Platform strategies have a far reaching impact. It is therefore essential that you come prepared in this domain.
You can't have missed it. Platforms and ecosystems are en vogue in the strategy of many trendsetting companies. This is very understandable when you think of the words that Silicon Valley guru Peter Thiel spoke a few years ago when talking about what's so special in platform strategies: `Competition is for losers.' The platform economy indeed offers plentiful new opportunities to create value - thereby creating a market instead of competing on a market. In this domain, the winning company is no longer the one that owns and controls resources, but rather the one that excels in orchestration of demand and supply coupled with a superior customer experience. The usual suspects such as Amazon, Airbnb and Booking have triggered a wave of attention in boardrooms. Corporates such as IKEA (Taskrabbit - as predicted), Heineken (Beerwulf), ING (Yolt), ANWB (Connected), Rabobank (Global Farmers) are now all actively working on new business models using digital platforms.
Given the far reaching impact of platform strategies, it is essential for companies to come well prepared in this domain. Let's highlight a number of our essential experiences.
Platforms allow participants to benefit from the presence of others. This is very different from conventional strategies and this also implies that the source of value is very different: adding value for multiple groups of users in the ecosystem is the key differentiator. This means there's some brainwork to be done to design value propositions for both consumers and producers of value - only focusing on needs from consumers without thinking about 'what's in it for the producers' will not result in success. Related to this, one also needs a smart approach to the typical 'chicken & egg' problem: platforms gain value when the network grows, but how to fuel initial growth? The existing customer base is no guarantee for success.
A well-known quote is that `A fool with a tool is still a fool.' This is also true when it comes to designing and implementing platforms. Implementing a platform strategy impacts nearly the whole organization and involves a redesign of many processes. Too much of a technology focus will be killing. Notwithstanding, it is smart to maximize the use of available SaaS services to minimize required inhouse development. But too much focus on the perils of technology may result in disappointment. After all, a relentless focus on improving the customer experience in a data-driven way is what brought famous platforms such as Booking.com success.
Embracing platform strategies requires more than just using the standard toolbox for innovation because of the fundamentally different model. In fact, one should have a mindset to grow the platform into a self-sufficient business (instead of a marketing pet-project) and from the outset think of how to monetize it in the future. It goes without saying that this requires a lot from leadership. Leaders should not only have a profound view on what platforms strategies mean for their organization (crossing silos), but also choose the proper balance when it comes to implementation. It may for instance be tempting to scale up fast, but this may also result in low user engagement, high pressure on customer service or other issues. Leaders should not be blinded by the standard `vanity metrics' such as user numbers. These may lead the team to focus their attention on the wrong things on the wrong time. Stayzilla (an Indian AirBnb competitor) started to focus too much on their `room-nights' (volumes) metric instead of the resulting cash-flow, which the founders acknowledged in the end contributed to their decline.
There may be an interesting analogy with the world of professional performance race drivers. More specific, the ones who drive a car with a manual transmission gear box. They master the so called `heel and toe' art. This refers to the right foot position as it operates both the gas and the brake pedal at the same time. The same skill is in fact - proverbially - needed for implementing digital platforms. Yes, organisations should act and learn extremely fast (agile, minimum viable products) to cope with today's challenges - the speed pedal. But they should at the same time adopt a controlled approach and a clear view on the bigger picture before they start - the brake pedal.
Challenging? Sure. Rewarding? Hell, yes.
This is part 2 of the series Technology for Business Leaders. For part 1, click here.