The natural tendency in the world of Corporate IT is to create applications in response to business challenges. For instance, take any large Bank or Insurer or Manufacturer – you will find thousands of packaged applications that aim to solve a range of challenges from departmental level issues to enterprise-wide business problems. Over years these have given rise to application and infrastructure sprawl.
The application mindset creates little business value over the long run while creating massive technology headaches. For instance, the rationalization of these applications over time becomes a massive challenge in and of itself. At times, IT does not even understand how relevant some of these applications are to business users, who are even using them and the benefits derived. Over the last 15 years, Silicon Valley players such as Apple, Google, and Facebook et al have begun illustrating the power of building platforms that connect a range of users to the businesses that serve them. As the Network Effects connected to using these platforms have grown exponentially, so have the users.
What Corporate IT & business need to learn to do is to move to a Platform mindset.
The Platform Strategy…
Amazon is the perfect example of how to conceive and execute a platform strategy over a couple of decades. It began life as a retailer in 1994 and over time morphed into other complementary offerings such as Marketplace, AWS, Prime Video, Payments etc. These platforms have led to an ever-increasing panoply of services, higher revenues, promoted more directed consumer interactions and higher network effects. Each platform generates its own revenue stream and is a large standalone corporation in its own right. However, the sum of these platforms is higher than the sum of the individual products and this has led to Amazon becoming the most valuable company in the world (as of late 2017).
So what are the key business benefits and drivers of a platform oriented model?
Driver #1 Platforms enable you to build business ecosystems
Platforms enable enterprise business to orient their core capabilities better and to be able to deliver on those. Once that is done to a high degree of success, partners and other ecosystem players can plug in their capabilities. The functionality that the platform provides is the ability to inter The challenge most times is that large companies always seem to play catchup with business models of nimbler players. When they do this, they often choose an application based approach which does not enable them to take a holistic view of their enterprise and the business ecosystems around them. In the Platform approach, IT departments move to more of a service model while delivering agile platforms and technology architectures for business lines to develop products around.
E.g. Post the PSD2 regulation, innovators in the European Banking system will become a prime example of platform led business ecosystems.
Driver #2 Platforms enable you to rethink and better the customer experience thus driving new revenue streams
The primary appeal of a platform based architecture is the ability to drive cross-sell and upsell opportunities. This increases not the number of products adopted by a given customer but also (and ultimately) the total revenue per customer.
The below blog post discusses how Payment Providers are increasingly using advanced analytics on their business platforms to generate not only increased topline/sales growth but also to defend against fraud and anti-money laundering (AML).
Driver #3 Platforms enable you to experiment with business models (e.g. Data Monetization)
The next progressive driver in leveraging both internal and external data is to use it to drive new revenue streams in existing lines of business. This is also termed Data Monetization. Data Monetization is the organizational ability to turn data into cost savings & revenues in existing lines of business and to create new revenue streams. This requires fusing both internal and external data to create new analytics and visualization.
Driver #4 Platforms destroy business process silos
One of the chief reasons that hold back an enterprise ability to innovate is the presence of both business and data silos. This is directly a result of an Application based approach. When underlying business processes & data sources are both fragmented, communication between business teams moves over to other internal & informal mechanisms such as email, chat and phone calls etc. This is an overall recipe for delayed business decisions which are ultimately ineffective as they depend more on intuition than are backed by data. The Platforms approach drives the organization towards unification and rationalization of both the data and the business process that creates it thus leading to a unified and consistent view of both across the business.
Driver #5 Platforms move you to become a Real-time Enterprise
Enterprises that are platform oriented does more strategic things right than wrong. They constantly experiment with creating new and existing business capabilities with a view to making them appealing to a rapidly changing clientele. They refine these using constant feedback loops and create platforms comprised of cutting-edge technology stacks that dominate the competitive landscape. The Real-Time enterprise demands that workers at many levels ranging from the line of business managers to executives have fresh, high quality and actionable information on which they can base complex yet high-quality business decisions.
A business and IT strategy built on platform approaches enable an organization to take on a much wider & richer variety of business challenges. This enables an organization to achieve outcomes that were not really possible with the Application model.