Winning the Platforms Race: Essentials of a cohesive digital platform

 

The power and potential of the platform is widely acknowledged. According to an Accenture Technology Vision 2016 survey, 84 percent of Australian executives agree that platform-based business models will become a part of their organization’s core growth strategy within three years--higher than global results (37 percent) and Japan (23 percent), and on par with China.

More than 4 out of 10 (43 percent) of Australian executives believe that adopting a platform-based business model and engaging in ecosystems of digital partners are critical to the success of their business. With industries leading the charge on digital platforms, leaders from all areas of the business are involving themselves in platform strategies and priorities.

Framing the discussion around digital platforms often begins with a few questions:

• What capabilities does my digital platform need to have?
• How do I run my legacy IT systems and infrastructure in parallel to my next-generation digital platform?
• How do we build a platform in a progressive, agile and iterative manner to handle future developments in business models?
• How do I leverage my existing slate and build a platform strategy with little incremental capex?

These questions can be addressed through the five zones of a digital platform. These zones avoid the common challenge of finding new capital by working progressively within an organization’s existing investment approach. Just like platforms themselves, the zones build upon each other and feed additional innovations and developments. All are essential to a digital platform that is capable of driving an organization’s strategy and engaging consumers in sustainable connections.

This Point of View was originally published for Accenture. Read the complete Point of View at https://www.accenture.com/au-en/insight-winning-the-platforms-race


 

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Platforms can be a bad strategy

It’s the in thing, the most widely spoken tenet of business strategy – Platforms. To the extent that if you are not talking about it, you are from the stone ages.

Successful platform stories are all around us – i.e. Amazon, eBay, Facebook, Pinterest and Apple. Want to embrace the model? Think again. Hidden in these examples are different dimensions of what makes a successful platform.

Category 1: Amazon and e-bay offer a platform bringing buyers and sellers together and then pairs them off to create value for themselves.

Category 2: Facebook and Pinterest play the role of providers of a platform (essentially features), but don’t own or create value on it. The value is created in the enablement of conversations by users of the platform who ‘manage’ and ‘transact’ through ‘conversations’ on the platform, facilitated by communities.

Category 3: Apple through its Apps Store provides a platform for other third parties to build on it, but in a way prescribed by the interfaces exposed by the platform.

In summary, you needs to bring a network of buyers and sellers, create a community that leverages your platform to engage in conversations and open it up to other third parties to create value. Easy? But what happens if you have a traditional, conventional business model built around proprietary products and services, marketed through channels that you own, manage and govern? How do you migrate to the open world of platforms from there?

Well, for a start, you need to think about whether you want to be the platform provider or integrate your products & services into another platform provider? Being a platform provider gives one better control and leverage over the customer or consumers of the platform. Even though value is created by third parties who choose to bring their products and services onto the platform, the value for the provider is disproportionately and exponentially higher than the parties who choose to transact on it. eBay and Amazon’s valuation is multi-fold compared to the millions of buyers and sellers that contribute to it. The proximity to the customer brings deep insight of buying patterns and behaviour, unmatched! Which is why some players (esp. banks) have so far been very wary of integrating their products and services into a platform provider. By doing so, they become in some ways further removed from the customer and thus receive little insights on buying patterns. Also, there is this inherent fear that the platform provider can themselves offer competing services at some point. Inside banking board rooms, the one thing bankers fear the most is threat of competition from unexpected & tangential platform players like Facebook and Google than direct competition. It is the trust or lack of it that discerns them from being platform players or advocates of it. On the other hand, becoming a platform provider is not easy especially if you are yourself competing on the platform. Attracting external market participants can be a big challenge and not everyone can become one in the first place.  

I am not for a moment saying there is no value from a platform strategy – organizations need to think hard about their approach or else it can severely backfire. The answer lies in the problem!  

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