It’s easy to assume the platform game is the exclusive domain of digital natives. But while the likes of Google, Amazon and Microsoft have got a head start and proved the potential of platforms, it’s the incumbent traditional organisations that will reshape the world tomorrow.
Just look at agriculture giant John Deere. It’s created a data platform that gives everyone from farmers to software companies unprecedented insights into farming so the entire value chain can improve their operations. And beauty retailer Sephora has created a community-based platform that uses artificial intelligence to recommend products, creating a new connection between consumers and producers.
Such large, traditional companies are succeeding with platform business models because, like all incumbent organisations, they have strong brands, deep customer relationships, access to capital, domain expertise and global reach. While start-ups begin from scratch, a large organisation can use data to identify critical problems, test new value propositions on existing customers, solve challenges in complex industries and leverage their brand to scale rapidly.
Yet we see many global giants struggle to properly structure and scale compelling platform businesses because they don’t:
To overcome these common pitfalls and build a successful platform business, an end-to-end approach is key. For incumbent organisations, that means focusing on three key steps of a successful platform journey – strategise, innovate and grow.
Many organisations accept that platforms is an opportunity but find it difficult to identify their specific platform opportunity. They tend to have an idea of what growth areas hold promise for them, but uncovering the platform opportunity takes a deep understanding of the ecosystem within those growth areas.
So, you need to think big by assessing and prioritising growth areas based on their platform potential. You can then identify all the stakeholders in the most promising growth area to find a platform opportunity that’s worth exploring.
Define the ecosystem by detailing who the consumers, producers and potential partners are, as well as their needs. Then use this to explore the potential market size, market trends and competitors to build a vision of where you can add value with a platform business. You should also look at the capabilities, data and other enablers your organisation already has that will give you a head start on working towards the opportunity.
Together, these factors will let you prioritise the growth areas with the greatest platform potential. You can then explore the detail of how you can add value to the ecosystem. That means defining the consumer and producer segments you’ll target, the services and match-making tools you’ll offer them, and the data you’ll gather through the platform.
Of course, while we’ve described this as a series of steps, it’s not linear. As you learn more, you’ll need to iterate on what you’ve done before
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Once you’ve defined your platform opportunity, it’s tempting to dive in at the deep end and try to seize the opportunity all at once. But such a huge, sudden shift is daunting and demoralising for staff. And it’s only after significant investment that issues with the platform idea arise, leading to substandard solutions. Instead, you need an agile approach to build, test and iterate a prototype solution to determine if it really meets user needs.
So, validate the unmet needs of your potential platform users – the problems you’re aiming to solve for them. Explore their current journeys and how consumers and producers interact to really understand the issues before defining your platform’s core interaction that will solve them. Such a view will let you clearly articulate your platform value proposition.
You can then start building on your value proposition with services that support it, enable interactions between various participants and create value. This will also help you identify your data control point – the set of data that will maintain your position in the ecosystem, like Airbnb’s ratings that build trust between consumers (travellers) and producers (hosts).
When you know what your core interaction, supporting services and control point are, you can build a minimum viable product of your platform business to test it in the market. By listening to the users of your test platform, you can iterate your offer to better meet their needs
To successfully become a platform business, you need to prepare your organisation for scale and growth. Traditional businesses tend to close themselves to competitors. Platform businesses grow rapidly by building on open technology that treats competitors as partners. This isn’t just a technical change, it’s a transformation of the entire organisational mindset. Many companies fall at this hurdle because making such a shift isn’t easy, but it’s essential to unlocking the true value of platform businesses.
Start by defining your platform operating model. You need to understand the skills, data, technology and infrastructure you need to allow rapid scaling and true flexibility. You also need to build an adaptable organisational structure and culture and decide how you’ll finance the new platform business.
When you understand your operating model, you’ll be able to define the key network effects that will drive exponential growth for your platform. To do this, you need to identify potential advocates for your platform and define how you’ll get them to recommend you. This is the crucial concept for platform businesses – you must understand every element of value within your platform and how that will drive loyalty and advocacy
Creating a platform business offers significantly more competitive advantage when you move first. Being first or fast to market will give you time to refine your strategies, learn more about your customers and begin extending your services systematically. So, be the company that sets the standard for your industry by creating the platform and ecosystem others join. If that’s not possible, explore how you can partner with or join a platform by solving problems others haven’t. Just remember to strategise, innovate and then grow.