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Digital platforms

Digital transformation and creating value through technology are priorities for organizations worldwide. According to market intelligence provider International Data Corporation, digital transformation spending should reach $3.9 trillion by 2027.

“Platform companies have become increasingly important to the global economy and are some of the largest and most valued companies today,” says Harvard Business School Professor Feng Zhu, who teaches the online course Winning with Digital Platforms.

If you want to help your organization respond to opportunities and inform its strategic planning, here’s an overview of digital platforms and how they create value.

What Is a Digital Platform?
Digital platforms are business models that use online infrastructure to facilitate interactions between groups. Examples include:

  • Social media channels
  • Online marketplaces
  • Crowdsourcing websites and apps

Digital platforms have several features that enhance their functionality and appeal.
For one, they can grow and accommodate transactions without significant cost increases. That scalability is essential to expanding market reach with minimal business infrastructure.
Accessibility is another important feature. Digital platforms operate continuously and are accessible regardless of time zone or geographic location. This boosts user engagement by enabling real-time interactions and transactions.
Digital platforms also streamline business processes and automate complex tasks—reducing the need for extensive manual labor, minimizing operational costs, and improving resource management.

These features allow digital platforms to generate substantial value. If you want to shift your organization to a digital platform business model, here are three ways it can enhance the user experience.

How Digital Platforms Create Value

Connect Buyers and Sellers
Digital platforms have revolutionized how buyers and sellers connect. They’ve moved business interactions from traditional settings—like physical marketplaces and classified ads—to online environments, significantly increasing their reach and partnership opportunities.

To help users connect online, digital platforms use matching design—algorithms that link them based on criteria like their needs and preferences. According to Winning with Digital Platforms, there are two types of matching designs:

  • Centralized matching design: Automatically matches users with a seller according to the platform’s algorithm
  • Decentralized matching design: Offers multiple options to users who search all the options before choosing based on their preferences

Selecting the right matching design is crucial to optimizing the user experience and operational efficiency.
“When the preferences of users are easily identifiable, and buyers and sellers view each other as largely interchangeable, it makes sense for the platform to be designed so that search and matching is automated,” Zhu says in Winning with Digital Platforms. “This is efficient because centralized matching minimizes search costs without compromising the quality of matches.”

In the course, Zhu explains how ride-sharing companies use centralized matching.
“In the ride-sharing sector, the preferences of both drivers and riders are easily identifiable,” Zhu says. “Riders want a ride from point A to point B that’s as safe, fast, and inexpensive as possible. As long as these three criteria are met, riders don’t care much about which particular driver they’re matched with. Drivers want to be matched with riders as soon as possible, and as close as possible to minimize idle time. They also want a rider to be respectful. This transparency of preferences explains why most ride-sharing platforms adopt a centralized matching design—with the added option of rejecting a match if need be.”
Alternatively, decentralized matching works best when predicting users’ preferences is challenging. For example, eBay allows sellers and buyers to connect directly on its platform with little interference—enhancing user autonomy and personalizing the buying experience.

Set Pricing
Digital platforms also add value through strategic pricing. Unlike traditional retailers, digital platforms collect and interpret large amounts of data to adjust prices in real time.

Common factors that affect pricing include:

  • Market demands
  • Supply chain conditions
  • Consumer behaviors

To meet users’ needs, align your matching design and pricing model.

Pricing models include:

  • Centralized pricing model: When your platform has enough information to ensure prices don’t deter buyers or sellers from using it
  • Decentralized pricing model: Prices set by individual sellers or through bargaining based on important information your platform doesn’t have

“Pricing decisions almost always go hand in hand with search and matching,” Zhu says in Winning with Digital Platforms. “If a platform has a centralized matching model, they’ll have a centralized pricing model. And if they have a decentralized matching model, they’ll often use a decentralized pricing model.”

For example, online grocery delivery platform Instacart doesn’t allow users to choose “shoppers” and bases its design and pricing models on factors such as inventory availability and its “favorite shopper” feature. Conversely, platforms like house rental app Airbnb allow homeowners to set listing prices, giving them more control.

There are exceptions to this rule. For instance, ride-sharing companies use centralized matching designs, but drivers don’t have the high-level knowledge to determine prices. As a result, companies like Uber use dynamic pricing—setting flexible prices based on current market demands—by adjusting rates based on routes’ time and distance, traffic, and rider-to-driver ratio.
No matter your model, be transparent about how you set prices.

Establish Trust
Since the rise in e-commerce has led to fewer physical transactions, digital platforms now act as a credible intermediary to establish user trust.
In Winning with Digital Platforms, HBS Professor Krishna Palepu talks about how wholesale marketplace company Alibaba addressed trust concerns between geographically spread out buyers and sellers.

“The trust problem comes in two forms,” Palepu says. “One: The customers who are buying the product don’t know whether the quality of the product is going to be according to what is advertised on the site, and also whether it’ll be delivered on time—and, in fact, whether it’ll be delivered at all. On the other hand, merchants are concerned about whether they’ll receive payment once the goods are shipped and they’re delivered to the customer; the credit risk involved in collecting the payments. Both these issues have driven a lot of distrust. And this is just a common distrust that you will have in any marketplace.”
To overcome that issue, Alibaba introduced mobile and online payment platform Alipay, which uses an escrow account to safeguard transactions and protect buyers against undelivered goods and sellers from unpaid deliveries. The system ensures legitimate transactions by mandating Alipay accounts for all users, helping identify credible partners.
Establishing trust isn’t just about securing transactions; it also helps reduce online interactions’ perceived risk. By building credibility—as Alibaba did with Alipay—you can boost user satisfaction, the likelihood of repeat engagements, and platform reliability.

Create Value with Digital Platforms
Transitioning to a digital platform business model isn’t easy and requires buy-in from employees and organizational leaders. To ensure your digital transformation efforts succeed, focus on creating an effective digital platform strategy.

Digital platforms cater to various needs of their visitors. Among the best-known platforms are:
E-commerce: Amazon, Etsy and eBay
Content creation: YouTube and Spotify
Business collaboration: Slack, Zoom and Microsoft Teams
Knowledge: Quora and StackOverflow
Learning: Coursera, Udemy and edX
Social media: Facebook, X (Twitter), TikTok and Instagram
Gaming platforms: Steam, PlayStation Network and Xbox Live
Financial platforms: PayPal, Venmo and Stripe
Transportation and travel platforms: Uber, Lyft and Airbnb
Healthcare platforms: MeMD, PatientsLikeMe, Zocdoc and GoodRx

Benefits of a digital platform

Among the many benefits a digital platform affords businesses, some of the most high-profile are:

  • Improved customer experience. Customer service-related digital platforms can better the relationship between buyer and seller in a number of ways throughout the process, including freely offering pertinent information prior to the sale, streamlining the purchasing process, and providing support after the transaction.
  • Expanded customer reach. An online presence provides a wider potential range of customers than a storefront. Digital platforms are the best way for businesses to connect with a broader audience and create new opportunities for innovation and growth.
  • Improved data insights. Digital platforms often include business analytics and data collection to help businesses gain insight into customer behaviors and trends. This information, when gleaned by shrewd professionals, strengthens decision-making and drives growth.
  • Costs fall and efficiency rises. Digital platforms, properly established and maintained, help businesses reduce operating costs, perhaps through operational efficiency or consolidation of multiple platforms for services. In addition, digital platforms allow businesses to automate certain tasks and streamline business processes, improving time and cost savings.
  • Increased flexibility. A good digital platform is flexible and adaptable to changing business needs and trends, allowing a business to remain competitive.


Key components of a digital platform
A digital platform is a comprehensive combination of hardware and software, making it more complex than a web server, which provides information from a database. Digital platforms perform many functions, web serving being one of them.

The key components of a digital platform vary depending on the purpose and use of the platform. However, there are some common elements across platforms, including the following:

  • Infrastructure. Beginning with the basic building blocks, every platform requires both hardware and software. This includes servers, storage, networking, operating systems, databases, application programming interfaces (APIs) and middleware.
  • Front end. This external part of the platform allows users to interact with the platform. It includes web pages, PC and mobile apps and any other interface for user interaction.
  • Back end. This includes the database, storage, business logic, APIs and other back-end services.
  • User authentication. For user verification and access control, most digital platforms include a single-factor means of authentication, such as a login with a password, but some use two-factor authentication, such as texting an access code to the user’s smartphone.
  • User management. This part of the system handles user registration, login, logout and profile management.
  • APIs. Many platforms have an API that allows third parties to access the system, giving users access to more than just a browser or the provider’s application.
  • Analytics and monitoring. These include logging user activity for both analytics and security, along with monitoring for suspicious activity.
  • Scalability and load balancing. Because digital platforms are sometimes inundated with traffic, spreading traffic among different servers and data centers is vital to maintaining optimal performance.
  • Content storage and management. Digital platforms serve content to users, and those texts, images, videos and more require management and maintenance.
  • Payment and billing. Since many digital platforms allow and encourage transactions, secure payment processing, including billing and shipping, is needed on the platform.


How to create a digital platform

While there are some digital platforms available for purchase as package software or as free and open-source software, the vast majority of digital platforms are homegrown and developed specifically by the platform provider.

Following are some tips for building a digital platform:

  • Start small. Clearly define the platform’s core functionality. Focus on getting the basics working instead of trying to do everything at once. Amazon, YouTube and Twitter did not become the comprehensive platforms they are today without years of focused, flexible effort to get there.
  • Perform comprehensive market research. Communicate with a target audience to learn their wants, needs, preferences and dislikes. This process is ongoing, with developers using constant feedback to effect changes and improvements.
  • Pick the right technology stack. Not all hardware and software perform equally. Some servers, for example, scale up for high performance, while others scale out to allow for massive multi-user functions. Some process transactions better than others. Be sure to properly pair hardware and software to your needs.
  • Build the front end and back end at the same time. Highly interactive and transactional platforms require constant attention to both the user interface and back-end processing technologies simultaneously. Transactional information from the back end, for example, can inform front-end decisions on user interface.
  • Test and document. Because a digital platform is so complex, the DevOps method, emphasizing regular updates and deployment, is a strong choice for platform development. The process, along with its successes and challenges, is documented throughout, so whether a business experiences turnover or, conversely, expands its development team, the code and processes remain available to employees.
  • Keep going. Creating a digital platform is an ongoing process that requires continuous improvement and adaptation to changing user needs and technology advancements. Collaboration among cross-functional teams, including developers, designers, product managers and marketers, is essential for success. Additionally, feedback from users plays a crucial role in refining and evolving the platform over time.

Digital platforms vs. digital products
Digital platforms should not be confused with digital products. A digital platform is a medium that facilitates the exchange of something of value between two or more parties, while digital products are goods or services that are exchanged.
There is a relationship between the two; users visit a digital platform, such as iTunes or Spotify, to purchase or download a digital product, such as a video or music.

Source; Andy Patrizio, Bojan Crnologar

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