Nearly a decade ago, business leaders realized that their business – and every business – needed to be digital. Fast-forward to now, and digitization everywhere is just part of everyday reality. So, what is the new equivalent of disruptive thought? For us, it’s “Every business is a business platform” – an idea whose time is fast approaching.
For evidence, just look at how platforms shape the business value chains around us. Whether they realize it or not, almost everyone on the planet is now interacting with platform technology. The expanding range of platforms that are increasingly powering the global economy – Amazon, Alphabet, Apple, Meta, Microsoft, Oracle, Salesforce, SAP, ServiceNow and more – is changing the way we live, connect, and operate our businesses.
The pandemic has raised the need for platform-based techniques, as businesses have moved to meet the immediate need for safe, convenient, and consistent offers. But the platform revolution is only just beginning: The World Economic Forum estimates that 70% of the new economic value created over the next decade will come from digital platform business models.
From Pipeline to Platform
This is a tremendous opportunity that no organization can ignore. That’s why so many of our conversations today with clients in all industries are centered on how they can harness the power of platform technologies. The good news? With the right strategy and technology in place, every business can do this. And the starting point for a successful transition? Understanding why business platforms represent the rest of the past.
The first industrial revolution-and the global economy until the advent of digital-was fueled by pipeline business with three defining characteristics. First, mass production, with large production lines producing anything from cars to shoes to medicines. Second, widespread consumption of those products by consumers around the world. Third, globalized supply chains linking mass production to mass consumption.
A platform
the business has three different characteristics. First, production is distributed and democratized: Instead of everyone passively receiving the same product-say a newspaper, movie or game-any consumer (or “prosumer”) can make and upload their own product for sharing across the ecosystem. That goes into the second characteristic: personalized consumption, as people create their own travel experience-imagine immersing yourself in YouTube versus watching CNN. The third characteristic? Global digital connectivity-seamless linking of shared production and personalized consumption, and thus the relationship is broken.
Two Platform Possibilities: Product or Enabler
Platforms born into the digital world – from Google to Coinbase to Roblox – have these three characteristics. But as longer -established businesses move into the platform world, they don’t need all three. For example, a global retailer entered the business platform to rethink customer experiences and enable new ecosystems, powered by cloud connectivity to crowdsource design ideas and personalize consumption for each customer. But this does not affect the distribution of high-quality products to consumers.
As underlined by this example, there are two different platform possibilities. For digitally born companies, the platform is the actual product they sell to their customers. It is their primary source of income, and an industry-agnostic, multitenant environment that relies on the power of the ecosystem and network economy. Conversely, for traditional companies that use the platform to sell their products to customers, the platform is a enabler. It acts as a revenue accelerator, using the platform framework to drive high -speed agility, integrate internal and external ecosystems and open up new possibilities. It is also highly customized to specific industry needs.
To illustrate this diverse dynamic, take Marriott and Airbnb. At Airbnb, “production” – the houses and apartments that customers live in – is distributed around the world, and the real product is the platform’s ability to understand people’s preferences and connect them to appropriate property owner. In contrast, Marriott retains control of its core product-the hotel-but uses platform technologies, global connectivity, data and AI to personalize the individual guest’s consumption experience.
Here is another example of a traditional business using the power of platforms. An electric utility is experiencing an early night increase in electricity demand in every neighborhood. The reason? At the same time the people went home and turned on the aircon. To account for this surge, the utility created a grid platform that synchronizes Nest thermostats in thousands of customers ’homes and synchronizes cooling with them to accommodate increasing demand and reduce the chance of a power outage.
How to Navigate the Journey: The Three R’s
How can your business participate in the platform revolution? The best strategy is not to develop a business strategy and then analyze how technology can support it. Instead, it is to create a tech-driven business strategy with platform technology embedded at its core from the very beginning. Your company can then use this integrated approach to achieve new business value through three steps we call the “three R’s”:
- Think again your company’s business model and customer experience: This means shaping your platform strategy and the underlying business case by identifying which customer needs it is desirable, feasible and viable to meet through it, and the most relevant use cases for doing so. Whether you’re a pharma company re-imagining the end-to-end vaccine experience or a running-shoe company re-imagining the runner experience, it usually requires a very industrial lens.
- Redefine your organization and ecosystem partner: To deliver the re -imagined customer experience, the current organization, talent pool, operating model and ecosystem partnerships must be revisited – and usually completely overhauled. This means adopting a platform-first, cloud-first mindset, and identifying and engaging with new strategic partners (potential cross-industry) to join the platform. Examples of these ecosystems range from Apple’s app developer community to Tesla’s partnership with discount tire outlets.
- Free your platform to speed and drive its adoption: In the platform world, traditional annual or six monthly releases are too slow for new offers or functionality. Companies need cloud-native platform architectures that use technology-enabled automation and product management to drive rapid change, data usage-including from third parties via APIs – to gain intelligence that continually enhances operational effectiveness and customer experiences. An example? We helped an oil major combine real-time data from all of its divisions to better inform its decision-making on where its next rig will be located.
Take these three steps, and your business will run smoothly to realize the economic potential of the platform. If you thought platforms were just for tech businesses, think again. Every business is – or can be – a business platform. With you.
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