Finance Monthly - January 2022

he two clear leaders in this emerging digital economy are the US and China. Their current dominance in platform-based enterprises means that they are the most prepared for the forthcoming wave of disruption, which is due to their ‘platform vision’, i.e., their understanding of the underlying logic and digital architectures of the new digital economy. China especially is demonstrating long- term strategic thinking with considerable investment and technology partnerships in other countries. The impact of the digital economy is the result of two major disruptive innovations—platform- based business models and deep technologies such as data analytics, blockchain, quantum computing and advances in the life sciences such as nanotechnology. In order to understand how digital technologies are already revolutionising business, leaders need to develop an organisation- wide platform vision to overcome the conceptual confusion that often exists between digital businesses, systems and platforms. Thesedifferingconceptscanbebest understood by looking at how the digitalisation of business evolved. At the start of the first internet wave in the early 1990s, companies started to build portals that provided new channels to market, powered by the first e-commerce technologies. Online portals such as AOL and CompuServe, and then mobile portals such as British Telecom’s Genie Internet, created unified customer experiences by integrating information such as news, travel, weather, sports, and entertainment with the first generation of online shopping services. As web technologies and digital user experience design practices developed, portals brought new channels, media, interfaces, processes and technologies into the economy. Following this phase, we learned to create new digital systems. A digital system is an integrated set of digital components, service interfaces and computational infrastructure that is highly scalable, available, and economically efficient. Some examples are customer relationship management (CRM) systems, learning management systems (LMS), and content management systems (CMS). In the following phase of digitalisation, these systems were integrated to create digital solutions capable of producing or augmenting critical business capabilities. An example is a multi- channel marketing solution that can send a range of messages such as emails, SMS messages and which defines rules, business logic, and market segmentation on communications workflows. So a digital solution contains multiple digital systems and critically impacts on one or more business capabilities. Digital solutions usually have an internal perspective rather than user-centric platforms and are based on niche business capabilities. They are always created in a closed manner, meaning they cannot scale and extend to new markets and value propositions. Today, many modern startups are closed digital solutions rather than being built on an open platform logic. However, this does not stop these solutions from being positioned as platforms, resulting in conceptual confusion for leaders who are not fully digitally literate. This architectural misunderstand- ing can present significant chal- lenges for businesses that wish to transform digitally through acquisi- tions. Purchased businesses can of- ten be challenging to integrate into holding companies because their digital systems are not interopera- ble. Digital solutions can be evolved into platforms through architectur- al re-engineering, a process that requires the various digital compo- nents to be made open for exten- sion, evolution and reconfiguration. Platform-based business models can be understood by categorising the way in which people interact with them in three core ways: 1) Core interactions Relatively simple fundamental interactions which reinforce the core value proposition. 2) Volume functions These allow a platform to increase the number of people who use it. 3) Exchanges of value The access offered by a platform in return for users sharing personal information and content. When these different forms of interactions are explicitly understood, organisations are then able to build platforms flexibly, meaning that they can be opened up with extensions to create new solutions created by external partners. It is this aspect that is transforming the very structure of our global economy, where the focus is no longer on single Bus i ne s s & Economy 40 Finance Monthly.