In my last article for the Hybrid Hive I explored the emergence of a third mode of IT delivery: tri-modal IT. It centres on how the organisations that shift to a business platform model will be the winners in the digital age. They effectively operate in ‘Mode 3’ of IT delivery (an evolution of Gartner’s bi-modal IT).
In this article I wanted to delve deeper into what organisations should consider when thinking about platforms, and how this will shape the businesses of tomorrow.
Why is the concept of a business platform so important?
At an extreme level, platforms have the power to transform the idea of community, impacting citizenship and even the concept of governmental jurisdiction. Estonia is an example of this – the most advanced digital society in the world.
Just look at Facebook. It now has more users on a daily basis than exist in the most densely populated countries in the world.
Platforms are the pinnacle of disruption at scale when done correctly. The good news is they aren’t just for the bravest of start-ups.
Enterprises are well placed to exploit this business model themselves, and the most progressive are starting to develop their own.
What makes platform businesses different?
For most enterprises, traditional IT delivery is constrained by enterprise development processes and the controls around them. Typically, a platform business enables a much more unstructured approach to growing your organisation and its value.
A platform-scale business is different due to the enablement offered to customers and partners, in order to produce and consume services, data or applications.
The key is to understand the concept of the consumer, the producer, and the relationship between the two. On top of this there’s often a cyclic relationship in a business process or the supply chain they interact with.
Consumers and producers expand services or information available from your platform. This results in the exponential growth of delivering customer value, while the ecosystem and users grow.
To prove the point, Facebook would be nothing without the 1bn+ users that interact with it.
Facebook’s platform is the enabler. The value is in the user base and ecosystem of services it provides to keep them interested, and the marketing and insight about patterns of life it provides.
Where do I start?
Most enterprises are at the beginning of their definition and creation of their own platform business models. However, most are struggling to understand the question of what and how.
Gartner recently predicted platform business growth will rise year-on-year and become mainstream (according to the programmable economy hype cycle curve) by 2022.
While 2022 may be several years away, but the time it takes to develop a market-leading ecosystem of consumers and producers means organisations should consider this now.
I’d argue this platform business model and its operation could be defined as ‘Mode 3’. Gartner’s bi-modal term will become tri-modal IT or truly hybrid IT in the coming years.
I would also argue the definition of a platform business model as part of a go-to market strategy is THE essential component of digitalising your business. This is what will make your company relevant in the digital economy.
It certainly hasn’t hurt AirBnB, Uber, Apple, Microsoft, Amazon, Google, and organisations such as Rolls Royce, Bosch, Aviva and others are well advanced in their thinking this space and have already started their journey.
What should I be thinking about?
1) The value in your platform is measured upon the effectiveness and scale of your ecosystem of consumers and producers. This means you have to put emphasis on interactions with the community and user base.
2) Data, content and value are created by individuals or partners outside of your organisation. Managing reputation and risk is much harder to control as a result.
3) Enabling your consumers to find the right information quickly must be considered. Presenting relevance in your content and personalising it for consumers is essential for a good interaction and experience.
4) There is a need for continual evolution of your platform. This is to sustain interest of partners, developers and individuals, in order to remain relevant. Continual innovation is required weekly if not on a daily or even more frequent basis.
5) Your platform will be judged and critiqued by a mass market that potentially has no brand loyalty to your organisation, compared with your previously inward-facing services and applications. You have to build and earn trust.
6) The business value of your internally-focussed legacy systems may change, meaning investment in modernisation or stabilisation may have to occur.
7) Your business platform is a business model not an IT project, programme or service. It means focus is placed foremost on the enablement of value and interactions for customers and consumers rather than software or technology.
8) Your platform will require continual investment and evolution to grow business value in the digital world. This is a shift that amplifies the extent of your ‘Mode 2’ digital processes that will have switched investment and financial models from capex to opex.
9) Consider how to monetise (currency or otherwise) different scales and types of transactions with the consumer and producer. This impacts your supplier management processes and systems.
10) Partnerships and your ecosystem are elevated to the public domain. Partners’ businesses and reputation can improve your own platform and its value directly.
11) Data security and regulation requires careful consideration. Your platform may need new security policies that adapt to a shift to ‘outside first’. This is as you digitalise en-masse to fully work as a connected cloud-enabled business.
Why do you need to offer a true digital business platform?
The answer is simple. If you don’t, you will have no digital business of relevance, and therefore your opportunity to grow is limited.
Creating one is a little trickier to explain but lets explore it. Take Amazon as an example:
Amazon started business offering goods like any other online retailer. However, the game changed when it exposed its back-end processes. Billing and logistics services opened to a marketplace of partner businesses to consume and offer to their clients, sometimes in direct competition with its our warehouse of goods.
By exposing its back-end services via application programmatic interfaces (APIs) Amazon defined the services that partners and developers could consume.
Amazon then defined a change to its website presentation layer, enabling transparency of pricing and providers. This evolved into offering a service desk for returns and questions for its ecosystem of partners.
Amazon had a valuable business before sharing with others. However, it grew rapidly once it opened up its data and moved from an asset heavy to a lighter asset business. This enabled it to grow faster at lower risk into new territories and a broader customer base – an exponential acceleration of value.
Where do you start identifying value to an ecosystem?
By understanding your existing business processes and data.
The development of a platform business needs to start with a business strategy and an understanding of the value you hold that is of interest to consumers and producers.
You could start from scratch (like YouTube) but for most enterprises their brand is known for something else. Smaller jumps in sector or market segment are often easier.
Look at your data; it’s often hugely valuable. There are examples of some business of having 80+ years of electronic records. Think about data that could be easily and securely shared to the digital world. By offering it through an API there is potential for economic benefit, directly or indirectly being of monetary value.
Business processes can often also be leveraged. The key for processes is seamless end-to-end automation for efficiency.
The internet of things-enabled processes you are developing in your business may be prime for exploitation by partners. This could either be the process or data they consume.
Consider the data gathered by Boeing or Rolls Royce engines. This is valuable inside and outside the walls of their business and can be enhanced, analysed and consumed for new value by others.
Imagine being able to expose the data to your supply chain and how this may make the process more efficient through automation.
Platform businesses will be the winners
As we consider this move to a Hyperscale ‘Mode 3’ of operations, you can start to see how our future economies and businesses will be driven by platforms.
The rate of change is only accelerating. I see the mainstream adoption of digital business platforms being just a few years away, so the time to embrace this new way of thinking is now.
It’s very much a case of ‘disrupt, or be disrupted’. Those businesses that do not they fail to stand up and be relevant in the digital age.