CTO of Wunderman Thompson NA, applying technology to drive client growth across the Americas and beyond.
The past decade has seen the rise of a new type of business model: the platform business. While more traditional business models set the stage for companies to supply services to meet consumer demand — packaging cost-effective services or marketing them to consumers for profit — a platform business disrupts traditional business models by facilitating direct interaction between value creators. Instead of the companies pushing services out in the world, platform businesses seek to enable exchanges between producers and consumers.
Spotify, AirBnB, Uber, Netflix and Amazon (SAUNA) have all adopted this model, facilitating interactions between artists and listeners, hosts and guests, drivers and riders, buyers and sellers. The platform opportunity is poised to grow — in 2016, an Accenture survey found that 81% of executives believed platform-based business models would be core to their growth strategy in three years. By 2019, McKinsey reported that 84% of incumbent companies owned or operated platforms.
So, which factors differentiate business platform leaders from laggards? What elements of a business platform make them successful? Why are they so challenging to get right? And, for everyone new to this concept, where should you start? Let’s dive into what makes a platform business successful and how you can build one of your own.
Today, the rate of technology innovation outpaces our ability to adapt and understand the potential of advances in the moment. For technology to differentiate a business, the business must successfully adopt the technology in the first place. Closing that technology-to-human adaptability gap requires executive leadership to drive organizational change.
As Microsoft CEO Satya Nadella coaches, sustainable change comes from the aggressive adoption of technology through a culture of experimentation. That’s certainly the case with business platforms, where technology is applied to data, along with trusted partners, to make services accessible and adopted at scale.
Platform businesses need business platforms.
Platform businesses connect their customers in wickedly simple ways. Once fully realized, this network effect creates and exchanges value through customer interactions. That value attracts more customers to the platform, scaling value creation further via network effects. When it’s working, it can create value at scale like nothing else.
Yet despite the rise in platform business startups, I recently read in Haydn Shaughnessy’s book Shift: A Leader’s Guide to the Platform Economy that the majority fail. Software and hardware innovations in cloud computing, mobility, artificial intelligence, API-based integrations, social and web-based tools made it easy to spin up technology platforms to underpin platform business.
However, business platforms require more than just technology — they rely on data-driven approaches to gain meaningful insights and a partner ecosystem to accelerate growth. Navigating these inherently complex technology, data and partner relationships to streamline optimal business environments is what differentiates a technology platform from a business platform.
Build your own business platform.
When looking to build a business platform, you need to understand the four core elements driving growth and value between customers:
1. Data: Know your customers. If you want insights and informed ideas that make a lasting impact on your business, a data-driven approach is the only option. To compete in today’s landscape, you must continuously learn to drive real transformative change.
2. Technology: Technology democratizes access to customer intelligence across the enterprise. By scaling experimentation and simplifying execution, you can shorten the distance from new ideas to tangible business impact.
3. Partners: Platform business success lies in the strength of its connections. Your business platform must carefully manage your partner ecosystem to bring the right service and product mix to market.
4. Governance: The partner ecosystem’s size and shape will vary greatly depending upon the nature of your platform business. Regardless, participants within ecosystems — agencies, vendors, consultancies, system integrators and so on — require a governance framework for fast and devolved decision-making by those best positioned to do the work.
Adapt to the platform.
Business platforms have proven real worth in today’s marketplace. If you’re looking to build your own, know that you’ll need to begin laying the groundwork now. It may take new software, a new team and a fresh look at how you’re leveraging partners for maximum efficiency. But by focusing on the right pillars — data, technology, partners, governance — you can begin building pieces as you layout your high-level vision.
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