  • B2B platforms use their expertise in a particular industry and existing supply chains to get started; many B2B platforms are not engaged in matching.
     

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