One can hardly read anything about digital transformation and not encounter the term “platform”.

Establishing “the platform” is one of the critical success factors for companies going through digital transformation.   But what is a platform?

Platforms have actually been around for years.  For example, a shopping mall is a platform for shoppers and merchants.  Computers are platforms for operating systems and applications to run upon. The website from which you’re reading this is a platform for authors and readers.

So what is a digital platform?  Well, the answer depends on who you ask.

“A digital platform is the unique collection of tools and services an organization uses to deliver its digital strategy. A digital platform refers to the software or hardware of a site.”1

Gartner defines a platform as a means to “provide the business with a [digitally-based] foundation where resources can come together – sometimes quickly and temporarily, sometimes in a relatively fixed way – to create value.  Some resources may be inside, permanently owned by the company; some will be shared, and some can come from outside.  The value comes largely from connecting the resources, and the network effects between them”.2

In the digital economy, all platforms have an ecosystem with the same basic structure, made up of four types of players3:

  • Owners – control their intellectual property and governance
  • Providers – serve as the platforms’ user interface
  • Producers – create offerings
  • Consumers – use the offerings

Value results from bringing these four players together through the use of a digital platform.

Why is the Platform So Important For Digital Transformation?

Simply put, the way that business is getting done is changing.  The digital platform is key to that change.

What is making the platform so critical in digital transformation is the shift from a supply-side economy to a demand-side economies of scale.  Companies have long operated in the supply-side economy mindset, represented by a pipeline approach with the company on one end of the pipeline and the customer on the other.  In a supply-side economy, companies achieve power by controlling resources, increasing efficiency, and fending off challenges from any of the five forces described in Michael Porter’s Five Forces model.4

Pipelines don’t work in the demand-driven, digital economy.  In a demand-side economy, technology creates efficiencies in social networking, demand aggregation, application development, and other factors that help networks expand. The larger the network, the more participants.  The more participants, the higher average value per transaction, the better the matches between supply and demand, and the richer the data that can be used to find other matches between demand and supply.  Greater scale (because the digital platform is not constrained by brick-and-mortar) generates more value, which attracts more participants, which creates more value.5  This phenomenon is referred to as “network effects”.

If your company wants to compete in the digital economy, the right platform is critical.  But the platform is not just a website in front of some sort of ecommerce system, but truly a multi-point channel for interaction. Think of the platform as the modern-day bazaar.

But unlike the bazaar of old, a digital platform is not constrained by brick-and-mortar.  A digital platform offers businesses with capabilities that are far greater than the sum of the parts. Platforms give companies a way to be much nimbler and responsive to changing business needs by leveraging the players within the ecosystem to deliver solutions.   Some obvious examples are platforms like Apple’s AppStore or the Google PlayStore.  Most of the apps found on either platform were developed by someone external to the organization, and likely developed far more quickly than either company could have done on their own.

Building Your Digital Platform

A recent Harvard Business Review article6 described three approaches for building your company’s digital platform:

Use existing tools: A good way to “try out” a digital platform is to use pre-existing tools like Facebook or Twitter. JetBlue used its Twitter account to create a highly responsive, 24/7 customer service line.

Partner or invest: If your company wants to diversify and include a digital platform, but lacks the skills or time to develop it, this may be a good route.  For many organizations, this is a reasonable approach that limits risk. General Motors introduced digital platforms within its portfolio via an investment in Lyft, the ride-sharing company. Its digital platform, Express Driv, offers GM cars for rent to Lyft drivers.

Build your own: Not for the faint of heart, this option is the most difficult, because it requires a great deal of organizational adaptation.  Companies choosing this route have sufficient capital, a willingness to weather the ups-and-downs of transformation, and a clear vision of how a digital platform will add value to their market.  GE has chosen this route in its development of Predix, a platform for the industrial internet.

Start Here

Is your company ready to build its digital platform? If so, this is how to start:

Define the Vision: What is the vision for the platform?  How will it add value to the four players (owners, providers, producers, consumers) within the platform?

Assess your organization’s readiness: Do you have the skills and expertise to build a platform?  Is your organization’s culture ready and willing to reinvent how work is done?  Will your company embrace collaboration with people and organizations external to your company?

Build the plan: What steps are needed to achieve the vision?  What training and partnerships are required to enable the transformation?  How will your company exploit the network effects of the platform?  Who will lead the effort? What resources and funding are required?

Sources:

1  Bunskoek, Krista, and Edward Kay. “What Is a Digital Platform? And How Does It Differ from Campaigns or Branding?” Quora. N.p., n.d. Web. 1 Sept. 2016. https://www.quora.com/What-is-a-digital-platform-And-how-does-it-differ-from-campaigns-or-branding

2  “Building the Digital Platform: Insights From the 2016 Gartner CIO Agenda Report.” Gartner Executive Program (n.d.): n. pag. Gartner.com. Web. 1 Sept. 2016. https://www.gartner.com/imagesrv/cio/pdf/cio_agenda_insights_2016.pdf

3 Marshall W. VanAlstyne, et al. “Pipelines, Platforms, and the New Rules of Strategy”, HBR, April, 2016.

4  “Porter’s 5 Forces.” Investopedia. N.p., 07 Apr. 2016. Web. 18 Sept. 2016. http://www.investopedia.com/terms/p/porter.asp retrieved 9/1/2016.

5 Marshall W. VanAlstyne, et al. “Pipelines, Platforms, and the New Rules of Strategy”, HBR, April, 2016.

6  Libert, Barry, Megan Beck, and Yoram Wind (Jerry). “3 Ways to Get Your Own Digital Platform.” Social Platforms. Harvard Business Review, 22 July 2016. Web. 18 Sept. 2016. https://hbr.org/2016/07/3-ways-to-get-your-own-digital-platform, retrieved 9/1/2016

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