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Understanding Digital Products and Digital Platforms

As technology changes every other day, products and businesses in the market take a different dimension. Digital products and digital platforms are the key aspects of the ever changing world of business. As digital products and digital platforms advances, the requirements of the users also grow. This implies that the service providers have to go by the trend to bring out the best products that will satisfy the customer needs. Due to high tech changes, the questions arises, “What is the difference between digital products and digital platforms? Are they both necessary for the growth of the business? What position do they hold in the current market? Well, most business people are left with tons of questions in their minds. To understand the two business aspects better, we are going to highlight the difference and importance of each of them to the business.

In simple terms, a digital product is simply a service or an entity consumed or used by an end-user. Such products or services are usually sold for later benefits. On the other hand, a digital platform is a form of business that has more benefits that connect two or more parties to do a business that can, later on, attract a large number end-users. As the word suggests, a platform provides means of communicating while a product is produced good or service ready to be rendered o the end user.

The distinction between Digital Products and Digital Platforms

Operational Difference

Both digital platforms and digital products have their distinct ways when it comes to how they operate. As for the products, the process of operation involves bringing out the best product one at a time to one end-user. This implies that the business produces the product or service which is meant to be used by the user. At the end of it all, a one way revenue stream is formulated. An excellent example of a digital product is Netflix. The process involves the Netflix Company offering showbiz services to their end-users. I simple terms, this means that the consumers are only meant to purchase the content and get the best out of it. At the end of it all, Netflix owns all the rights to the contents and that the end-user cannot resell it.

On the other hand, a platform does not focus only on one revenue stream. A platform is meant to make several sells. It is a channel through which both service provider and consumers find solutions to business-related problems and the solution is meant to benefit both parties. In simple terms, a platform fulfills the equation of demand and supply whereby party A is in need of a given service or product, while the party B is ready to fulfill the requirements of party A. A good example is the one for YouTube. Let’s take party A to be content creators and party B to be the one’s audience the content. You will notice that party A benefits from the number of views while party B benefits form watching the information posted on YouTube by party A. This simply means that YouTube is only a platform to bring together party A and party B yet none of them owns YouTube.

Circular Model and Linear Model

As for the platforms, they outdo linear model and partakes a circular model approach for its operations to be effective. You may wonder what this means. Well, in simple terms, the company offers top-rated service by providing a way through which third-party businesses and product consumers communicates. A perfect example is the one for YouTube whereby content creators around the world share the information with platform users. This point shows that platforms are of great importance and they play a crucial role in digital businesses worldwide.

To understand better the way a platform works relating on linear model, you will need to know that the purpose of linear model is to attract top-rated services by giving out the best product that is later on sold to users. A perfect example of linear model of operation is the Toyota Company that produces/manufactures vehicles. The vehicles produced are later on sold directly to the users. Another good example is the content production company such as Netflix which produces contents to be sold directly to end-users. You may wonder why a big business like Netflix that is up to date with current technology and trends can’t stand on its own. Well, it is simply not a business platform.

The State of Product or Service Economically

Let us start by analyzing the platforms. In this case, the costs of distribution and production are relatively low. This implies that there are minimal expenses and this increases the revenue. Let us take the typical example of YouTube where the content creator only requires to increase the number of subscribers for them to upload new content. This sounds fair. Right? The difference comes in whereby the platforms are known to be of great value, while the opposite is applied to the products. The main reason behind this is because products need more of human resources and financial resources for them to make more sale and attract more consumers.

Just like Netflix as an example, content producers will have to spend more finances on services such as production, marketing, creating, launching among others when they upload new content to the website. The moment the content attracts the consumers, more profits will be made and this will attract more and more customers.

The Structure of Business Models

Just as we discussed in the introduction, the primary purpose of a platform is to ensure communication is perfect on both parties. It is a circle that revolves around all the transactions and what it takes for the entire circle to run efficiently and satisfy both parties involved. The transaction has four main purposes that should be put in place to bear effective running. The purposes include connecting the service provided to the customer in demand, formulating terms of service, formulating foundation for both suppliers and end-users, and providing key features and services.

As for the products, the workload involved is a bit smoother because the supplier mainly focuses on how to develop and advance the product according to the trending technology. This implies that no transactions are involved. The main work is to deliver the required services or products to consumers. This leads us to the essential purposes of the products which include providing top-notch services to the targeted users, formulating and ensuring terms of service and standards are well maintained, and giving the foundation of customer.

Direct Network Vs. Indirect Networks

You may wonder what direct and indirect networks are all about. Well, let us take this scenario, when you have you possess a digitalized phone yet a friend of yours lacks the same, there will be a barrier in communication because the cycle is incomplete. However, if both of you had digitalized phones, there will be effective communication since both parties have what it takes to make the communication moving. Now the network effect is the extra advantage acquired from a new user that joins the connected networks.

The network effect comes in two distinct forms; there is an indirect network and a direct network. As for the product, it falls under a direct network. This implies that the number of user rises with a rise in business values. A good example is the Netflix whereby when the number of users rises, and it prompts an increase in the brand of Netflix; thus, its value rises.

As for the platforms, there are distinct forms of digital platforms like two or even more groups that offer services to one another. For example, in the uber business, more drivers are free to use the network which means that both the drivers and the uber platform benefits from the business. Another example is that of the digitalized forms, everyone here has a phone, and everyone can communicate smoothly.

Conclusion

That is the end of analyzing digital platforms and digital products. Digital products and digital platforms both are business models, yet each one has its dimensions when it comes to how they operate. After the analysis, you will notice that the digital platform has its importance and special features that make different. The same applies to digital products. The main word in both digital product and digital platform is digital transformation. They both have a common goal at the end; to generate revenue at the end of operation.

The purpose of creating a business is to fulfill the chain of demand and supply. Thus, the purpose of digital products and digital platforms is to give consumers the best of services and rise above all the trending technologies that arise every other day. Understanding the key differences between the two terms is what matters the most. At the end of the day, both have their requirements to fill the gap in the market, and they meet at a common point of generating revenue.

Are you looking to build a digital products or  platforms? then Aalpha can help, contact us today.

Stuti Dhruv

About The Author

My name is Stuti Dhruv & I am senior consultant at Aalpha, primarily working on pre sales, consulting with clients on latest technology trends.