Nearly a decade ago, business leaders realized that their business — and every business — needed to go digital. Fast-forward to today, and ubiquitous digitization is simply part of everyday reality. So, what’s the new equivalent disruptive thought? For us, it’s “Every business is a platform business” — an idea whose time is fast approaching.
For evidence, just look at how platforms are reshaping business value chains all around us. Whether they realize it or not, virtually everyone on the planet is now in daily contact with platform technology. The expanding array of platforms that increasingly power the global economy — Amazon, Alphabet, Apple, Meta, Microsoft, Oracle, Salesforce, SAP, ServiceNow and others — are changing the way we all live, connect, and run our businesses.
The pandemic elevated the need for platform-based approaches, as businesses moved to meet urgent demand for safe, convenient, and consistent offerings. Yet the platform revolution has only just begun: The World Economic Forum estimates that 70% of new economic value created over the next decade will be from digital platform business models.
From Pipeline to Platform
It’s a massive opportunity that no organization can afford to ignore. That’s why so many of our conversations today with clients across all industries center on how they can harness the power of platform technologies. The good news? With the right strategy and technology in place, every enterprise can do this. And the starting point for a successful transition? Understanding why platform businesses represent a break with the past.
The first industrial revolution — and the global economy until the advent of digital — were powered by pipeline businesses with three defining characteristics. First, mass production, with large-scale production lines making anything from cars to shoes to medicines. Second, mass consumption of those products by consumers worldwide. Third, globalized supply chains connecting the mass production with the mass consumption.
A platform business has three very different characteristics. First, production is distributed and democratized: Rather than everyone passively receiving the same product — say a newspaper, movie or game — any consumer (or “prosumer”) can create and upload their own product for sharing across the ecosystem. That feeds into the second characteristic: personalized consumption, as people create their own experience journeys — think immersing yourself in YouTube versus watching CNN. The third trait? Global digital connectivity — seamlessly linking the distributed production and personalized consumption, thereby disintermediating the relationship.
Two Platform Possibilities: Product or Enabler
The platforms born in the world of digital — from Google to Coinbase to Roblox — have these three characteristics. But as longer-established enterprises move into the platform world, they don’t necessarily need all three. For instance, a global retailer has entered the platform business to reimagine 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 distribution of quality products to consumers.
As this example underlines, there are two distinct platform possibilities. For digitally born companies, the platform is the actual product they sell to their customers. It’s their primary source of revenue, and is an industry-agnostic, multitenant environment that relies on the power of the ecosystem and network economy. By contrast, for traditional companies that use the platform to sell their products to customers, the platform is an enabler. It acts as a revenue accelerator, leveraging the platform framework to bring high-speed agility, integrate internal and external ecosystems and open up new possibilities. It’s also highly customized to specific industry needs.
To visualize these differing dynamics, take Marriott and Airbnb. With Airbnb, the “production” — the houses and apartments where customers stay — is distributed globally, and the real product is the platform’s ability to understand people’s preferences and connect them with appropriate property owners. By contrast, Marriott keeps control of its core product — the hotel — but uses platform technologies, global connectivity, data and AI to personalize the consumption experience to the individual guest.
Here’s another example of a traditional business harnessing the power of platforms. An electric utility was experiencing an early evening surge in power demand in every neighborhood. The reason? People were arriving back home at the same time and turning up their air conditioning. To account for this surge, the utility built a grid platform that synchronizes with the Nest thermostats in thousands of customers’ homes and synchronizes the cooling across them to smooth out the demand spike and lessen the chance of a loss of power.
How to Navigate the Journey: The Three R’s
How can your business join the platform revolution? The best approach isn’t to develop a business strategy and then work out how technology can support it. Instead, it’s to create a tech-driven business strategy with platform technology embedded at its core from the very start. Your company can then use this coordinated strategy to realize new business value through three steps that we term the “three R’s”:
- Reimagine your company’s business model and customer experience: This means shaping your platform strategy and the underlying business case by defining which customer needs it is desirable, feasible and viable to meet through it, and the most relevant use cases for doing this. Whether you’re a pharma company reimagining the end-to-end experience of being vaccinated or a running-shoe company reimagining the runner experience, this usually requires a very industry-specific lens.
- Redefine your organization and partner ecosystem: To deliver the re-imagined customer experience, the existing organization, talent pool, operating model and ecosystem partnerships must be revisited — and usually completely changed. This means adopting a platform-first, cloud-first mindset, and identifying and engaging with new strategic partners (potentially cross-industry) to join the platform. Examples of these ecosystems range from Apple’s app developer community to Tesla’s collaboration with discount tire outlets.
- Release your platform at speed and drive its adoption: In the platform world, traditional annual or six-monthly release cycles for new offerings or functionalities are far too slow. Companies need cloud-native platform architectures that use automation and tech-powered product management to drive rapid innovation, leveraging data — including from third parties via APIs — to derive intelligence that continually improves operational effectiveness and customer experiences. An example? We helped an oil major integrate real-time data from across its divisions to better inform its decision-making on where to locate its next rig.
Take these three steps, and your business will be well-paced to realize the potential of the platform economy. If you thought platforms were just for tech businesses, think again. Every business is — or can become — a platform business. Including yours.