Remember when the world was flat? Or, at least, when we used to view it like the above.
Today, it looks more like this:
This second image is, in fact, a heatmap showing the Facebook connections between the social network’s billion-or-so users. It’s a jolting reminder of our new, hyper-connected, real-time world.
People are, indeed, connected like never before. The exponential scale of cloud computing, and the explosion of smartphones into hundreds of millions of consumer hands has created unprecedented opportunities.
And the companies that are grabbing those opportunities are almost all ‘platform-based businesses’.
Traditional value-chains were linear (production > distribution > promotion > consumption); but platform-based businesses upend this model entirely. Platforms serve to match suppliers and consumers, releasing bottlenecks and creating new efficiencies.
IdeasForLeaders.com crisply defines the shift that ambitious organisations need to make – from traditional products, to platforms: “the path to profitability depends on maximizing the transactions on the platform rather than maximizing the number of units sold of a particular product”
Becoming a platform business – an Uber, Alibaba, YouTube, or Netflix for example – means creating the tools and the environment for others to create and exchange value. Platform companies are orchestra conductors, creating digital platforms and strategies that are attractive enough for natural network effects to take hold – creating self-perpetuating ecosystems that grow in usefulness for each participant.
Examples of platform-based models are appearing in almost every industry, and not just the obvious examples like retail, transport, and entertainment. Philips Healthcare is repositioning from a provider of medical equipment, to a data-rich platform that enables others to build healthcare tools on Philips Healthsuite. Closer to home, Absa Bank has embraced social, peer-to-peer lending with its acquisition and incorporation of the RainFin platform into its lending unit.
These are just two examples of classical companies embedding platform-based thinking into traditional business models. The shift to platforms may start small, somewhere within the faster-paced innovation side of the business (see my recent post on two-speed organisations), but may ultimately become the core principle driving tomorrow’s winning companies.
The question facing business leaders is how they can protect existing value streams, while manoeuvring into position to take advantage of platforms?
The starting point is working out what strategies and tactics will work, to either change the dynamics of your market for the better, or create entirely new markets. Understanding how to reinvent your market then needs to be supported by the right technology to create your digital platform.
Peter Weill, from MIT Sloan’s Center for Information Systems Research, dissects platform companies into three layers:
- At the top is content… this is the product, service, or information that is consumed by consumers on the platform.
- In the middle sits customer experience… the mechanisms through which a community can congregate, collaborate, crowdsource inputs, and build value together.
- And finally, the bottom layer, technology, is the architecture on which this all rests – the systems, processes and technology used to deliver services to users and facilitate engagement.
Many organisations are hindered by their legacy in the bottom layer. There is a way to unlock this as illustrated in this 5 min section at 31 mins of Paulo Rosado’s keynote in Lisbon last month.
Fundamentally your platform capability must provide fast change and continuous delivery at every layer of your legacy and technology stack.
The secret of Digital is Speed of Change!
But technology alone won’t create a new market, disrupt an old one or take your business to new heights. You must address content, customer experience and technology simultaneously to join the platform revolution.