Psychological Aspects of Platform Business Models Risk Management

Journal of Environmental Treatment Techniques

2020, Volume 8, Issue 4, Pages: 1486-1490

J. Environ. Treat. Tech.

ISSN: 2309-1185

Journal web link: http://www.jett.dormaj.com

https://doi.org/10.47277/JETT/1490

Psychological Aspects of Platform Business Models

Risk Management

Alexei Valerivitch Altoukhov*, Marina Vladimirovna Kuzmina, Sergey Alexandrovitch

Tishchenko

Moscow State University, Moscow, Russia

Received: 06/07/2020

Accepted: 01/10/2020

Published: 20/12/2020

Abstract

The author of this article suggests an overview of the generic psychological principles of influence, earlier described by Robert Cialdini,

and their application to enterprise management. Each principle is analyzed according to the structural points: brief description; distinction of

enterprise-specific features; examples of positive and negative impact caused to the enterprise by the application of principle; introduction of

management methods. Throughout the publication we draw attention to the importance of enterprise psychological risks management,

because even though they are highly underestimated, they play a crucial role in the enterprise functioning and development perspective. Also,

with this article, the author tries to prove that these risks can be avoided or even used to the benefit of the enterprise performance, despite the

complexity of psychological risks management.

Keywords: decision-making, risk management, influence principles, platform law, business model.

business model based on a comprehensive collection of user data,

Introduction

i.e. analyze information about all types of user activity. Then, the

collected data is processed by the platform algorithms (for

example, based on artificial intelligence) so that the resulting

analytics is optimized for marketing purposes. It is self-evident

that any enterprise is subjected to risks influence at all phases of

its operation [1, 2, 3]. These risks might be different in a number

of ways: scope of their effect, potential results, the extent of their

influence, etc. Nevertheless, for the purpose of our research, we

choose two vital aspects, which are typical for any enterprise

risks:

Risk is based on an uncertainty: a risk always presumes

some probabilistic outcome, which can be described as a

potentially achieved result different from the planned one. From

this perspective, it would be more reasonable to mention both the

loss risk and the surplus profit risk. Any forecast outcome

associated with the realization of the previously determined

situation should not be related to risk category, since being “a

priori no-win” they are completely predictable. In a situation of

certainty there is no risk whatsoever, no matter the potential

outcome of this situation [4, p. 216].

Currently, with reference to the digital innovation economy,

the term “platform” is understood to mean a certain informational,

conceptual, technological base for the collection, processing and

transmission of certain information in the interests of the

participants of this platform. A platform can be, for example,

unified software, a general concept of design or promotion,

certain uniform standards of development, production,

implementation, use, etc. Thus, the platform is a way of

organizing and standardizing processes in a digital economy.

Platforms and platform law are actively developed, implemented

and developed in various sectors of the economy, in modern,

innovative areas of activity, including complex technical systems

or events. This is due to the fact that platforms are changing the

logic of the development of economic processes from

traditional" to more modern, fast, innovative. In particular,

digital platforms reduce or completely eliminate many barriers to

business, simplify and speed up communications, and offer new

opportunities and tools for creating value. Platforms transfer

traditional production to digital footprints, reducing costs and

turning products into services that provide greater profit; and

platform law is designed to ensure the legal side of these

processes. Therefore, it is no coincidence that digital platforms

are increasingly spoken of as a market - a meeting place for two

or more people in order to exchange values in one form or

another. We can say that in the modern economy, the platform is

what provides and structures the communication and interaction

of economic agents.

The scientific literature identifies the following types of risks

that affect the activities of the organization: environmental,

macroeconomic, trade and economic, currency, social, personnel,

technological [4-7]. Depending on the specifics of the activity, the

development strategy of the company and its resources, the

probability of risk increases [8, 9]. Hence the second major

aspect:

Decision-making in cases of uncertainty depends heavily

Regarding digital platforms directly, we add that they use a

Corresponding author: Alexei Valerivitch Altoukhov, Moscow State University, Moscow, Russia. E-mail: alexei.altoukhov@gmail.com

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2020, Volume 8, Issue 4, Pages: 1486-1490

on personal traits, skills, experience and even the emotional

state of the person who makes the decision: uncertainty implies

least two possible results of each alternative in the decision-

making. If this case an enterprise must consider all of the

potential, or at least most probable, outcomes. [4, p. 218]. The

way these potential outcomes are processed, analyzed, and in the

end accepted or discarded, depends directly on the leader’s ability

to make reasonable decisions in the environment of psychological

instability which is typical for any situation of uncertainty.

In other words, the degree to which a person is affected by the

emotional stress is a threat to operation of the whole enterprise.

That is why it is so important for the risk management to include

not only finances, competition, etc., but also the psychological

was worse – it would question the validity of the earlier decision-

making. In other words, the influence of the psychological

principle of the commitment not only initiated risks

implementation but led to a company merger.

On the other hand, some companies manage to use risks

potential to their advantage with the help of the commitment

principle. Take the web resource Copyblogger as an example, that

sells programs for its digital content marketing platform

Copyblogger Media. On the Copyblogger home page visitors are

offered to subscribe for the free online training courses. The only

thing needed is to provide an e-mail address, which is in fact one

of the forms of public obligations. Accepted obligations increase

the chances that the subscribers to free online courses will later

subscribe to some paid services [12, p. 19]. Commitment to

accepted obligations, even though accepted by mistake, has a

strong tendency for “self-preservation”, because it creates social

markers of an enterprise .

Methods

“

support points” which are especially needed for building

This involves the use of opportunities and elimination of

economic relations between enterprises [11, p. 117]. Though they

do “fail” and act against the enterprise interests. So, how can we

control the risks that are created by the commitment principle?

Any psychological risk is hard to manage, especially when

combined with other persistent risks that are more obvious and

with immediate consequences. In case of the commitment

principle it is more rational for the enterprise to regulate the

decisions that affect business processes (for example, choosing or

cancelling the supplier chain, entering a new market, etc.). The

necessity to coordinate decisions with the approved regulations

might prevent from emotional decision-making or accepting

obligations with negative consequences for the enterprise.

risks, including not so obvious, like the psychological principles

described by Robert Cialdini [10]. Robert Cialdini in his book

“

Influence: The Psychology of Persuasion” discriminates several

principles which make a person act in the desired manner by

affecting certain psychological stereotypes. The author suggests

viewing some of these principles in their reference not to a single

person or a group of people but to an enterprise. He then defines

methods used to minimize the effects of these principles on

decision-making. The authors of the article assume that risk

minimization is a necessary condition for the creation of any

business model. Therefore, relying on the obvious but important

principles described by Robert Cialdini, the authors of the article

in their research suggest a model for the development of effective

methods of psychological risk management.

4 The second principle: reciprocation

This principle is perfectly simple and well-known: you are

somehow obliged to return a favour [10, p. 34]. The feeling of

gratitude for any small favour can be so strong that even after a

long time the “obliged” person will be eager to return the favour,

and to a greater extent than was expected. The influence of this

principle is rooted historically in the necessity to share for the

community to survive. From the enterprise perspective this can

be interpreted as a postponed payment: receiving a service now,

the company does not spend its resources for its acquisition. On

the other hand, “returning the favour” might come out with the

problem of choosing between great expectations from the favour

provider and “face plant”, when refusing to repay the debt. In case

of any achieved agreement on the provided by the contract partner

service (a delayed, deferred payment, a new client, a qualified

employee, etc.), an enterprise accepts the risks of mutual

exchange principle. Take for example the LLC “RomMetLom”

company which has several branch departments that accept

ferrous and non-ferrous scrap metal. This company could not but

sell its competitor one of the branches because when the company

was formed and registered, this competing enterprise helped it

with the supply of equipment. The terms of the deal were good,

yet, it caused speculations on its effectiveness for the future of the

company. The question is open for discussion if the deal would

even take place, had not the companies been bound by the

reciprocal relations. Examples of positive implementation of the

reciprocation principle are countless. We all know companies

The first principle: commitment

Commitment means that people who have already made the

decision think of it better than they did before the decision-

making. Although there are no new “pro” arguments, the person

commits to his actions, persuading himself that the choice he

made was the right one [10, p. 70]. This is determined directly by

social influence: a person has little to no respect if he always

changes his mind or doubts his own decisions. Enterprises are

especially “sensitive” to this principle, since any doubts about the

decision made might have grave financial and reputation risks.

For example, business partners will question the necessity of

doing business with the company that constantly changes its

suppliers, cancels the achieved agreements, etc. The case with the

Merrill Lynch bank and its employee is a vivid example of how

one man’s decisions might lead a company to its collapse. Osman

Semerci had accumulated risky assets (CDOs) for a long time,

primary losses were estimated at 2.1 billion dollars minimum [11,

p. 157]. At first glance it seemed strange that the company

executives did not apply any sanctions to Mr Semerci, once the

losses were discovered. He kept his position and continued his

work until the bank collapsed. Moreover, the bank executives

supported his efforts. The commitment principle gives the

explanation to such ‘irrational’ behaviour at Merrill Lynch:

termination of Semerci’s employment along with the loss of 2.1

billion would also mean the loss of business reputation, and what

In case of psychological markers of an enterprise we speak of the susceptibility degree, to which the people who are making the decisions in the enterprise

are liable.

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2020, Volume 8, Issue 4, Pages: 1486-1490

built as a personal blog or exclusive training course, which offer

a free trial or advice on how to earn with web marketing, or learn

a foreign language fast, etc. They normally offer the first webinar

or online class for free, and even with a gift of some sorts, but in

the end they all ask to sign in for a full course. Statistically, the

majority of clients feel obliged to accept the offer.

The fourth principle: liking

According to Cialdini people tend to share views and agree

with people they know well or people they like, although this

feeling is based on superficial traits, such as physical appeal,

kindness, etc. If we speak about companies, then this principle

means that people who make the decisions tend to favour more

For a company it is harder to avoid the risks of reciprocal

relations than for an individual: the enterprise cannot intuitively

view some offered service as bait. First of all, the company

management must differentiate between personal favours and

company services, and by no means mix them together. Business

services must be put on paper with clearly defined conditions of

“

attractive” business partners. For example, those who have more

appealing representatives, nicer people in the ads, employees with

similar problems, etc. It is not uncommon, when the chance to tell

potential clients about the similarities between company

employees and guests increases probability of cooperation with

only one feeling of sympathy, between the two sides of the deal

“

exchange”: deadlines, terms of payment, etc. This will help

[13, p. 196].

avoid the feeling of unpaid debts, and as the result, not to make

any impractical enterprise decisions.

Nevertheless, sympathy does not always guarantee successful

outcome of the decision made. The potentially negative outcome

of the liking principle risks is obvious, when “Business for kids”

company is studied as an example. This enterprise provided

tutorship for students in economics academic disciplines. I order

to increase the number of clients, this enterprise made a deal with

an advertising company for the promotion of their services. The

choice would seem well-grounded, unless we disregard the fact

that the company was chosen on the basis of one single criterion

– personal acquaintance and friendship between the managing

director of “Business for kids” and the advertising company

employee. Trying to help a friend, the custoter did not study the

market, otherwise he would have known that the chosen

advertising company had no experience in the promotion of

educational institutions. The outcome: advertising campaign was

unsuccessful, new clients did not sign in, the whole seasonal cycle

of an academic semester the company was idle, losing profit, and

in the end went bankrupt. That is an infamous example, but the

number of options, when to use this principle for the company

benefit is much greater. A hint of similarity with the client,

dropped to him casually, can dramatically increase his loyalty [14,

p. 74]. For example, many vet clinics put on the websites their

employees’ background that show their affection for animals, and

also their own pets. This approach adds humanity to the company

image and makes it more appealing to the clients.

It goes without saying that it is more pleasant to make

business with partners who you like. Though decision-making

based on affection only might bring the company poor results. To

avoid the influence of the liking principle the company executives

should list the requirements applicable to potential clients, weigh

the pros and cons of a specific purchase, etc. This will make the

choice less dependent on personal preferences and more on

company interests. It might be a good idea to involve company

employees in the analysis and decision-making process from time

to time; that will help avoid biased opinion.

The third principle: social proof

According to this principle we determine what is correct by

finding out other people’s opinion. A behaviour is more correct

in a given situation to the degree that we see others performing it

[10, p. 121]. This is a very stable principle, because by acting

within social norms people are usually more successful in their

beginnings than acting contrary to them. This principle is

especially effectively working with people who suffer from low

self-esteem, people who constantly need somebody’s approval.

Speaking of enterprise, this is mostly relatable to the recently

established structures, new on the market, without clear goals and

means of its achievement. Quite often such companies find it

normal to copy other companies’ strategies, following in the

footsteps of the leaders, which can lead them to negative

consequences. As an example, we take a small hotel “X” , where

company’s executives at the start of their business decided to

follow the path of their more successful competitors. They placed

information about their hotel in the hotels.com web resources.

This website shows the number of people who booked the rooms

in the past few hours and their reviews of the service. Being

unprepared for serious competition, this hotel “X” received low

reviews, the number of clients went down, the company could not

compensate the financial losses and had to go bankrupt. The

principle of social proof played against the company.

Nevertheless, if used correctly, this principle can become a

very effective tool for profit increase. This is especially obvious

in the case of online shops. For example, Modcloth website

provides online voting for the best clothes, which is marked with

label “Best Sellers”. The buyers themselves are influenced by the

Modcloth choice. The clothes labelled “Best Sellers” is sold much

better than all the rest, bringing company more profit from sales

than the clothes outside that category. When there is a similarity

between the enterprises the principle of social proof has more

influence [10, p. 165]. This can be the market they share,

similarities of sold product, etc. In order to manage this influence

the enterprises (and its executives) must create a unique identity,

take the best from their rivals’ experience, but follow their own

path. Practically this means clear goals, strategy and tactics that

would consider the specifics of the enterprise. With this approach

the need to “plagiarize” the ideas of others will die out by itself,

without denying the advantages of this principle.

The fifth principle: the scarcity principle

(

uniqueness)

The scarcity principle means that opportunities seen more

valuable to us when their availability is limited [10, p. 231]. The

effect of this principle is stronger, if some object, or action, or

information is suddenly unavailable; and also, if the there is

competition for the restricted object, and that competition gets

tougher, the more attractive the object is. For an enterprise the

scarcity principle can be specified: goods, services, markets,

With respect to information confidentiality, the company name has been replaced.

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2020, Volume 8, Issue 4, Pages: 1486-1490

clients, employees are more valuable, if their number is limited.

For example, based on psychological preferences, when choosing

a candidate for the job, the preference will be given to a graduate

from an elite university; the logic behind this is that the graduate

is perceived as “a rare candidate”, which of course does not make

him a better employee.

management is crucial for any structural unit that aims at

successful operation in the market.

Ethical issue

Authors are aware of, and comply with, best practice in

publication ethics specifically with regard to authorship

The scarcity principle has larger risks due to its regular

efficiency, and people tend to trust it for this reason without any

doubts. Nevertheless, the fewer the exceptions, the more danger

(

avoidance of guest authorship), dual submission, manipulation

of figures, competing interests and compliance with policies on

research ethics. Authors adhere to publication requirements that

submitted work is original and has not been published elsewhere

in any language.

they represent. A small enterprise “Z” that sells hand-made home

appliances, making it business through the Instagram platform,

offered its clients a unique product: good luck charms by local

craftsman from Indonesia. Ordering, shipment, customs

clearance, etc. took much time, effort and finances. This fact alone

made the company owner position that small batch of items as the

major product among his goods. Yet, the demand and clients’

preferences were ignored, and the potential buyers were not eager

to pay a higher price for that product. This outcome of improper

implementation of the scarcity principle had its toll on the

company: although the company is still operational, the batch of

that unique charms was sold at a very low price, bringing financial

losses to the company balance. There is no need to search for the

successful implementation of the scarcity principle, it is right

there: the sudden deficiency of normally available product, high

competition and resulting uniqueness at the peak of the COVID-

Competing interests

The authors declare that there is no conflict of interest that

would prejudice the impartiality of this scientific work.

Authors’ contribution

All authors of this study have a complete contribution for data

collection, data analyses and manuscript writing.

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Psychological risks are quite frequently ignored, and since

they are underestimated and misunderstood, the methods of their

management are not yet developed. Although, with proper

implementation they can give a significant boost to company sales

and profit. As for the defence mechanisms against psychological

risks, the main recommendation would be minimizing emotional

influence in the process of decision-making. To achieve this, it

will be necessary to involve other key employees of the company

in the analysis and solution finding (bookkeepers, department

managers, etc.). This approach will show the same situation from

different perspectives, and also reduce the subjective influence of

a single person. Also, a significant help would be the development

of basic written regulations, requirements for the major company

activities (hiring new employees, choosing suppliers, estimating

product qualities, etc.). The need to consult company internal

regulations before making a decision will help assess the situation

rationally add subjectivity and prevent negative consequences for

the company. Certainly, all companies and situations are unique,

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With respect to information confidentiality, the company name has been replaced.

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