Platforms were once considered small and even quirky additions to business strategy. This is no longer the case: In 2018, companies deploying platform business models continue to surprise and challenge conventional approaches to creating value.
Platform companies have also been among the first to recognize and harness data-centric strategies, and many have moved to the forefront of a wide range of disruptive technologies, from cloud computing to IoT. In the process, platform companies have become powerful engines of innovation that play an increasingly integral part in economies throughout the world. A number of companies shared their journeys at our 2018 MIT Platform Strategy Summit. Their stories illustrate a number of broad principles that represent the locus and control of platform value today.
1. Technology, scale, and smart risk management. Executives building and operating platforms pointed to the interplay between technology, scale, and smart risk management. The CEO of Topcoder, Michael Morris, observed that to reduce transaction costs and grow network effects, companies must manage risk. Intelligently absorbing risk helps pull new transactions onto the platform and grows the enterprise.
For MuleSoft, a provider of API services, the transition from manual to self-service options reduced friction and accelerated employee onboarding times from weeks to minutes. MuleSoft’s CTO Uri Sarid said that “there has to be value in the platform, and self-service reduces friction in setup. Service in seconds is digital; service in days is not.”
The implications for emerging technologies were also discussed. Eamonn Maguire, global lead in financial services at KPMG, led a discussion with Gerhard Lohmann of CFO Reinsurance, Jalak Jobanputra of FuturePerfect Ventures, and Kiran Nagaraj of KPMG about blockchain technologies and where they might also contribute to reducing friction across platforms. Naturally, the answer was “it depends.” Some argued that blockchain still cannot match current transactional means of processing international payments. Others pointed to the significant gains that could be made in deploying blockchain to improve the efficiency, security, and transparency of areas like insurance, which are notorious for complex, siloed, paper-based processes.
2. The power of specialization and advanced decision engines. As platforms mature, they often become more complex and more specialized. This creates new management challenges and the need for more sophisticated decision engines to harness value.
Uber provides a case in point.