Why Do Digital Platforms for Development Fail to Have Lasting, Widespread Impacts?

FROM: Zenebe B. Uraguchi – 20. September 2022

If we want to move around, we have Uber, Bolt, or Lift. If we want to interact and share experiences, we have Facebook or WhatsApp. If we want to purchase goods, we have Amazon, Alibaba, eBay, Uber Eats, or Deliveroo. If we want to have access to healthcare services, we have platforms like PatientsLikeMe or Doctor On Demand. If we want to pay online, we have PayPal, Apple Pay, or Alipay. And if we want to stay somewhere, we have Airbnb.

Digital platforms expand our options and convenience, boost productivity and competitiveness, and encourage citizens’ participation. The digital economy has caused significant socioeconomic changes in most aspects of our life. They are now an integral part of our daily activities. This means that the "platform economy" has grown internationally and produced the most successful and valuable businesses. This has further been accelerated by the COVID-19 pandemic.

In this blog post, I am focusing on digital platforms supported by development initiatives in addition to those already on the market. While I recognize the goal of facilitating substantial, localized, and dynamic digital platforms for excluded and disadvantaged groups, are these platforms effective in generating opportunities? Or are they merely quick cuts since development organizations can easily create or support them?

Justifying the means

I have asked a few projects to tell me why they have thought about or decided to work on digital platforms as part of their initiatives. Most of the digital platforms that I have seen have three fundamental characteristics: they are technologically mediated, allow for user group interaction, and give those users the ability to do specific tasks.

I have heard the good sides of digital platforms – that they create economies of scale because as their user base expands, so does the volume of information they gather and facilitate over time by matching supply and demand. In other words, they serve as crucial means of communication and interaction and operate as strong market gatekeepers.

There is also another reason to implement digital platforms because they help in reducing the barrier to entry for small and micro firms into the market. For example, development practitioners proudly told me that rural communities that faced exclusion due to their location can now advertise their farm products and handmade goods online and attract customers, boosting sales and profitability.

As an illustration of a transaction platform, social media platforms provide additional options for value co-creation because they let users generate material in addition to exchanging it. Transaction platforms make money in several ways, including by charging parties to use their services through membership fees or pay-per-use access, as well as by taking a commission calculated as a percentage of the price the service provider charges.

Those that focus on online digital labor platforms also told me that the platforms have not only disrupted existing business models but also the employment model. As an example, work on digital labor platforms boosts income and formalizes employment markets by providing people the opportunity to work from any place, at any time, and take up whatever jobs suit them.

Projects that focus on governance also mentioned that digital platforms are important for registering and recording the ownership of assets to citizens, as well as for verifying citizen identity for access to the supply of public services. Digital spaces have become increasingly important for organizing political uprisings and opposition movements.

In summary: the people I have spoken to are convinced that digital platforms are credible ways to increase access to resources (time, knowledge, and assistance), information (such as job prospects or benefits guidance), and collective action and influence (such as social advocacy or supporting the voice of citizens for services. All these things help to reduce exclusion, they argued.

Taking a closer look

According to McKinsey estimations, digital platforms and ecosystems will mediate 30% of all global economic activity in the next ten years. There is indeed a clear trend toward the "platformization" of most development initiatives. But things are not always as they seem.

One of the biggest problems I noticed was the lack of making a separation between, on the one hand, digital platforms as a piece of technology or a group of software products and a business model that generates values, has sustainability (owned by actors and not projects) and reaches out many users because of the network effect (scalability) by enabling transactions, on the other hand.

Specifically, digital platforms inherently face the chicken-and-egg problem: bringing users first or creating a product or service on the platform. A user of a platform will only actively use the platform if it comes with relevant products or services, while platform developers will only create it for a given product or service if it has a sizable user base. The solution to the chicken-and-egg dilemma will strategically determine whether the platform succeeds or fails.

Let’s take a digital platform in the tourism sector as an example. The rationale for digital platforms is intended to generate travel activity through content and online platforms and drive business including recovery in travel after the pandemic. This includes peer reviews and other forms of user-generated content compared to traditional tourism boards and traditional outlets.

The question is: why does a project need to initiate a digital platform? Why not leverage Booking.com or TripAdvisor or another similar platform as in the case of tourism rather than create a new platform? Perhaps providing the infrastructure on which innovation and digital businesses can be established, global digital platforms, if they are available, may help foster local entrepreneurship and foster the use of creativity.

Alternatively, if the platform is locally rooted and seeks to serve a specific type of user, what is the business model for sustaining its service and reaching out to more users? In other words, enabling a sustainable and scalable digital platform needs to go beyond the platform as a product (intermediary infrastructure) and look at what happens or exists around the platform (innovation).

For example, who owns the platform? The owner of a platform is responsible for developing and managing it. If projects start the platform, they need to bring onboard ownership by actors that are part of the system. Some manufacturers or producers create or offer services or products to be used on the platform. Standards or quality assurance, coordination, financing (e.g. payment solutions), capacity development, and so on are other crucial ail issues that need to be part of a digital platform.

What matters is the value proposition

I am in full agreement with the fact that digitalization in the form of platforms encourages inclusion and participation, reduces time demands, improves access to services, increases representation in decision-making, and connects and informs in a responsible and accountable manner while also helping to enhance informed life choices.

Instead, my concern is that we tend to become captives of our tools and lose sight of the reason they were created in the first place. We put a lot of money into tools and count on them to address issues. Before deciding to support a digital platform, it is important to know what we want to do and why. Perhaps digital platforms may not be the answer to innovation. Some of them may be ineffective, if not counterproductive.

Before the digital platforms, asking the “what”, the “why” and the “how” questions will be critical for developing the value proposition of the platforms. Let’s critically think about our work by asking these questions before venturing into any digital platform development – that is, how can digital platforms add value or solves a problem for target stakeholders beyond the life span of development projects?

 

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