All businesses either will be digital platform businesses or they will be out of business. As we transition from transactions to conversations, we need to urgently consider the critical role our platform strategy must play.
Rather than making and selling products and services in a series of transactions with individual customers, we must view our customers as partners who should be integrated into a flow of value within the context of a connected, collaborative and scalable platform. In this environment, value creation is not linear. It is two-way and continuous.
MIT Digital Economy fellow and Boston University professor Marshall W. Van Alstyne in a recent Harvard Business Review interview said that with platforms, the rules of strategy change.
“Strategy shifts from controlling to orchestrating resources; from optimizing internal processes to facilitating external interactions; and from increasing customer value to maximizing the value of the ecosystem,” Van Alstyne said
“The failure to transition to a new approach explains the precarious situation that traditional businesses find themselves in. For traditional firms, the writing is on the wall: learn the new rules of strategy for a platform world, or begin planning your exit.”
What do we mean by platform? MIT Professor Michael Cusumano provides this definition: “A platform or complement strategy differs from a product strategy in that it requires an external ecosystem to generate complementary product or service innovations and build positive feedback between the complements and the platform. The effect is much greater potential for innovation and growth than a single product-oriented firm can generate alone.”
The importance of platforms is linked to the concept of network effects: The more products or services it offers, the more users it will attract. Scale increases the platform’s value, helping it attract more complementary offerings which in turn brings in more users, which then makes the platform even more valuable.
Accenture’s Tech Vision 2016 report makes it a point that a platform doesn’t just support the business, the platform is the business. The report also quotes Marshall Van Alstyne: “Products have features. Platforms have communities.”
The Accenture reports cite estimates from IDC, which predicts that within the next two years, a majority of large enterprises will create or partner with industry platforms. IDC also predicts that the number of industry clouds will reach 500 or more by 2018, up from today’s 100-plus.
For marketers focused on ensuring that their customer experience is the decisive differentiator, they must start considering how best can they integrated their systems, processes and people into an integrated customer-facing marketing-and-sales front end, which must also be synchronised with the transactional front end.
For example, a website content management system, integrated with a marketing automation application and a CRM-ERP solution, plus a powerful analytics tool is a force multiplier of genuine significance. Operate those solutions individually with limited integration and their collective value to the business is inhibited and not the game changer it should be .