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How does the shift towards a platform economy affect the identification and development of core competencies in traditional companies?

     David Tang    |    Core Competencies Analysis


This article provides a detailed response to: How does the shift towards a platform economy affect the identification and development of core competencies in traditional companies? For a comprehensive understanding of Core Competencies Analysis, we also include relevant case studies for further reading and links to Core Competencies Analysis best practice resources.

TLDR The shift towards a platform economy requires traditional companies to reevaluate core competencies, emphasizing Digital Transformation, ecosystem management, and customer-centric innovation.

Reading time: 5 minutes

Before we begin, let's review some important management concepts, as they relate to this question.

What does Platform Economy mean?
What does Core Competencies mean?
What does Digital Transformation mean?
What does Ecosystem Management mean?


The shift towards a platform economy represents a fundamental change in how value is created, delivered, and captured, forcing traditional organizations to reevaluate their core competencies. This transition is not merely about adopting new technologies but involves a strategic overhaul of business models, operational processes, and, most importantly, mindset. In this context, identifying and developing core competencies requires a nuanced understanding of the platform economy's dynamics, the ability to leverage digital capabilities, and the foresight to cultivate an ecosystem that can thrive within this new paradigm.

Understanding the Platform Economy

The platform economy is characterized by digital platforms that facilitate exchanges between two or more interdependent groups, usually consumers and producers. Unlike traditional linear business models, platform businesses create value by enabling interactions and leveraging network effects. This model has been popularized by companies like Amazon, Airbnb, and Uber, which have disrupted established industries by connecting users and service providers directly. For traditional organizations, this means that competitive advantage increasingly lies not just in the products or services they offer but in their ability to facilitate valuable connections and create vibrant ecosystems.

Core competencies in this context extend beyond operational efficiency and product innovation to include data analytics, customer experience management, and digital agility. Organizations must develop a deep understanding of their customers' needs and behaviors, leveraging data to personalize experiences and anticipate demand. This requires a robust technological infrastructure and a culture that values experimentation and learning.

Moreover, the platform economy emphasizes the importance of strategic partnerships and alliances. Traditional companies must learn to collaborate with a range of stakeholders, including startups, technology providers, and even competitors, to co-create value. This collaborative approach necessitates a rethinking of traditional competitive strategies, focusing instead on how to enhance the overall value of the ecosystem.

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Leveraging Digital Capabilities

Digital transformation is a prerequisite for success in the platform economy. This involves more than just digitizing existing processes; it requires a fundamental reimagining of how an organization operates and competes. Core competencies must now include digital literacy across all levels of the organization, the ability to rapidly develop and deploy digital solutions, and a commitment to data-driven decision-making.

Organizations must invest in technologies such as cloud computing, artificial intelligence, and blockchain to enhance agility, improve efficiency, and create new value propositions. For example, by using AI for predictive analytics, companies can better understand customer behavior, optimize their offerings, and identify new market opportunities. Similarly, blockchain can enhance transparency and trust in transactions, a critical component of successful platform ecosystems.

However, technology alone is not enough. Organizations must also cultivate a digital culture that embraces change, encourages innovation, and fosters collaboration. This involves retraining and upskilling employees, flattening organizational structures to enhance agility, and adopting a customer-centric approach to innovation. The goal is to create an environment where digital capabilities can be continuously developed and leveraged to meet evolving market demands.

Building and Sustaining Ecosystems

The platform economy is inherently ecosystem-centric. Success depends on an organization's ability to attract, engage, and retain a diverse network of participants, including users, developers, service providers, and even competitors. This requires a shift from a mindset of control to one of influence, where the focus is on creating a compelling value proposition that draws participants to the platform.

Core competencies in ecosystem management include community engagement, platform governance, and network effect optimization. Organizations must develop strategies to incentivize participation, ensure fair and transparent operations, and create feedback loops that allow the ecosystem to evolve based on user input. For example, Apple's App Store success can be attributed not just to the quality of the iPhone but also to the vibrant ecosystem of developers creating valuable apps that attract users to the platform.

Furthermore, sustainability in the platform economy requires a delicate balance between competition and cooperation. Organizations must navigate regulatory challenges, protect user data and privacy, and manage the risk of disintermediation. This necessitates a forward-thinking approach to risk management, regulatory compliance, and ethical considerations, ensuring that the platform not only delivers economic value but also contributes positively to society.

In conclusion, the shift towards a platform economy demands a reevaluation of core competencies within traditional organizations. Success in this new landscape requires a deep understanding of digital technologies, a commitment to customer-centric innovation, and the ability to cultivate and sustain vibrant ecosystems. Organizations that can navigate these challenges will not only survive but thrive, capturing new opportunities for growth and value creation in the digital age.

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Related Questions

Here are our additional questions you may be interested in.

Can core competencies be outsourced effectively, and if so, under what circumstances?
Outsourcing core competencies can enhance competitive advantage when strategic elements are retained in-house, aligned with external expertise, and risks are managed. [Read full explanation]
In what ways can mergers and acquisitions impact an organization's core competencies?
Explore how Mergers and Acquisitions can enhance or dilute an organization's Core Competencies, impacting Competitive Advantage, Innovation, and Market Position through strategic alignment and integration management. [Read full explanation]
How should companies adapt their core competencies in response to global market shifts?
Organizations must strategically adapt core competencies through Digital Transformation, Innovation and Agility, and a focus on Sustainability and Social Responsibility to navigate global market shifts effectively. [Read full explanation]
What strategies can organizations employ to protect their core competencies from being replicated by competitors?
Protecting core competencies involves Innovation, Strategic Human Resource Management, Intellectual Property Protection, and Strategic Alliances to create sustainable competitive advantages that are hard for competitors to replicate. [Read full explanation]
What is core competency in marketing?
Core competencies in marketing are unique organizational strengths that deliver exceptional customer value, differentiate from competitors, and drive superior performance through an integrated strategic framework. [Read full explanation]
Competencies vs. Competences: What's the Difference?
Understanding the distinction between Competencies and Competences is crucial for effective Talent Management, aligning technical skills with strategic objectives and fostering organizational success. [Read full explanation]

 
David Tang, New York

Strategy & Operations, Digital Transformation, Management Consulting

This Q&A article was reviewed by David Tang. David is the CEO and Founder of Flevy. Prior to Flevy, David worked as a management consultant for 8 years, where he served clients in North America, EMEA, and APAC. He graduated from Cornell with a BS in Electrical Engineering and MEng in Management.

It is licensed under CC BY 4.0. You're free to share and adapt with attribution. To cite this article, please use:

Source: "How does the shift towards a platform economy affect the identification and development of core competencies in traditional companies?," Flevy Management Insights, David Tang, 2025




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