Business platforms are nothing new. Steam power, the electricity grid and desktop computer operating systems have all created “ecosystems” of related businesses, products and services.
But to compete in the digital era, it’s imperative for every business to understand what type of platform will serve it best, how its business model must change and how to make the transition.
Businesses must re-imagine themselves in terms of the experiences they want to provide, rather than the specific transactions or products they want to sell. With this information in mind, they can then look to transform their operations by understanding what type of platform should be deployed and which partners to engage. This will allow them to seamlessly provide the experience(s) to their audience.
A reminder: A platform is a product or service that helps organisations create new products or services.
BUT PLATFORMS ARE NOTHING NEW.
In fact, we’ve been creating and using different platforms throughout the Industrial era. And they’ve always led to the creation of new markets, new industries and, ultimately, new platforms.
The electric power grid is a good example of a platform. Before grids became widespread, it wasn’t unusual for businesses to have their own power plants onsite. Once ubiquitous, power grids became a platform that allowed the creation of multiple new industries based around the reliable supply of electricity. These included manufacturing facilities and the production of electrically powered devices for use at home and at work.
In the digital age, “platform” usually describes a cloud-based service that comprises digitised business processes, data and infrastructure. Internal elements provide back-end processes and external components supporting devices, sensors, user interfaces, app stores and partner services.
In 1998, Google was a fledgling platform: a very good search engine built on niche hardware and software. But by building out its stack with services such as Gmail, Maps, Docs, Voice, YouTube and most recently Allo, and by making its application programming interfaces (APIs) available to developers, Google has become a platform. Third parties use its various components to create new products (or enhance existing ones), which has expanded Google’s platform into a layered and highly functional ecosystem.
A digital business is a platform business
Businesses can develop many kinds of platforms. They can start by optimising their existing IT stack, then look further ahead and adopt platforms that will help them create new digital business models.
According to the MIT Sloan Management Review, such transformative platforms have three components:
- Platform: Hardware, software, networks, partners, business processes, data and technology.
- Experience: Customer-facing processes, decision-making processes, tools and interfaces.
- Content: Information and other consumables like software, online services and other digital products.
Reviewing how these components function in your organisation allows you to identify those that are both high value and have capacity to spare. By making these assets available and accessible as a platform, you can allow individuals and partner businesses to access and use them to develop an ecosystem of products and services. This can create new value and extend your platform’s reach and utility.
Why do platforms matter?
The predominant business model is evolving toward a platform-based economy. Already today, the economic value and control that is moving through platforms is significant, at $4.5trillion USD (Center for Global Enterprise, Rise of the Platform Survey 2015).
The rise of cloud, mobile and social technologies — and their corollaries, such as the widespread adoption of smartphones and social media platforms, video streaming services, big data and the Internet of Things (IoT) – has led customers to expect fast, accurate and personalised service online.
At the same time, it is increasingly difficult to anticipate and keep up with the pace of change. Kurzweil’s law of accelerating returns posits that we’ll see a 1000-fold advance in human progress in just 10 years’ time.
PwC postulated one example of this type of change, predicting that the rise of autonomous vehicles would mean a 99 percent reduction in the number of cars on U.S. roads by 2030.
The ripple effects of such a development are difficult to estimate, but would include reductions in traffic accidents, commuting time and fuel/energy expenditure, and the size of the national vehicle fleet. Associated industries, like vehicle repairers, insurers, logistics, would see their businesses transformed or even eliminated. The social effects of such a change are even more difficult to anticipate.
How can we predict what this might mean for business – and how can businesses prepare? Platforms give businesses a way to create a more loosely coupled environment that is agile and open. Companies can anticipate change and act, without being burdened with legacy IT environments or tech-debt that inhibit innovation today.
What does a platform business look like?
Perhaps the best way to show the difference between industrial and platform businesses is to compare them side-by-side:
|Business feature||Industrial era||Platform era|
|Resources||Coordinate internal resources to create a product and sell to a large, segmented customer base.||Orchestrate a globally connected ecosystem (or community) of producers and consumers in an efficient digital marketplace and app store.|
|Organisational structure||Hierarchical organisational structure including functional silos with distinct lines of accountability.||Flat organisation with cross-functional teams and an agile, accountable culture.|
|Supply chain||Warehouse to manage inventory and delivery to match supply and demand.||Manage community– producers and consumers of goods and services pay as they use. Open the ecosystem to a wide range of producers and consumers.|
|Procurement||Rigorous procurement process to drive competitive pricing and control suppliers through contractual agreements.||‘Plug and play’ allows many producers to become suppliers. Transparency drives contestability and innovation. APIs and blockchains act as contracts.|
|Scale and optimisation
|Significant capital assets that drive economies of scale for national and global expansion.||Network effect of a vibrant and growing community on the platform. The more buyers, the more sellers. This creates a virtuous circle.|
|Planning and goals||Three-year strategic planning horizons. “Waterfall” project management. KPI’s and incentives for specific product, P&L goals.||Vision, one-year strategy with continuous agile improvement to meet short-term goals. KPI’s to drive community interaction and overall ecosystems profits.|
|Governance and control||Top-down command and control, policies, contracts.||Community ratings drive adoption, optimising costs and accelerating decision-making. Transparency drives ethical behaviour. Blueprinting policies into APIs and algorithms provides a second line of defence.|
|Product||Market research, segmentation, customer-centric design, customers come to you at the point of sale.||Human-centred design, real-time curation of “experiences” using the ecosystem around the platform, matching producers and consumers at any point in their journey.|
|Marketing and sales||Linear “path to purchase” and sales funnel. Marketing and sales operate as separate silos.||Non-linear user journey requires a single, comprehensive view of the customer to influence via the right channel and content at the right time, where automation allows for easy purchasing.|
|Brand and reputation||Brand is managed in silos – thought leadership, content marketing, creative agencies and customer service teams.||Marketing and design teams work side by side with developers and data scientists to deliver a just-in-time digital experience.|
|Loyalty and advocacy||Loyalty programs, structural and informal lock-ins.||Always-on experiences creating daily habits to bring people back and encourage them to invite their friends to join the community.|
Thanks to the “mass personalization” enabled by big data and pervasive online services, consumers now expect highly curated experiences tailored to their preferences and profiles, and customers are driving the economy.
Thus, the first step for any business that wants to be competitive in the current environment is to decide what experience it wants to be known for, and then determine how to assemble and curate that experience.
For example, the current experience of buying a car is a disconnected series of discrete transactions. The customer visits auto manufacturer websites for model and specification information, to access reviews and test drive online, check insurance and finance sites, car dealership sites and more. Insurance, registration and ongoing maintenance are also handled separately.
What’s interesting here is that each company is competing for business within their traditional scope. For example, the banks are competing with other lenders of personal loans. They aim to provide a best in class omni-channel experience for the lending component of buying a car. The real business opportunity here is to launch a platform that allows the creation of a single ecosystem where all these searches, purchasing processes, government processes, car sensing for maintenance servicing and transactions can take place seamlessly — creating an experience that directly addresses the buyer’s real need.
The experience any customer has with your brand, products, services or strategy is the new point of entry to sustainable, profitable business relationships. These experiences generate the most valuable information a modern enterprise can possess — information on individual preferences. This makes it possible to create detailed customer profiles describing purchase histories, beliefs, habits and quirks.
This matters because the traditional “sales funnel” models are no longer as useful as they once were. Customers still progress from “awareness” to “purchase,” but it’s no longer a linear journey. There are multiple points of entry at every stage and customers may “jump in” at any point.
A referral to your product could come from almost anywhere, thanks to the multi-dimensional nature of social influence; non-linear paths to purchase; advocates who aren’t customers; and the shift to ongoing relationships beyond individual transactions. This also means that post-sales services are more important than before as they’ll help shape the customer’s ongoing relationship with your brand.
This means “always-on” is more important than ever. Businesses need a new approach to carry this out across a network or ecosystem. Such a shift requires a new breed of talent, including:
- Digital signallers: People who can scour the world of search, social and mobile for insights into online habits and “digital body language.”
- Marketing traders: Individuals who think like investment portfolio managers to determine which channels and segments to invest in and what mix will yield the greatest return.
- Content editors: Employees who understand customers and can produce valuable content across an array of media targeted to individuals at key points along the experience journey.
- Big data sociologists: People who can combine analysis with an understanding of the customers’ context to ensure your company is ready to help in moments of need or decision.
- Agile technologists: Masters of Scrum and design thinking who act as change agents, championing experimentation and working across the enterprise.
- Digital enablers: Employees who will partner with sales, marketing and customer service managers on the “front line” to co-create and curate experiences for the individuals they’re targeting.
- Digital workers: Bots that augment the team, speeding up repetitive processes, learning patterns and providing intelligent advice.
Of course companies can only succeed if they have access to platforms that provide a single view – pulling in data from sensors, devices, systems and personal preferences – and allow that intelligence to be applied by immediately adjusting messages, product configurations, offers and processes at any stage of the user experience journey.
Operating in the platform era
Businesses must harness platforms to create value through connections and interactions rather than through ownership of individual resources. The lines between the organisation, its suppliers and its customers are blurring, and traditional business structures must be carefully reviewed to determine if they’re still fit for purpose.
For example, consider the current “‘Plan>Build>Run” model that structures many IT teams. This will be replaced by a “Plan>Consume” framework, that combines IT and Operational Technology (OT) functions.
The new Plan function has more focus on strategy – mapping user experience journeys, service integration and policies, and partnering within the business and its ecosystem of suppliers and producers. The focus will be on iterating multiple projects that will evolve into a larger offering, rather than on monolithic projects intended to do everything at once.
The Build function has effectively been moved to the Platform. New projects are executed by agile, cross-functional teams that can operate in sprints. Or the team can be completely crowd-sourced by providing external developers with access to the platform.
The Run function is now all about managing and optimising consumption of IT services to manage effectiveness and profitability.
Own vs. rent
Enterprises will need to make decisions about when to connect to an existing platform or build their own. The key driver for these decisions is based on the experience the business wants to own and where it will find its competitive advantage.
Broadly speaking, organisations should own business platforms that are core to their business model, but they can rent platform layers and integrate them to make up the parts.
For example, if you’re a manufacturer, you may decide that your design system and process is your core asset, and build a platform that makes it available to third parties. It could connect to assets, all the way from 3D printers for prototyping to heavy machinery for manufacturing, and provide customers with the ability to design products, create specifications, manufacture prototypes, use analytics to improve design, source manufacturing services and so on.
In this new business model you can rent most, if not all, of the platform layers – such as API development and access to computer, analytics and IoT systems. You own the design system and the unique combination of integrated platform services that allow you to create a totally new form of value.
This new way of looking at IT has significant implications for partners and partner relationships. In the platform era, partners work with you to co-create a solution rather than developing a solution independently based on your needs.
This approach also means partners can develop industry-based stacks, with configurable services, applications and processes specifically designed for different verticals. For example, CSC has worked with its technology vendors to develop a banking platform with essential functionality that can be quickly tailored to meet any individual bank’s needs.
These new business models can also create new ways to pay (and be paid) for services. Rather than large upfront expenditures on materials, operational models like subscriptions, management retainers and consumption-based pricing are coming into play.
The transformation here is the move from one-off projects with one-off fees to ongoing relationships with shared revenue models; if projects are running all the time, they need to be supported all the time.
Platform partner ecosystem
Different types of platforms and partners will need to be integrated to create each new business model platform. From Internet of Things platform partners, payments platform partners, business system platforms, all the way through to cloud platform partners. How you select, integrate, manage and orchestrate services and construct commercial models across this entire ecosystem, to ensure seamless platform performance, will require a new breed of Services management.
Transforming Australian and New Zealand enterprises
For a strong Australian and New Zealand economy, we need to see more platform businesses being created here. A recent survey by The Center for Global Enterprise shows that Australia and New Zealand are behind, with only one significant platform making the list – Atlassian.
Existing incumbent enterprises need to consider how to enter the platform business.
This can be particularly challenging for asset-heavy enterprises, those with many employees, a hierarchal organisational structure and significant capital and physical assets. These companies need to establish new governance models and policies to support a platform business and encourage high-quality community participation. They must also develop new incentives for managers to drive profit across the ecosystem rather than for specific products and services. A well-known example is GE’s launch of the Predix platform for the industrial Internet, as the business reinvents itself into a software provider to support the IoT.
A risk-reduced transition: CSC’s role
As a next-generation IT services provider, CSC is committed to helping our clients on their digital journey. To do this we are increasing our capability around the major enterprise software platform technologies, in addition to integration capability to create new services platforms.
CSC is co-investing and co-engineering with our systems and technology partners. This means our clients benefit from cloud-based services that are available on demand; can access platforms for both configuration and integration to meet specific needs; and gain the ability to manage workloads securely and seamlessly across cloud platforms and legacy systems.
We’re also building industry-specific platforms that “bake in” the most important capabilities and offer bespoke customisation and app stores so they can be tailored to a client’s specific needs in banking, defence, energy, healthcare, manufacturing and more.
We’re collaborating with other industry players differently too. We don’t see competitors anymore; we see a shifting array of partners. Clients want solutions and they want to take advantage of hybrid IT to improve their agility and responsiveness.
The platform era is here, because your customers are demanding it. And if you don’t want your organisation to be left behind, you’d better start building.