The type of platform that is the most powerful and capable of disrupting traditional industries is an online-to-offline (O2O) platform. In this type of platform, the platform creator finds a way to bring the economies of the digital world to a physical good.
O2O platforms can add new members quickly, control the customer experience, leverage pre-existing capital and labor resources, and use data and algorithms to improve matches. O2O platforms can scale rapidly and compete aggressively. Investors see the potential of O2O and have been willing to fund aggressive expansion plans
Based on Brynjolfsson and McAfee, in their book “Harnessing Our Digital Future - Machine Platform Crowd”, that pricing, personalization, and trust are crucial elements of successful platforms.
Encouraging customer loyalty through customization
Successful platforms deploy their digital building blocks to personalize or customize participants‘ experiences. This creates two advantages:
- Added value: The participant gets a more personal or tailored experience.
- Improved stickiness of the platform: A participant who has carefully configured the platform to do what they want is loath to switch platforms because of the investment in the first platform.
Building trust through two-way reputation systems
Perhaps the most surprising aspect of many O2O platforms is the willingness of strangers to do things with other strangers. With BlaBlaCar, people willingly get into a stranger‘s car (or let a stranger into their car) for a long-distance, intercity road trip. With Airbnb, people willingly sleep in a stranger‘s home (or let a stranger into their home). Why? Because these platforms have mechanisms for creating trust.