This signal post summarizes our newest research report on an interview study that explores how Finnish companies view and capitalise on opportunities in the platform economy. The study is based on interviews that were conducted in Finland and in the USA in 2019 with companies from various business sectors such as food, pulp and paper, manufacturing and security.
For more details, read the full report.
The aim of our interview study was to find out how Finnish companies view and capitalise on opportunities in the evolving platform economy, the phenomenon that we broadly define as a way of creating value and organizing layered (business or other) activities enabled by digital platforms, information and data.
The guiding research questions for this work were:
- How do Finnish companies understand the concept of the platform economy in general and in their business sector?
- What opportunities and threats do Finnish companies perceive in terms of the technological, social and political aspects of the platform economy?
- What factors act as drivers or barriers in the process of Finnish companies entering the platform economy?
- How do the findings from Finnish companies compare to those from the USA?
In 2019, a total of 10 interviews were conducted in Finland and 8 interviews in the USA, representing various business sectors such as food, pulp and paper, manufacturing and security. The rationale for complementing the Finnish interviews with a handful of American interviews was to gain a rough overview of the similarities and differences between the two, even if meticulous comparisons could not be made based on these limited samples.
Results and recommendations
The results of the study reveal new aspects of Finnish companies’ attitudes and preparedness for the uptake of platform economy opportunities. For example, the companies appeared to be well aware and informed about the platform economy and platform-based business models even if risk-averse attitudes and the legacy of traditional non-platform businesses were described as significantly slowing progress. In comparison, the interviews in the USA focused more on how important it is to make progress fast and learn from the more rapidly changing sectors. The American companies also seemed less risk-averse, more open to data sharing and more strongly customer-driven in their service development.
We conclude our report with a discussion and analysis of the strengths and weaknesses of Finnish companies in the emerging platform economy. These are further processed into recommendations for the Finnish companies and public sector decision-makers.
Key recommendations for the Finnish companies that are willing to capitalise on the opportunities of the platform economy (for details, see the full report):
- Dream big and adopt a bold mindset.
- Identify and address the bottlenecks.
- Build and join partnerships and ecosystems.
- Listen to the customers’ needs and values.
Key recommendations for Finnish public sector decision-makers who are willing to support progress in the platform economy (for details, see the full report):
- Maintain support measures and address gaps in the innovation chain.
- Tap into the positive social and societal aspects and potential of platforms.
- Enable business and safeguard public interest through regulations and improve response time.
- Deepen public-private collaboration.
For more information
Auvinen, H., & Koivisto, R. (2020). How do Finnish companies view and capitalise on opportunities in the evolving platform economy? Interview study. VTT Technical Research Centre of Finland. VTT Technology, No. 376
This signal post gives a short summary of a literature review on GDP and it’s usability as a measure in the increasingly digitalised economy. For more details, download the full report.
A measure for the manufacturing age
Gross Domestic Product was adopted in the 1940s, the age of manufacturing, to measure the strength of a country’s economy and it also became a proxy for well-being. It’s a measure of the monetary value of all goods and services produced by a country. A rapidly increasing portion of today’s economy is technology services, including platforms that offer “free/add-supported” products or act as international online intermediaries to facilitate the exchange of goods, services or information. By definition, the GDP doesn’t measure “free” products. In economic terms, the value a consumer gets from the “free”, and potentially higher quality products is measured by utility or consumer surplus, which is also not captured in GDP.
The slowing of GDP growth
While the GDP of most of the world’s economies has been increasing since its inception, the rate of GDP growth has slowed recently. More importantly, the growth rates of GDP per capita and GDP per hour worked (labour productivity) have also slowed. While the root cause of the slowdown in GDP growth has been debated for several decades, most economists agree that a portion of the slowdown is real and not solely an issue with capturing the growth of the platform and technology sector. Structural issues like demographics as well as the fact that past innovations like the electric motor likely had a larger impact on productivity than recent innovations are all contributing factors.
The uniqueness of the platform economy and the technology sector
While the reasons above partially explain the slowdown in GDP growth, many agree there is a growing proportion of the economy that isn’t being captured as part of GDP. There are a number of unique aspects of the platform economy and the technology sector that make it challenging to measure, manage, and ensure fair taxation. These include: ability to scale at low cost; “free/ad-supported” pricing models; borderless reach; blurred lines between consumers and producers; venture funding that encourages long-term market capitalisation over short-term profitability; digital services that replace physical products; and there’s a decreasing marginal contribution to GDP as the technology sector grows.
Given the unique aspects of the platform economy and the technology sector described above, it is possible that some aspects are having a negative influence on GDP growth while other aspects are having a positive influence that is difficult to capture using the current definition of GDP. The growth of the platform economy has been partially based on a culture of “free/low cost” products and services that provide utility and happiness to people beyond their economic value. This consumer surplus adds up to substantial uncaptured GDP.
This additional utility and happiness create a positive feedback loop that drives growth in the technology sector and the platform economy. As people seek to increase utility and happiness, they consume more in the platform economy which leads to its continued expansion as well as growth in uncaptured GDP.
Soft Innovation Resources
Understanding how to encourage the expansion of the platform economy may be key to increasing the rate of GDP growth. Watanabe, et al., postulate that countries (and companies) can increase their rate of growth by diverting a portion of their resources away from R&D and towards enabling Soft Innovation Resources (SIRs) as a complement to traditional R&D. These are soft resources that can be harnessed to drive innovation and growth at individual companies, which rolls up to growth at the country level.
Enablers of Soft Innovation Resources are listed below:
- Supra-Functionality: People seek out products and services where they experience satisfaction beyond utilitarian functional needs. They desire social, cultural, aspirational, tribal, and emotional benefits.
- Sleeping or Untapped Resources: These are existing resources that are under-utilized resulting in an unused capacity that may be spread sparsely and difficult to access without technology.
- Trust: People’s level of trust in various aspects of their lives, society, and the economy can affect their participation and contribution to innovation and the creation of economic value.
- Maximizing Gratification: Seeking gratification of needs is a key pillar of Maslow’s theories about motivation and human behaviour. As increasingly sophisticated needs are gratified, there is a desire to maintain and build upon the increased level of gratification.
- Assimilation and Self-Propagation: Sustainable growth can be obtained when past innovations are assimilated into future innovations, effectively creating a self-propagating cycle of innovation.
- Co-Evolution: The coupling of two or more items which then innovate and evolve along a common path.
The future of GDP measurement
Although the GDP measure has been revised over time, there is widespread recognition that more changes are needed if it’s to remain relevant as the digital economy grows. There is debate about how platforms and the digital economy are contributing to GDP and the amount of uncaptured GDP. For example, the US Bureau of Economic Analysis (BEA) concluded uncaptured GDP would increase the rate of GDP growth by less than 0.01% per year. On the other hand, Brynjolfsson, et al. developed a measure they call GDP-B and they concluded that the consumer surplus from Facebook alone would increase the rate of US GDP growth by 0.1% per year and platforms such as internet search, e-mail, and maps would contribute significantly more. And somewhere in between, an independent study commissioned by the UK government concluded that annual GDP growth is understated by 0.3% to 0.6%, largely due to the platform economy.
It’s clear there are wide-ranging opinions on the magnitude of uncaptured GDP. International organisations such as the OECD and World Economic Forum are also trying to bring clarity to the situation. Additionally, a number of measures are being developed such as the Human Development Index (United Nations) and the Better Life Index (OECD) with a focus on well-being to augment GDP.
Strategies for future growth
The slowdown in GDP growth is complicated and multi-faceted. Perhaps some of the structural impediments to growth can’t be mitigated. Perhaps because digital platforms and their ecosystems function as highly efficient intermediaries that increase the flow of goods and services at substantially lower costs, we’re experiencing a temporary downward adjustment and growth will resume from a new baseline. As a result of this complexity, strategies to encourage future growth are challenging and diverse.
At the country level, the literature suggests strategies such as: developing economic measures to supplement GDP and better inform public policy in the digital age; create policies to increase skills training and corporate technology purchases to increase adoption of new technologies; develop policies to encourage experimentation in new technologies and business models; focus on improving the quality and lowering the cost of healthcare and education; increase immigration; enable Soft Innovation Resources; and refine international taxation and shipping practices to increase fairness in the shipping and taxation of digital goods and services.
At the company level, the literature suggests strategies such as: lagging firms should invest in skills training and increase the adoption of new technologies; leading firms should include the enablement of Soft Innovation Resources into their R&D and product development activities; and expand current products and services into platforms and expand platforms into platform ecosystems.
Selected articles and websites
The Economist – Measuring Economies – The trouble with GDP
Harvard Business Review – How Should We Measure the Digital Economy?
OECD – Are GDP and Productivity Measures Up to the Challenges of the Digital Economy?
Robert Gordon – Declining American Economic Growth Despite Ongoing Innovation
Watanabe, et al. – Measuring GDP in the digital economy: Increasing dependence on uncaptured GDP
Tou, et al. – Soft Innovation Resources: Enabler for Reversal in GDP Growth in the Digital Economy
MIT – GDP-B: Accounting for the Value of New and Free Goods in the Digital Economy
British Government – Independent Review of UK Economic Statistics: Final Report (2016)
US Bureau of Economics Analysis – Valuing ‘Free’ Media in GDP: An Experimental Approach
Investopedia – Definition of consumer surplus
OECD – Measuring the Digital transformation
World Economic Forum – Welcome to the age of the platform nation
Forbes – Uber will lower GDP
United Nations – Human Development Index
OECD – Better Life Index
OECD – Unified Approach to taxation in the digital economy
In this signal post we discuss the opportunities and threats in how the platform economy is changing the gaming industry. While digitalisation and the internet have already transformed the sector in many ways, technical and business models innovations are continuously giving new shape to the market. Legislative and regulatory approaches are also changing, with a strong need to address the risks and negative impacts involved. Consumer protection and money laundering are just two examples of the societally and economically important challenges in the core of gaming.
In simplified terms, gambling means wagering of money on an uncertain event and uncertain outcome, with the aim of winning more money. Gambling entails consideration and risk-taking as well as the promise of a prize. The word ‘gaming’ is typically, and in this signal post, used in reference to legal gambling, i.e. gambling services (not computer, video and mobile games, although connections to those will be discussed in the last paragraph) offered by companies in compliance with the law. These laws do, however, differ greatly between countries and regions, ranging from total bans to strategic gambling tourism as in Monaco or Macau.
Good (and not so good) use of platform strategies
Online gambling providers employ the same strategies found in other areas of the platform economy. Their systems are based on an eCommerce platform upon which various games and offerings are built. While many operate in a business to consumer (B2C) model, others also offer products and services in a business to business (B2B) model. By gathering feedback from their user base and testing new products and services, the online gambling providers create an ecosystem around their platform to drive innovation and build their customer base.
Providers that are licensed through countries with strict regulatory frameworks, such as in Europe and North America, are obligated to operate in a transparent and responsible manner. There are other countries with less robust regulations and in some cases, online gambling providers operating there use platform technologies such as blockchain, cryptocurrencies, and smart contracts to both build trust with their customers and to operate without complying with regulatory and tax laws.
A recent study prepared for the European Commission paints a picture of the European regulatory landscape for online gambling. Taking into account the growing consumption of online gaming, the report addresses the many challenges that urgently require a stronger regulatory response, such as gambling addiction, protection of minors, consumer protection, integrity of sports, money laundering and crime. What makes regulating and enforcing regulations extremely complex in the online environment is that gambling services are offered across borders, often by virtual gambling facilities that may consist of layered eco-systems of service providers. Services are also available 24/7, their use is made extremely convenient, transactions take place immediately and the user may perceive the game experience as being anonymous.
The study emphasizes the importance of European level action. However, specific European Union (EU) level regulation is not suggested, which is in alignment with previous communications by the European Commission. National policies, and therefore national regulations, share a lot of objectives but have also major ideological differences. Harmonisation would, therefore, be a step too far at this point, but joint efforts in effective enforcement, for example, is in the interest of all parties.
The online gaming and betting operators established, licensed and regulated within the EU have organised themselves as the European Gaming and Betting Association (EGBA). The aim of EGBA is to ensure a safe and reliable European digital environment for online gaming by working together with national authorities, EU authorities as well as other stakeholders. The association is committed to a high level of consumer protection while developing regulated services with the goal to be attractive enough to channel users away from unregulated offers.
According to EGBA, the online gambling market in Europe has an annual growth of around 10% and the gross profits of the sector are expected to grow to €24.7 billion in 2020. Comparing online and land-based gambling, in 2017 the ratio between the two was 21:79. The top three most popular online offers are sports betting (40%), casino games (32%) and lotteries (13%). Interestingly, Europe is the leader, with the share of European services accounting for 49% of the global online gambling market in 2017. The international business opportunities for European gaming services is expected to grow further, especially in several US states where sports betting was recently legalised.
Case of Finland
In Finland, the gaming system is based on the exclusive right principle, and since the merger in 2017, all gambling games are being offered by one single operator Veikkaus Oy. The company is owned by the Finnish State, and the offering covers lucky games, slot machines, instant games and skill games, with one-third of its activity taking place online. Veikkaus has a strong obligation and commitment to operate games responsibly and mitigate risks, and the revenue generated is used for societal causes in its entirety. This means that roughly one billion euros per year is distributed, via the relevant ministries, to beneficiaries in culture, sports, science, youth work, etc.
Even with the long tradition and strong value basis, debates about Veikkaus and the Finnish gaming system in general get heated from time to time. For example, last autumn Veikkaus’ new strategy aimed to address the public discussions about whether the fact that revenues benefit the common good justifies the problems caused, and typically these problems are being borne by those in the weakest position. Building a safe and more responsible gaming environment is one of the big strategic goals of Veikkaus, and the decision to speed up the adoption of compulsory identification on slot machines is one practical step. This means that starting in January 2021 Veikkaus will introduce new technology that will better prevent underage gaming as well as enable players to set a ban on their own gaming.
When it comes to the digital and online world, Veikkaus is a pioneer in esports solutions, and it was among the first companies in the world to offer legal esports betting in 2014. Service development in the esports domain is continuous, and products, services and platforms around esports have been developed in collaboration with Veikkaus and others using a unique concept, the Innovation Challenge Week. The winner last year was German GameBuddy, with their innovation of a social community platform for gamers.
Interesting insights into the Finnish case are also found in the survey commissioned by Kasino Curt in 2019 that gathered citizens’ views on the monopoly, political decision making and negative impacts around gaming. One clear finding is that Finns are not fully content with the current mitigation actions to fix problem gaming: 27% of respondents said enough was done, whereas 44% disagreed. 58% went so far as to agree that gambling machines should be removed from everyday environments such as grocery stores, but 29% would not make such changes. A majority of respondents also thought Finland should break away from the monopoly and introduce a licensing system instead, totalling 40%, whereas 29% disagreed on this. The gaming market and industry implications of such a change would be significant. Public discussions comparing future alternatives are active, and the pros and cons of the licensing system option should be studied carefully in order to see if licensing could be a viable approach in the increasingly global gaming environment expressed in the platform economy.
Connections to computer, video and mobile games
Millennials and Generation Z have grown up in a digital world with easy access to computer, video and mobile games. They have a preference for entertainment where there is skill involved and there is the option to play against other players. Not only are online gambling providers catering to this preference, but physical casinos are starting to replace traditional slot machines with games that resemble video games in an effort to attract younger customers. Additionally, these younger generations grew up playing on multi-player game platforms like Fortnite, CS:GO, and Defence Of The Ancients (DOTA) and are now driving the demand for professional esports tournaments and esports betting.
The near-ubiquitous presence of tablets and mobile device platforms means young people have unprecedented access to mobile games. In many cases, these are simple entertainment. However, there is a growing segment social casino games that are introducing young people to virtual gambling. Social casino games simulate typical card and table games but players wager virtual credits and no money changes hands. The games are often integrated into social media platforms and the outcomes are not always random. Instead, they are based on psychological theories that increase engagement and player satisfaction. In some cases, online gaming providers also produce social casino games and there is growing concern that the use of social casino games amongst young people is a “gateway” to money gambling in adulthood that may contribute to gambling addiction.
Selected articles and websites
Alison Drain: White Paper, The Converging of the Gaming and Gambling Ecosystems
Esportsearning: Top Games Awarding Prize Money
European Gaming and Betting Association (EGBA)
Hackernoon: What is the Future of Gambling Industry?
Hyoun S. Kim: Social Casino Games: Current Evidence and Future Directions
Kasino Curtin tilaama tutkimus osoittaa: suomalaiset eivät luota kansanedustajiin rahapeliasioissa
MintDice: How Cryptocurrency is Changing Online Gambling in Europe
NewsBTC: MECA Coin – Creating a Democratized Online Gambling Ecosystem on Blockchain
Publications Office of the European Union, 2018: Evaluation of regulatory tools for enforcing online gambling rules and channelling demand towards controlled offers
Veikkaus: German GameBuddy wins Veikkaus Innovation Challenge Week
Veikkaus: Responsibility for the individual in focus in Veikkaus’ new strategy – compulsory identification on slot machines brought forward by a year
Veikkaus: Veikkaus – a Finnish gaming company with a special mission
Veikkaus: Veikkaus to hold an Innovation Challenge Week to find startups and begin collaboration – focus on esports
In this signal post I will share my takeaways from attending the Platform Economy Summit Europe in Frankfurt, September 17-18, 2019. The summit brought together business leaders, investors, policy makers and platform strategists to discuss opportunities and threats of platform-based business models. Political, technological and societal dimensions were also explored, especially from the European perspective, and a wide range of strategies to harness the potential of the platform economy were laid out.
The two-day summit featured inspirational in-depth talks by the platform economy experts and gurus, most notably by Professor Marshall Van Alstyne from MIT IDE and co-author of Platform Revolution Sangeet Paul Choudary. Success stories, lessons learned as well as future aspirations were shared by companies and organisations from all walks of life, such as Alibaba Group, Deutsche Bank, European Commission, World Economic Forum, Apigee, FoundersLane, MaaS Global and Amadeus. Lively panel discussions occasionally evolved into profound debates, and the interactive participation of the audience ensured all points of view were being heard.
Next I will summarise my main takeaways under the following statements:
- “The platform game has only just begun.”
- “There is no ONE platform strategy.”
- “Emerging technologies will rule in round two.”
- “The bold yet patient mindset will succeed.”
These statements reflect the overall tone of discussions at the summit, and I will explain them using what was heard and seen in the presentations, talks, panel discussions, message board conversations and polls, written materials and networking activities.
”The platform game has only just begun”
As discussed in one of our previous signal posts, the platform economy is still in its infancy, and we have only seen the very first success stories. This was also the message at the summit, and future potential across different sectors and industries was widely discussed. In fact, platforms have potential to transform all and any traditional industries but also to blur sectoral boundaries. Platform business is all about ecosystems (not egosystems) that allow different fields to collaborate and innovate something new.
Expected next steps in platform development assume tighter B2B ecosystems to form and blossom. Platforms and “platforms of platforms” will enable business relationships among competitors as well as complementors to evolve. From the European perspective the regulatory harmonisation and solid foundations in public digital infrastructure provide a good breeding ground for this. Unlike what we often hear in the mass media, various speakers at the summit saw European public sector initiatives as profoundly productive support actions to foster responsible and healthy platform business. Examples include national and EU-led actions to re-regulate and de-regulate, such as the GDPR (General Data Protection Regulation) and PSD2 (Payment Services Directive 2). European Single Market was also seen as an encouraging environment for European platforms to grow in and scale up from, on the path from local or national to global business.
Silicon Valley may be the mecca of technological innovation, and China has recently established itself as the leading business model innovator. Europe can learns from these, but also highlight its own strengths, such as its special focus on social and societal value creation. Awareness of the various pros as well as cons of the platform economy is high in Europe and keeps growing, and this attitude supports balanced and responsible development of platform activities.
”There is no ONE platform strategy”
All companies, organisations, business sectors, industries and markets have their unique qualities, and consequently there cannot be one single platform strategy that would fit all. The “digital natives” that have grown into global platform giants are obviously very different from moderate-sized incumbents in traditional industries, local markets and long business traditions. Understanding of what types of platform strategies fit with different situations is growing, and an integral part of it is also to find your own role relative to other actors in the so called ecosystem economy.
The strengths and weaknesses of an organisation help determine the best platform strategy. The size, maturity, traditions, legacy, resources, capabilities and skills are all important factors. Not everyone needs to set up their own platform, and an important step is to assess which one of the basic roles in the platform economy could suit you: the orchestrator, partner or contributor. You also need to consider who you want to join forces with and experiment and collaborate with. And who do you want to challenge and compete against?
”Emerging technologies will rule in round two”
Discussions on the platform economy are often coloured with technologically visionary ideas on AI (artificial intelligence), machine learning, blockchain technologies, big data and APIs (application programming interfaces), cloud computing, IoT (internet of things), etc. These technologies will improve functionalities such as identity management, ecosystem coordination, fostering of openness and trust, decision assistance and anomaly detection. These and more opportunities were addressed at the Platform Economy Summit, and amazing future aspirations were laid out by speakers on how these advanced technologies will be harnessed in the future.
However, the message was also pretty clear that there is no need to procrastinate and wait for all of these technology solutions to mature, even if they will be game changers later on, in the “round two” of the platform economy. Currently available technologies are more than enough to get started with, and the first round of the platform economy game is in full swing. To get your platform strategy ready and implemented is the thing to do right now, and in practice this could mean for example getting a good understanding of what is the potential with data in your branch of business. There is static and dynamic data, and there is also primary and secondary data. APIs are an important tool in ecosystem building, and B2B API activity correlates well with business growth and success.
”The bold yet patient mindset will succeed”
The often repeated message of the summit was, that companies willing to embrace the platform economy should get started and crystallise their platform strategy as soon as possible. Studies show that even a “failed” platform strategy results in better financial outcomes than no strategy at all. Developing a platform strategy necessitates boldness, radically innovative thinking and support from the top management. A platform strategy needs to go beyond digitalisation and incremental improvements, with the aim to operationalise new business models enabled by platforms. It needs to be integrated into the overall corporate strategy and show willingness to change and rethink the old ways.
But even if a platform strategy requires risk taking and changes in many aspects, including the company culture, it does not need to mean suddenly abandoning the core business. Instead, the platform strategy could be implemented, for example, in a separate business unit that is granted the resources and support to explore and develop the company in its new role as an actor in platform ecosystems.
Lack of boldness and leadership were mentioned as the common delimiting factors in platform strategy uptake. But along the next steps, if platform opportunities were being explored, the consequent challenge was often the lack of patience in fostering platform business growth. We are so used to hearing the overnight success stories of global platform corporations that our expectations of the pace of growth may be unrealistic. Instead, a patient mindset is needed, so that innovation horizons are conquered one step at a time. Also, monitoring the development of platform initiatives may often require different performance metrics and KPIs than what the traditional business is measures with. Therefore new approaches and patience will be also needed in follow-up processes.
Selected articles and websites
Jacobides, Michael G. (2019). In the Ecosystem Economy, What’s Your Strategy? Harvard Business Review
MIT: Marshall Van Alstyne
Platform Economy Summit Europe
Platform Strategist: Sangeet Paul Choudary
This signal post discusses the experiences gained by interviewing different platform experts in Silicon Valley and the San Francisco Bay Area, California, in April 2019.
What is different in Silicon Valley?
Silicon Valley and the Bay Area are known as the birthplace of many technological achievements and innovations, including the platform economy. The biggest platform companies – Facebook, Apple, Microsoft, Airbnb, Uber and Slack, for example – have their origins and headquarters in the region. There are clear reasons for this development: investment funds, expertise and networks are available all in the same place. It is possible to get the attention in the start-up phase, get funding and support and build networks to grow the company. The good reputation of Silicon Valley certainly also contributes to its importance.
Even though Silicon Valley is known for its B2C (business to consumer) platform giants, other types of platforms also flourish there. One could say that the innovation and business networks are also organized like platforms. For example, the start-up incubator SVAdvantage connects innovators and companies that need solutions. They also offer facilities to develop and test technologies. Suchlike B2B (business to business) platforms are not as well-known as the B2C platforms.
The other difference between Silicon Valley and Finland is the mindset. In the Bay Area, trust is born from success and from sharing it. This in turn creates a positive feedback loop resulting in even more success. It is pure business even though there is often an element of tribal – referring to fostering of loyalty between employer and employee – culture in technology companies too. In Finland, emotions – reflecting traditional responsibility culture – are important also in creating business. In the US, to set up a company with the intent to quickly sell it to a larger company interested in their technology versus grow the business themselves, is a popular strategy, whereas in Finland we may regard such exit strategies even as treachery or failure. The same difference appears in the attitude to going bankrupt: in Finland, it is a shame, but in the US, learning from ones failures can be viewed as a precondition for success and people are encouraged to try again. The cultural differences appear also in the attitude toward copying or emulating business ideas and strategies from others in the US, whereas it is not at all a popular ideology in Finland.
Security, privacy and ethics
Freedom is a distinctive feature in the US, and it applies especially to business. Data – the essence of a platform – is a free resource to be exploited. However, security is an important issue for a company as well as for the whole nation. One of the crucial preconditions for safety and security is situational awareness, which can be the essence of a security platform. The fast grown platform company Slack is a good example of a platform that has developed new security related solutions. They are using their own product in-house, “drinking the company Kool-Aid”, and pioneering in showing how Slack can be used in security.
The traditional physical security business, on the other hand, is heavy with old risk averse thinking and legacy. Culture change is needed, and platforms can offer a solution. The physical environment is being digitalized. For example, ID batches or keys are disappearing and replaced by biosensors and the need for human physical presence in a space for surveillance and monitoring purposes is being replaced by robots. Integrating security data on a platform, will allow for any situation to be shown, monitored and controlled on a single pane of glass. On the regulatory level, the role of government is to provide safety and security for the citizens participating in the platform economy.
Due to some local privacy and ethical cases (e.g. Facebook and Uber) and due to the developments in Europe, the privacy and ethics discussion has started also in US.
What next? Future of platform economy
The typical thinking of rapid and continuous growth seems to dominate the platforms economy discussion. New technologies enable capacity to integrate more and more functions and operations at lower cost and thereby advance integration. Platforms can also be integrators forming “platforms of platforms” or “meta platforms”. For example, traditional safety and security services may be disrupted by new platforms, which offer the situational awareness in the digital form on a single pane of glass.
The giant US based platforms have lately got negative publicity for privacy and ethical reasons. A new attitude in platform development seems to, however, be about to emerge, aiming to offer trust, ethics and empowerment.
References and links
The transport and mobility sector is one area of the economy already benefitting in a big way from platform innovations. Megatrends of digitalization and servitization are having a major impact on transport systems around the world, and as a result the transport sector already functions, to a great extent, according to the principles of the platform economy. For example, we see app-based innovations in ride-sourcing (e.g. Uber) and in mobility as a service (MaaS) packaging (e.g. Whim). The pioneering platform companies in transport are becoming mainstream alternatives to traditional models that typically involve car ownership. User interest in access-focussed platform services such as these is growing. To support these developments, and to manage unintended negative impacts, new regulations have also been introduced (e.g. the Finnish Act on Transport Services).
The platform economy meets the current transport discourse
In recent years, the transport sector has eagerly adopted the terminology, business models and ecosystem approaches that characterize the platform economy. This is not only seen in entrepreneurial initiatives and business innovations but also in the public sector sphere. Decision-makers and policy planners have acknowledged the great potential of platforms to promote more sustainable mobility in terms of accessibility, flexibility, affordability, environmental performance, etc. Steering measures and regulations can help platform-based transport and mobility market grow in a sustainable manner, i.e. building on public transport services and with preference to environmentally and socially sound solutions.
In the current transport discourse, the term platform economy is already well established. Service providers identify themselves as platform owners, and politicians alike have grasped the opportunities involved with platform-based value creation (see, e.g. Anne Berner, the Minister of Transport and Communications of Finland). It has even been suggested, that the platform economy is the currently reigning ideology in transport policy.
Recent and expected developments in the field
Recent examples of new platform-based transport services in Finland can be found under Traffic Lab, an initiative by Finnish Transport Safety Agency that brings together innovators to collaborate, share and learn. These and many others were presented at the Transport and Infrastructure 2018 seminar this autumn.
In turn, the public sector ambitions to incorporate digitalization and servitization into the transport sector were recently highlighted in the scenarios for carbon-free transport by 2045. From the follow-up work on these scenarios, we expect to see concrete action plans that embrace the full business and societal potential of platform innovations.
Selected articles and websites
Anne Berner, Minister of Transport and Communications of Finland: Alustatalous liikuttaa myös Suomea, Impulssi-blogi
Anne Berner, Minister of Transport and Communications of Finland: Opening markets in the digital era, New Europe
Carbon-free transport by 2045 – Paths to an emission-free future. Interim report by the Transport Climate Policy working group
Heikki Metsäranta: Ideologiat liikennepolitiikassa, Tie & Liikenne 4, 2018
The Ministry of Transport and Communications: Act on Transport Services
Traffic Lab website, Finnish Transport Safety Agency
Väylät & Liikenne 2018 esitelmät (Transport and Infrastructure 2018 Seminar proceeding summaries)
This signal post drills into the topic of profiling of platform users. We will have a look at how information on users’ background together with data on their offline and online behaviour is used by platforms and allied businesses. On the one hand, profiling allows service providers to answer user needs and to tailor personalised content. On the other hand, being constantly surveyed and analysed can become too much, especially when exhaustive profiling efforts across platforms begin to limit or even control individuals based on evaluations, groupings and ratings. The ever increasing use of smart phones and apps, as well as use of artificial intelligence and other enabling technologies, are in particular accelerating the business around profiling, and individuals as well as regulators may find themselves somewhat puzzled in this game.
What is profiling all about?
In the context of the platform economy, we understand profiling as collecting, analysis and application of user data as a part of the functioning of a platform. This means that e.g. algorithms are used to access and process vast amounts of data, such as personal background information and records of online behaviour. The level of digital profiling can vary greatly, and a simple example would contain a user profile created by an individual and their record of activities within one platform. A more complex case could be a multi-platform user ID that not only records all of the user’s actions on several platforms but also makes use of externally acquired data, such as data on credit card usage.
The core purpose of profiling is for the platforms to simply better understand their customers and develop their services. User profiles for individuals or groups allow targeting and personalisation of the offering based on user needs and preferences, and practical examples of making use of this knowledge include tailoring of services, price-discrimination, fraud detection and filtering of either services or users.
Pros and cons of profiling
From the user perspective, profiling is often discussed regarding problems that arise. Firstly, the data collected is largely from sources other than the individuals themselves, and the whole process of information gathering and processing is often a non-transparent activity. The user may thus have little or no knowledge of what is being known and recorded of them or how their user profile data is analysed. Secondly, how profiles are made use of in platforms, as well as how this data may be redistributed and sold onwards, is a concern. Discrimination may apply not only to needs-based tailoring of service offering and pricing but extend into ethically questionable decisions based on income, ethnicity, religion, age, location, the circle of friends, gender, etc. It should also be acknowledged that profiling may lead to misjudgement and faulty conclusions, and it may be impossible for the user to correct and escape such situations. The third and most serious problem area with profiling is when data and information on users is applied in harmful and malicious ways. This involves, for example, intentionally narrowing down options and exposure of the user to information or services or aggressively manipulating, shaping and influencing user behaviour. In practice this can mean filter bubbles, fake news, exclusion, political propaganda, etc. And in fact, the very idea of everything we do online or offline being recorded and corporations and governments being able to access this information can be pretty intimidating. Let alone the risk of this information being hacked and used for criminal purposes. Add advanced data analytics and artificial intelligence to the equation and the threats seem even less manageable.
However, profiling can and should rather be a virtuous cycle that allows platforms to create more relevant services and tailor personalised, or even hyper-personalised, content. This means a smooth “customer journey” with easy and timely access to whatever it is that an individual finds interesting or is in need of. Profiling may help you find compatible or interlinked products, reward you with personally tailored offers and for example allow services and pricing to be adjusted fairly to your lifestyle. In the future we’re also expecting behavioural analytics and psychological profiling to be used increasingly in anticipatory functions, for example to detect security, health or wellbeing deviations. These new application areas can be important not only for the individual but the society as a whole. Imagine fraud, terrorism or suicidal behaviours being tactfully addressed at early stages of emergence.
Where do we go from here?
Concerns raised over profiling are inducing actions in the public and private sectors respectively and in collaboration. A focal example in the topic of data management in Europe is the General Data Protection Regulation (GDPR) (EU) 2016/679 that will be applied in all European Union Member States from 25 May 2018 onwards. This regulation addresses the protection of natural persons with regard to the processing of personal data and on the free movement of such data. And even if launched as a European rather than a global initiative, the GDPR applies to all entities processing personal data of EU citizens, and many global players have in fact already claimed compliance in all their practices. Issues covered by the regulation include limiting the scope of personal data to be collected, the individual’s right to access data on them and detailed responsibilities for those processing personal data.
While the EU tries to manage the protection of personal data and thus bring transparency and fairness to profiling, the Chinese government is exploring a very different direction by being taking the lead in gradually introducing a Social Credit System. This model is at the moment being piloted, with the aim to establish the ultimate profiling effort of citizens regarding their economic and social status. Examples of the functioning of the credit system include using the data sourced from a multitude of surveillance sources to control citizens’ access to transport, schools, jobs or even dating websites based on their score.
Another type of initiative is the Finnish undertaking to build an alternative system empowering individuals to have an active role in defining the services and conditions under which their personal information is used. The IHAN (International Human Account Network) account system for data exchange, as promoted by the Finnish Innovation Fund Sitra, is designed analogously to the IBAN (International Bank Account Number) system used in banking. The aim with IHAN is to establish an ecosystem for fair human-driven data economy, at first starting in Finland and then extending to Europe and onwards. The plan entails creating common rules and concept for information exchange, and testing of the technical platform will be done together with pilots from areas of health, transport, agriculture, etc.
Selected articles and websites
Business Insider Nordic: China has started ranking citizens with a creepy ‘social credit’ system — here’s what you can do wrong, and the embarrassing, demeaning ways they can punish you
François Chollet: What worries me about AI
General Data Protection Regulation (EU) 2016/679 – EUR-Lex
Kirk Borne: Top Data Trends for 2018 – Part 1
Platform Value Now: Tackling fake news and misinformation in platforms
Sitra: Human-driven data economy
Wikipedia: Profiling (information science)
Wikipedia: Social Credit System
Wolfie Christl, Cracked Labs: Corporate Surveillance in Everyday Life
Ecosystems in the platform economy can accommodate all and any stakeholders, and the public sector among other actors can decide on the degree of ambition in the role they want to take. The most lightweight option would be to simply follow the field and allow market driven development of platforms proceed. In a more active mode the public sector would monitor and react to upcoming challenges and, for example, adjust taxation and regulation to match with the new landscape. Further on, a genuinely proactive role would entail active support for platforms and participation as a partner in platforms. The most ambitious option would be to aim to become a forerunner and contribute to strategic steering of the platform economy development. In this role the public sector could take on responsibilities in ecosystem facilitation but also show the way by embedding public services and internal processes to platforms.
In this signal post we introduce a few examples of the public sector taking ambitious and active part in the platform economy. These cases exemplify how visions are being turned into the new normal and how implementation steps have been taken in Finland and Estonia. The three topics covered are (1) platforms of open public data (serving among others further platform development), (2) provision of public services in platforms and (3) the visionary idea of citizenship as a platform (and for sale).
Open public data
Open public data means information produced or administered by a public organisation, and it is made available free of charge for private and commercial purposes alike, very much in line with the platform economy thinking. In Finland, metadata of public open data is collated in the Avoindata.fi service and then the European Data Portal. Although ‘work in progress’, many forerunner examples of novel open data initiatives are already running or under preparation. Often regulatory changes are needed to proceed towards open data effectively yet safely and securely.
Example: The Finnish Transport Agency maintains the NAP service (National Access Point), where since the beginning of 2018 all passenger transport service providers are obliged to open up their data on their services. The foundation for the system was laid in the innovative regulatory update, the Act on Transport Services, and accessing this data in the service, maintained by the transport authority, is expected to accelerate development of, for example, more comprehensive journey planners and advanced transport services.
Example: The government is proposing in Finland a new act on the secondary use of health and social data, intended to enter into force in July 2018. It would pave the way for a centralised electronic licence service and a licensing authority for the secondary use of health and social data. Finland already has extensive high quality data resources that could be put to more flexible and secure use instead of the current situation of dispersed datasets in different information systems by different authorities. The new act aims to streamline data requests and access as well as improve data security and thus benefit research, innovation and business but also teaching, monitoring, statistics, official planning, etc.
Public services in platforms
Digitalisation, in general, has been widely adopted as a target in public service provision, but the platform economy provides an even wider opportunity to more efficient, more accessible and less bureaucratic services. Education and social services among others are already making first steps in employing platforms, and a platform of platforms could also be envisioned, enabling seamless information exchange and navigation between services. For example, imagine managing your academic milestones, entitlement to study grants or other social assistance as well as medical records or unemployment situation not using separate manual processes but interlinked platforms with one-stop-shop principle. For a first implementation step, platform synergies could be built along administrative branches, such as education, or along specific fields of activity, such as administrative processes linked to building, construction and environmental permits.
Example: Suomi.fi is an online service in Finland that functions as a portal to public services and information. Although not a fully developed platform of platforms, this online service already demonstrates the single point of access principle in action. Suomi.fi empowers the user to find and then access a multitude of public services as well as their information and authorisations. For example, you could use the service to check your vehicle registry information and, if necessary, communicate electronically with the authorities to update it.
Citizenship as a platform
One imaginative or even utopian idea is to bring not only public sector data or services into platforms but to provide and exercise citizenship as a platform. Ultimately this would mean that an individual could choose their preferred digital citizenship platform and thus be, for example, entitled to public services and subject to taxation according to this choice. Citizenship as a digital platform would allow individual value-based decisions on citizenship rather than based on criteria such as country of birth. While the full concept remains theoretical, the first partial applications are running.
Example: E-Residency is a government issued digital identity launched by the Republic of Estonia in late 2014. It allows entrepreneurs from anywhere around the world to set up and run a location independent business but does not entail, for example, tax residency or citizenship rights to reside in Estonia. This legal and technical platform is the first of its kind, and the digitally accessible user benefits include company registrations, document signing, online banking, etc. The system also contributes to more transparent financial footprint through monitoring of digital trails. Between the launch and February 2018, over 33 000 applicants from 154 countries have established over 5 000 companies as e-Residents.
Selected articles and websites
Avoindata.fi − Open Data and interoperabilty tools
European Data Portal
Finnish Transport Agency: Service providers of passenger transport can now store data in the NAP service
Ministry of Finance: Open data: Opening up access to data for innovative use of information
Ministry of Social Affairs and Health: Secondary use of health and social data
Republic of Estonia: eResidency – Become an e-resident
Suomi.fi – information and services for your life events
Wikipedia: e-Residency of Estonia
This time we have a guest author, who provides a fresh and personal view into the platform economy. Akseli spent two weeks at VTT Technical Research Centre of Finland Ltd in November 2017, completing his work practice programme. One of the tasks Akseli took on was to familiarize himself with the concept of the platform economy and write his very own signal post on a topic of his choice.
Akseli chose to look into Youtube gaming, and how gaming companies, gamers and regulators are currently in a difficult situation. Many interesting things are happening in this area, but the rules of the game are not always so clear…
Hi! I’m Akseli Ala-Juusela, I’m 15 years old, and I was instructed to write a blog post on platform economy, so here we are!
Many people around the world take advantage of platforms like Uber, AirBnB and Youtube. Some problems have emerged, though, as huge corporations are looking for their share in advertisements and profits from the platform.
Challenges of Youtube gaming
I’m going to use Youtube as an example since I’m most aware of its issues. You see there are underlying problems for anybody trying to play videogames for an online audience. The entertainers need to have written permission from the maker according to some, and just purchasing the game and commenting on what is happening on the screen is enough according to others. There are some clear copyright violations like uploading the whole of Star Wars to Youtube without permission from Lucasarts and Disney. But there are also some borderland cases, for example, playing a game while adding your own jokes and commentary.
This leads to all kinds of law talk that I will never understand without going to a law school. But the gist of it is that one court decision could kill a big business and ruin lives of game based internet entertainers who are one of the biggest things dependent on Youtube. These channels are desperately trying to migrate to other forms of entertainment like vlogs (video blogs) and skits (comedy shorts).
We need worldwide rules
The only smart way of going about it is by defining the rules of the internet that will either affect on a global or a local scale. I would suggest the global version as it is much easier to regulate and harder to bypass. The only problem with global rules is that it is hard to punish those you don’t find or can’t reach.
Youtube also has a unique problem that they will probably never completely solve: there are 300 hours of video added there daily  which makes weeding out propaganda and terrorists a lot harder. Some countries like Germany require platforms like Youtube to take illegal content off in 24 hours , so it is near impossible to please everybody. More so, Germany threatens with a 5-50 million euro fine for not complying so the answer to them was to make a bot that could identify and eliminate anything that could be considered as inflammatory or illegal.
In conclusion: In my opinion, this is a lackluster way to handle situations, and we need a wider set of internationally recognised rules, that are endorsed, for online platforms.
Selected articles and websites
A big thank you to Akseli!
A couple of weeks ago (October 2017) the Prime Minister’s Office, Ministry of Economic Affairs and Employment and Finnish Funding Agency for Innovation Tekes published the national roadmap for digital platform economy for Finland. The first half of the report paints the present picture of the platform economy as a global phenomenon and Finland’s position in it. The second half drills into the national future aspirations for success and growth and introduces a vision and roadmap for Finland. Furthermore, an atlas of ten sector-specific roadmaps is presented and an action plan to fulfil the vision is outlined.
Top-down meets bottom-up
Finland is a pioneer in launching such a comprehensive national vision, roadmap and implementation plan for digital platform economy. Germany, Japan, Singapore and even the EU have touched upon the topic in their industrial or STI (science, technology and innovation) policies, but not with such focused dedication as Finland. The Finnish strategy is to harness platform economy as an enabling tool that has potential to generate growth for businesses as well as enhance productivity of the entire society. A key element of the vision is to develop national competitive edge out of the platform economy.
But why the choice of national and collective approach, when the leading platforms (from the US) have typically emerged as market-based business innovations? The Finnish initiative seems to embrace the platform economy as a wider phenomenon that covers the potential for value creation and capture not just for companies but for citizens and the state alike. Platform ecosystems therefore extend to all actors in the society, and governmental institutions can step up to take active part. According to the report, the foreseen role of public sector includes for example:
- facilitating society-wide dialogue and aligned national vision
- implementing a competitiveness partnership between public and private sectors
- strengthening the development and business environment for platforms
- developing the knowledge base, resources and tools
- showing example by open public data and platforms launched by the public sector
- other enabling support such as regulative measures.
In short, the Finnish hypothesis for how to accelerate and benefit from the platform economy is to activate both the bottom-up (innovators, businesses, individuals, etc.) and top-down (governments, authorities, regulators, etc.) stakeholders. No getting stuck in the chicken-and-egg dilemma, but getting started on all levels and in a nationwide public-private-partnership.
Other interesting messages
Strengthening of the knowledge base and education to support skills in the platform economy has received a lot of attention in the Finnish roadmap report. This covers both formal education as well as further training along the career path. What is especially highlighted is software design skills, but what about entrepreneurial mindset, data-driven innovativeness and cross-sectoral service thinking?
The value of data and the vast potential for its usage is also emphasized in the report. Data economy as a concept is being mentioned, and especially the role of the public sector is explored in terms of developing rules, providing common technical specifications as well as showing the way with public data resources.
Selected articles and websites
National roadmap report: Digitaalisen alustatalouden tiekartasto
Videos from the launching event (October 23, 2017): Suomi ja tekoäly alustatalouden aikakaudella
Further information: Suomi ja tekoäly alustatalouden aikakaudella