For a Return on Platform Investment, Focus on New Capabilities

Reimagining your business as a platform won’t add value to the organization by itself. Instead, creating new platform-based capabilities is the key to success.

Michael Schrage Reading Time: 5 min 

Topics

Platform Investment Business Strategy

The mere mention of Alibaba, Netflix, or Facebook evokes “platform envy” among executives at traditional, legacy organizations. That’s understandable. From Google to GitHub, platform companies — businesses that create value by connecting participants — continue to disrupt global industries and established business models alike.

Companies alert to strategic opportunities recognize that business success today requires taking part in and even creating open platform ecosystems — it’s not enough just to promote digital transformation. As the CEO of a global German industrial equipment supplier told me, “We know that in an internet of things world, we must go beyond products and components, and embrace platforms.” Every serious business is trying to embrace and extend its inner Amazon; to paraphrase Amazon CEO Jeff Bezos, “Go platform or go home” is the new managerial mantra.

But to what end? Too many world-class product and services companies find their platformization quests painfully procrustean. Like Procrustes of Greek mythology, who brutally hacked up or stretched people’s bodies to fit them into a bed of a certain size, companies risk defining their “platform” value so narrowly that they end up with constricted or conflicted implementations. Even when fully embracing application programming interfaces, micro-service architectures, and other enabling digital technologies, companies frequently fail to get the business impact they crave. The technologies work; their wannabe platforms do not.

One Challenge: We Don’t Have a Common Language

Many of the problems with translating platform principles into specific practices can be attributed to conflicting and confusing definitions. For instance, a blog in Harvard Business Review a few years ago noted that “by building a digital platform, other businesses can easily connect their business with yours, build products and services on top of it, and co-create value.”

On the other hand, Quora’s platform definition declares: “Platforms are ways of enabling one product to work with other products.” And Microsoft cofounder Bill Gates is said to have described platforms this way: “A platform is when the economic value of everybody that uses it exceeds the value of the company that creates it.”

These definitions — individually and collectively — may be provocative, but they offer little practical guidance to managers struggling to compete with tenacious, born-digital disruptors unburdened by history, legacy, and costs.

Topics

About the Author

Michael Schrage is a visiting scholar at the MIT Initiative on the Digital Economy and a visiting fellow in the Imperial College Department of Innovation and Entrepreneurship. He has served as an adviser on innovation issues and investments to organizations that include Mars Inc., Procter & Gamble, Google Inc., Intel Corp., BT Group plc, Siemens AG, NASDAQ, IBM Corp., and Alcoa Corp. He has presented workshops on design experimentation and innovation risk for businesses, organizations, and executive education programs worldwide.

Tags:

More Like This

Add a comment

You must to post a comment.

First time here? Sign up for a free account: Comment on articles and get access to many more articles.

Comment (1)
Michael Vakulenko
Cannot agree more. We need a common language to have meaningful discussion on the platform businesses. 

The term "platform" is overused to the point of meaning any software centric business. 

In reality, there are different kinds of platforms. This empirical study of 170+ platforms identifies 9 types of software platforms: https://medium.com/platform-hunt/the-8-types-of-software-platforms-473c74f4536a 

These 9 kinds of platforms are very different in how they create network effects, interactions they enable, approaches to solving “chicken and egg” problems (do you build the demand side first or the supply side?), openness levels, growth dynamics, subsidies, competitive strategies and monetisation methods.