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Platforms, Present and Future XI

The majority of GO-JEK drivers are satisfied with the increased income since they joined GO-JEK and 90% of them are reporting an increased quality of life. Image credit: GO-JEK

Platforms supporting the Gig Economy

Platforms are basically slashing the transaction cost in connecting providers (of products, services) to the marketplace. As such they are ideal tools to support the Gig Economy and I would like to spend a few words to explore their role in this context.

A clear example linking offering with demand can be found in platforms like GO-JEK and YEGOMOTO, one supporting a variety of services in Indonesia – starting with Uber-like transportation, the other in Ruanda -also a Uber-like but based on motorcycles. These two countries are emerging economies and have little business infrastructures, if compared to Western countries, thus creating business is much more difficult. Not so with the Digital Transformation where power is shifting to small players (or, at least, small players get a chance). Platforms, like the ones just mentioned, enable a sparse but numerous “workforce” to reach the marketplace.

Platforms are lowering the market entry levels at the same time providing a digital infrastructure that flanks  (upgrading) physical infrastructures where they exist or provide a viable alternative to them (as it might be the case in emerging economies). Of course you need a minimum of physical infrastructures to access the digital ones, i.e. a pervasive, affordable, wireless network and this is now (almost) ubiquitously available, even in emerging economies.

It is interesting to note that whilst in established economies platforms by decreasing the transaction cost (hence in a competitive market resulting in a decreased price to the end user)  are decreasing the market value in the specific segment addressed by the platform, in emerging companies platforms are enabling a new market, hence creating jobs and value (that market goes from 0 -non existing- to some value). It is also important to notice that platforms, supporting transactions in the digital space, have very little friction, hence the market growth can be very quick (no scaling issue, something that you have to face in the physical world). This can be seen in platforms like GO_JEK mentioned before that have seen a tremendous growth: from 100,000 orders a day in 2015 to over 100 million orders a day in 2018 (a thousand fold increase!). Also important to notice that once a platform has been established to support a service (like car hailing) it is straightforward to have the same platform support other services. In case of GO-JEK we have seen the growth from one service in 2015 to 18 services in 2018. In other words, platforms become neutral infrastructures to support massively distributed business. This is clearly supporting the Gig economy,
Again, whilst in established economies we are seeing a growing concern of job depreciation (companies are turning to the Gig economy to save money, e.g. in food distribution undercutting pre-existing salary levels) in emerging economies there is not a competition with existing jobs but job creation. We see this again in the examples I mentioned of Indonesia and Ruanda where the platforms have created jobs, resulting in an increased wealth and in a satisfaction of those gig workers that is reaching 90%!

About Roberto Saracco

Roberto Saracco fell in love with technology and its implications long time ago. His background is in math and computer science. Until April 2017 he led the EIT Digital Italian Node and then was head of the Industrial Doctoral School of EIT Digital up to September 2018. Previously, up to December 2011 he was the Director of the Telecom Italia Future Centre in Venice, looking at the interplay of technology evolution, economics and society. At the turn of the century he led a World Bank-Infodev project to stimulate entrepreneurship in Latin America. He is a senior member of IEEE where he leads the Industry Advisory Board within the Future Directions Committee and co-chairs the Digital Reality Initiative. He teaches a Master course on Technology Forecasting and Market impact at the University of Trento. He has published over 100 papers in journals and magazines and 14 books.