Smart platform experiment cycle (SPEC): a process to design, analyze, and validate digital platforms

Abstract

Digital platform business models are disrupting traditional business processes and reveal a new way of creating value. Current validation processes for business models are designed to assess pipeline business models. They cannot grasp the logic of digital platforms, which increasingly integrate Artificial Intelligence (AI) to ensure success. This study developed a new validation process for early market validation of digital platform business models by following the Design Science Research methodology. The designed process, the Smart Platform Experiment Cycle (SPEC), is created by combining the Four-Step Iterative Cycle of business experiments, the Customer Development Process, and the Build-Measure-Learn feedback loop of the Lean Startup approach and enriching it with the knowledge of digital platforms. It consists of five iterative steps showing the startup how to design their platform business model and corresponding experiments and how to run, measure, analyze, and learn from the outcomes and results. To assess its efficacy, applicability, and validity, SPEC was applied in the German startup GassiAlarm, a service marketplace business model. The application of SPEC revealed shortcomings in the pricing strategy and highlighted to what extent their current business model would be successful. SPEC reduces the risk of building a product or service the market deems redundant and gives insights into its success rate. More applications of the SPEC are needed to validate its robustness further and to extend it to other types of digital platform business models for improved generalization.

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“…As an example, for the validation of a digital platform business model, Brecht et al (2021) developed the Smart Platform Experiment Cycle (SPEC). It is a fivestep process designed to validate digital platform business models through business experiments with customers.…”

“…The SPEC aims to achieve validation by spending limited time and money. Possible outcomes of the process are a (in)validated hypothesis about the platform business model that initiates either a new iteration of the SPEC or a decision to pivot or stop the activities subjected in the hypotheses (Brecht et al 2021). However, a prerequisite to starting the SPEC is a verified platform business model.…”

“…Figure 1 shows how the sprint process aims to cover the steps necessary for the discovery of a business model before its validation with the SPEC (Brecht et al 2021). Furthermore, the tools used for the creation of the design sprint for platforms are displayed, namely the Google Design Sprint 2.0 and the chosen tools for digital platform design.…”

“…In this light, previous research on the validation of platform business models suggested investigating how digital platform business models can be designed and verified when no initial concepts exist. It is essential to generate and verify an initial concept before investing money to validate and scale the platform (Brecht et al 2021). Practice has used frameworks such as the Google Sprint by the venture capital firm Google Ventures to prototype, test initial concepts, and verify them (Nashrulloh et al 2019).…”

“…Therefore, it focuses on the use case of designing a digital platform business model from scratch. It incorporates the unique features and characteristics of digital platform business models that differ in many aspects from the logic of traditional pipeline business models (Brecht et al 2021). Consequently, this research is concerned with answering the following research question:…”