Leveraging Value Creation to Drive the Growth of B2B Platforms
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ARTICLE 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.
KEY TAKEAWAYS
- 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.
- Standalone value, the value of the platform without network effects.
- 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.
- 72 percent create standalone value, and 23 percent create only standalone 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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About Geoffrey Parker
Geoffrey Parker is Professor of Engineering at the Thayer School of Engineering at Dartmouth College where he also serves as Director of the Master of Engineering Management Program. He is also a Visiting Scholar and Research Fellow at MIT’s Initiative for the Digital Economy. Professor Parker has made significant contributions to the field of network economics and strategy as co-developer of the theory of “two-sided” markets. His current research includes studies of distributed innovation, business platform strategy, and technical/economic systems to integrate renewable energy.
