Core 10: The Change Makers' Manual

Digital Innovation & Entrepreneurship

D igital platforms seek to secure new users, and often expand into new territory, where they face a mixed bag of rivals. It’s a cut-throat landscape. Just as a digital platform defeats its challengers to secure a market, an entirely different competitor pops up on another front. What worked against one rival might not work with another. And because digital platforms face challengers from different directions – often at the same time – their response must change swiftly. How can digital platforms stay ahead in a game where the goalposts are constantly shifting? How should they confront competitors from different sectors and with different technology? Do digital platforms enjoy winner-takes-it-all dynamics or is their new-found market dominance fragile? And how can they win over new customers who don’t really care which platform they use? We’ve developed a competition grid to help digital platforms determine how to compete – depending on the nature of the competition. How did MobilePay beat its rivals? This grid is the result of a seven- year study of MobilePay, a leading digital payment platform in Denmark. Our research has sometimes allowed us to be in the very room where the Danish platform’s strategies were discussed, and war plans were formulated. We’ve traced MobilePay’s journey since its launch in 2013 – it has since gone on to become the dominant payment platform in Denmark, currently used by more than 90 per cent of the population. Over the

similarities and differences. Using this analysis, we’ve identified four approaches that a platform can use to ward off competitors. Seize the middle: Encircle and mirror Maintaining the upper hand against a similar rival requires the most resources, time and speed. In MobilePay’s case, this means facing a competitor that is native to the payment industry and has a similar focus on lean IT infrastructure. We watched as MobilePay fought off Swipp – a digital payment platform offered by 81 Danish banks. As both platforms were fighting for the same customers and markets, MobilePay needed to get there first to encircle its rival and prevent any retaliation. To stay ahead and gain market leadership, MobilePay’s best defence was to match whatever its rival did next. Two-front war: Envelop and dislodge This approach is used against a competitor from the same industry background but with a different approach to technological innovation. We looked at the Nordic infrastructure payment provider Nets – once used by MobilePay – which launched a rival platform with a focus on complex technological innovation. Our advised approach here is to attack by enveloping the services offered by the competitor to boost value for existing customers. These types of competitors – which come from the same industry but have a different approach to technological innovation – are usually incumbent companies. Both digital platforms may even have collaborated, as Nets once did with MobilePay. But as the platform gains traction and begins to envelop its former partner, the relationship

years, MobilePay has had to fend off competition from diverse rivals such as fintech start-ups, banks and infrastructure payment providers with legacy systems, and more recently from established tech firms. Our method has led us to look at rivals’ differences and similarities – do they come from the same sector? Do they have the same approach to technological innovation? Choosing from four different approaches that we’ve outlined, a platform can place itself on the grid and work out the next best moves. To use the grid, a digital platform must first establish its

may turn sour. As part of its defence, we recommend that a platform dislodges this rival by decreasing dependency on its services. Armageddon game: Concentrate forces and fortify This approach is used against competitors who come from a different sector or industry but have a similar approach to IT innovation. In MobilePay’s case, these were tech giants who had gone beyond their core business to enter the payment market, but – like the Danish platform – streamlined their technology. Here, we advise platforms under threat to rally together globally and locally and consolidate their customer base as rivals enter the fray. We watched MobilePay try to outwit the likes of Apple Pay and Google Pay by boosting the customer experience with new features, such as personalised gifts. The Danish platform also began collaborating with other European digital payment platforms, all facing the same competition. Then, by switching to attack mode, MobilePay consolidated its existing technology and focused on these customers by offering unique services in comparison to its competitors. Fool’s mate: Augment and bet against This approach requires the least effort and applies to competitors who have the least in common, both in their industry background and in their approach to technological innovation. Here, we advise platforms to keep a watchful eye on what a competitor is up to – they don’t always need to engage directly. We looked at Paii, a digital payment platform offered jointly by telecom operators, who decided to develop complex

own competitive identity. Is the platform native to a particular industry – as MobilePay was to the payment market – or are they an industry outsider – such as Apple Pay? And what is the nature of their technological innovation? Are platforms opting – as MobilePay did – for a streamlined approach with lean and flexible IT systems? Or are they investing time and resources in building more elaborate IT infrastructure, often from scratch? As a second step, a digital platform needs to establish the competitive identity of its rivals according to these dimensions and determine

yet more efficient technology infrastructure. MobilePay bet on using different technology for its services and though Paii had beaten it to market, customers preferred the Danish platform. As part of its attack, MobilePay went on to strengthen its customer offering by boosting services, and a lack of take-up eventually forced Paii out of business. Over time, digital platforms will face many diverse competitors and may find themselves fighting on several fronts simultaneously. There’s no fixed prescription for survival, and situations play out differently depending on rivals’ characteristics and overall competitive dynamics. But once you identify your own competitive identity and that of your rivals, you’ll know when you can save your resources and just keep an eye out, and when to prepare for fierce battle. And while we haven’t studied every industry sector, we’d expect the grid to be applicable across other sectors where digital platforms are jostling for supremacy.

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