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How to turn a traditional business into a platform-based success

traditional business into a platform-based success
Written By: Srikar Reddy


How to turn a traditional business into a platform-based success

December 12, 2019 7-Minute read

The experiences of successful digital businesses such as Amazon, Airbnb, WeChat, Didi, Uber, Spotify or Expedia have implications for both consumer markets and the digital transformation of businesses across a wide spectrum of industries. These platform-based business models have four characteristics in common: they are open, scalable, connected and intelligent. Their success is largely due to their focus on a two-sided platform and the creation of a holistic business that skews a siloed approach.

Traditional businesses, because of the legacy they have in terms of business models and technologies, have struggled with their digital transformation when compared with born-digital companies. Is it possible to learn from platform-based companies?

Spanish firm Inditex, for example, opened its first Zara store in 1975. In the following four decades, this vertically integrated apparel manufacturer and marketer expanded throughout the world into more than 120 countries with 10,000 physical stores. Any company undergoing such dramatic brick- and-mortar expansion might be at risk of failing to adapt quickly enough to the digital revolution. In the apparel and footwear retail sector, about 9% of the dollar value of sales take place over the internet, with this growing at 24% a year traditional channels are growing at less than 4%.

Inditex decided a decade ago to transform its entire value chain, not just the retail end of it. It invested heavily in an integrated platform covering relationships with suppliers, factory management, distribution logistics and sales. The benefits have been diverse: more efficient inventory management and logistics, faster customer feedback and overall optimization of assets. As an integrated platform, Inditex capitalizes on omnichannel sales, including physical stores, department store corners, catalogue sales, telephone sales, online stores, mobile apps and a social media presence. By 2019 about 14% of all sales were digital in the markets in which it had already rolled out this strategy.

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This blog was originally published in the World Economic Forum.​