AWS Cloud Enterprise Strategy Blog

Reimagining Your Business Model: How to Leverage Platforms and Marketplaces

In this guest post, Doug Smith, AWS Americas Advisory Shared Delivery Practice Leader, and Prasad MK, Senior Advisory Consultant, talk about using the cloud to support platform and ecosystem models. As enterprises consider the new business models and strategies available to them in the cloud, many should consider these an option; platform and ecosystems have proven successful across a wide variety of industries and circumstances.



Guest post by Doug Smith, Americas Advisory Shared Delivery Practice Leader, AWS and Prasad MK, Senior Advisory Consultant, AWS

Today’s dynamic business environment requires companies to think beyond traditional strategies. Many enterprises overlook a powerful and innovative new possibility: creating a platform or marketplace ecosystem in collaboration with internal and external partners. This post shows the benefits of such a platform and marketplace business model and elaborates the strategy for building one through three examples, involving (1) the emergence of a new giant, (2) an incumbent strengthening its leadership, and (3) a leader expanding into a new industry.

A new giant emerges

Chinese fintech Ant Group Six years ago, Chinese fintech Ant Group (formerly Ant Financial) didn’t exist. Today, it’s one of the largest financial institutions in the world and as of August of this year was valued at around $225 billion. They achieved this through an innovative business model transformation that brought together over 700 million users and 2,000 partner financial institutions. It started with a payment platform, Alipay. Through simple integration, Alipay became the payment standard across shoppers, small and medium businesses, freelancers, and many other entities.

Alipay leveraged data and analytics to understand its customer’s sentiments and identify their needs beyond just payment processing. Alipay identified adjacent ecosystems in financial services, insurance, mortgage, and wealth management and created a marketplace with the sole purpose of becoming a one-stop financial solution for its customers. This paved the way for the emergence of Ant Financial. Ant Financial became the marketplace facilitator between customers and various financial institutions and disrupted traditional players.

Ant Financial’s key to success was the ability to understand their customer’s needs beyond payment processing. This built a kind of stickiness with customers. Ant Financial was also able to identify newer ecosystem partners and create a purpose-driven marketplace. As a result, Ant Financial was able to increase the marketplace usage, scale through its network effects, and build a superior ability to attract and retain customers.

An incumbent strengthens its leadership

Pfizer In June 2020, Pfizer launched the Breakthrough Growth Initiative and committed up to $500 million to fund the effort. This initiative invests in and partners with niche platform players conducting research in the areas of inflammation and immunology, internal medicine, oncology, rare diseases, and vaccines. The Breakthrough Growth Initiative is just not an isolated strategy by Pfizer. Pfizer has created a robust process through its Pfizer Ventures, which scans the ecosystem to identify and invest in suitable partners who have the potential to strengthen Pfizer’s industry leadership.

This is an example of an established incumbent focused on building niche platform solutions with other niche players in the industry. There are many organizations similar to Pfizer, such as Boeing, that are creating next-gen platform solutions through symbiotic partnerships with other organizations.

A leader expands into a new industry

VerizonThe advent of 5G communication is creating a plethora of innovation opportunities across all industries. 5G is regarded as the foundation for future communication powered by its unmatched speed and low latency. Verizon has embarked on an initiative to create platform solutions by leveraging its 5G capabilities and partnering with other industries. One such example is Verizon’s partnership with Corning to create the factory of the future, powered by 5G. The purpose of this collaboration is to create a “smart factory” with “maximum automation, zero-touch quality assurance and near real-time supply chain tracking.”

The Verizon and Corning partnership will create a smart manufacturing platform that takes advantage of their differentiated strengths and partnerships with various ecosystem leaders within the factory floor and beyond. And more importantly, the partnership paves a way for Verizon to expand its solutions into the manufacturing industry beyond just being a communication services provider. By leveraging its differentiated product or solution and partnering with leaders in other industries, an established enterprise can enter a new market and quickly gain an advantage over existing organizations.

So how do you reimagine your business model?

In the above examples, enterprises and startups reimagined their business models by creating a platform and marketplace powered by new business ecosystems, blurring the traditional boundaries between industries. A successful strategy to reimagine business models involves four key steps:

  1. Identify the purpose. Respond to the unmet needs of the targeted customer segment. Taking a holistic outlook on customer needs, including how customers interact with adjacent industries, will help identify the true unmet needs of the customer. Steer your platform and marketplace toward filling those needs.
  2. Define a holistic ecosystem. Choose whether you’ll use B2B or B2C strategies and identify the ecosystem players who can help achieve your purpose. It is important to note that ecosystem players need not be traditional enterprises. Consider all entities (public or private sector) and startups that are involved in the ecosystem.
  3. Design a symbiotic operating model. Upon defining the ecosystem, the next logical step is to define the operating model. Identify the roles of the ecosystem players, governance, partnership models, and monetization strategies.
  4. Build a scalable platform and marketplace. After defining the operating model, it’s time to design a platform and marketplace to scale with the network effects of the ecosystem players. This provides the platform and marketplace the ability to drive intuitive customer interactions, personalized solutions, and enriched customer experiences.

The first step to creating a snowball effect

A snowball rolling downhillAs Jeff Bezos says, “Working backwards from customer needs often demands that we acquire new competencies and exercise new muscles, never mind how uncomfortable and awkward-feeling those first steps might be.” This is applicable to building disruptive platforms and marketplaces as well. The first step of this journey begins with establishing a seed team with an entrepreneurial mindset who can experiment and fail fast. Many enterprises and startups have created a snowball effect by taking this first step, catapulting their organization to new heights.




About the Authors

Doug Smith has over 28 years of Information Technology industry experience and held key positions at McKinsey, Dun & Bradstreet, RR Donnelly, Accenture and Amazon. Doug is a visionary and obsessed in enabling customers create future proof business strategies. Doug is the Americas Advisory Shared Delivery Practice Leader at AWS, responsible for Customer Strategy, Business Enablement and Technology Operations.

Prasad MK is a Digital Transformation and Innovation leader with rich experience across industry verticals. Prasad is a Senior Advisory Consultant at AWS and is responsible for enabling C-level executives create disruptive ecosystem driven business models and launch differentiated Platforms and Marketplaces

Mark Schwartz

Mark Schwartz

Mark Schwartz is an Enterprise Strategist at Amazon Web Services and the author of The Art of Business Value and A Seat at the Table: IT Leadership in the Age of Agility. Before joining AWS he was the CIO of US Citizenship and Immigration Service (part of the Department of Homeland Security), CIO of Intrax, and CEO of Auctiva. He has an MBA from Wharton, a BS in Computer Science from Yale, and an MA in Philosophy from Yale.