There is an increasing understanding that driving future sustainable growth in the transformed digital economy requires us to think differently about the structure, operations and product strategy of our businesses. The label for this new approach is a “platform business model.” Successfully transitioning to a platform-based business model will mean the difference between growth and future success or outright failure for many organizations.
What do we mean by ‘platform’?
A platform is a combination of culture, services, data and technology upon which additional innovation and value can be rapidly and efficiently delivered.
Platforms can add value by enabling service innovation for customers and clients, fostering more efficient ways of working, revealing new insights from operational data – or likely a combination of all three.
Some organizations such as Salesforce.com build platform businesses that enable customers and partners to create additional value on top of their platform. Other organizations such as Netflix and Uber use a platform strategy to accelerate internal delivery of services and value to consumers. In both cases the necessary ingredients for a successful platform approach remain the same.
Successful adoption of a platform business model requires: An adaptable and problem-solving staff, clarity regarding the core set of services shared across teams and organizations, understanding of the centrality and importance of data as the lifeblood asset of the company, and an integrated, scalable, agile and reliable technology foundation.
Why growth depends on platforms
Organizations with platform-based business models have a number of inherent advantages over organizations with a more traditional structure and operating model. Product development is typically faster because building on top of shared platform services accelerates implementation cycles and the rapidity with which new services and features can be released based on real customer evidence and feedback.
Decision-making also is typically faster using a platform approach than that of traditional, hierarchically governed organizations. Central is the notion of continuous improvement based on a recurring feedback loop: Real-time data on customer insights and process efficiencies allows for faster, more accurate decision making, which begets better products that more closely meet customer needs, which in turn provides more data and experience that feeds into the product development loop.
Capturing a growing share of revenue enables more aggressive reinvestment in underlying platform capabilities, which reinforces the built-in advantage of the positive platform feedback loop. Organizations that optimize and build on these platform-enabled feedback processes tend to pull away at an increasing rate from their more traditional competitors.
Platform approaches differ from traditional business models by emphasizing horizontal integration of data, processes and services across organizational boundaries. Traditional business models depend on hierarchical decision-making and emphasize specialization and ownership within functionally distinct organizational boundaries.
Platform-based approaches typically require a flatter organization with networked collaboration and decision-making processes that focus on responsiveness by pushing decision-making authority closer to the point of engagement with the customer or client.
The imperative to push decision making away from traditional hierarchical leadership roles toward empowered and enabled members of staff places a premium on adaptability, higher level problem solving and analytical skills.
Successful platform organizations hire talent that can flex between different roles and can continuously develop new skills and capabilities. These organization focus on empowering staff to make decisions based on data with readily available access to the data and required analytical tools.
Data is the lifeblood of all platform-based business models. Accurate, real or near real-time operational data is the foundation of fast, accurate decision making leading to better product and service designs, and continuous improvement in business operations efficiency.
Platform-based businesses invest heavily in the technical data landscapes that provide a 360-degree view of the business and are able to ingest, process and distribute data as efficiently as possible to the staff and systems driving the business forward. Continuous, ongoing Investment in the analytics tools required to use data to inform business decisions is critical.
One of the keys to driving growth with a platform business model is the ability to identify common processes across the organization and to turn these into shared automated services within the technical landscape.
The creation of a set of common shared platform services creates significant benefits for the organization. Decision-making and transactional friction is dramatically reduced by adopting standard service definitions while the time-to-market to introduce new products and services is radically improved by building new capabilities from a reusable set of “Lego” building blocks.
Platform-based businesses almost always base their technical architectures on modern cloud-based, scalable design and operating principles. The elastic nature of cloud-based architectures and the ease with which integrated data landscapes can be provisioned and operated makes these the optimal environment for delivery and management of platform services.
Some of the world’s largest and most successful platform companies – including Netflix, Facebook, Twitter, Uber and Spotify – make much of their platform capabilities available via open-source code. Organizations embarking on building out platform-based technical infrastructures can today accelerate their journey by reusing the building blocks made freely available by these companies and others.
Building these technical platform capabilities from scratch often does not make sense for an organization. Fortunately, there are an increasing number of very sophisticated and fully managed platform services available from the main cloud platform providers, such as Amazon Web Services, Microsoft Azure and Google’s Cloud Platform. Adoption of a technical architecture and landscape based on these fully managed services radically reduce an organization’s need to invest in technical operating capabilities and the associated fixed in-house costs.
The advantages of developing a platform business model are increasingly clear to all types of businesses and organizations who are committed to growth, innovation, and defining the future for their customers and marketplaces. Success depends on developing the organizational rigor and internal operating discipline to embrace required change and effectively develop and execute an enterprise-wide platform approach.