Should your Company become (or build) a Platform?
What does it take to use Platform Design to explore new Business Innovation cores?
“Should my organization become a platform? Is it the right time? What does it take to take the leap”?
Those are all key questions at today. To better frame the first and most important one, you should probably rather start asking ‘what aspect of my company should go platform?’.
This question is surely a complex one: as we explored lately in one of our latest writings, a platform strategy can be applied to both the business model you use to address a potential market opportunity, as well as to how you design and develop your own organisational model.
In business model innovation, platform dynamics are powerful means to mobilise external players and existing underutilised inventory of available resources: reshaping an otherwise disorganised ecosystem produces high value for the organising brand, when funneled into the platform dynamic.
At the organisational level, applying a platform mindset means to create a context — and bunch of support services — helping your internal employees, your closest partners and a larger expertise ecosystem interact in simple ways, unleashing their potential in fulfilling customer’s needs and catching new opportunities that are often unseen by traditional management approaches.
Many of the middle and large sized companies we worked with recently were hugely interested in both these aspects. Adopting novel platform approaches at the organisational level is rapidly catching up interest, beyond the traditional use of platform thinking in designing new product or services as-a-marketplace. Due to the highly complex nature of big firms like these by the way, their first steps in any new field normally happens in safe zones, usually small projects of a specific department that is more prone to such kind of experimentation and often in the HR or in the product design & innovation departments, at least in our experience. As an example, platform thinking approaches have been used to design ways to support the evolution of talents and reward them to reduce corporate brain drain, enabling intrapreneurships, leveraging on peer learning and peer exchange dynamics.
But then, ‘is it the right time’ for your organization to play the platform game? When confronted with this question we should remind ourselves that every business process is subject to an evolutionary pressure. Every human activity for which there’s a large demand— and business processes are included— evolves from being a novelty to becoming an ubiquitous utility. As a rule of thumb — using a platform move will make sense when you recognize that your value proposition is getting commoditized fast and you are in good position to build an “infrastructure” that provides the possibility, for your ecosystem, to build higher value services by leveraging on a set of common enablers.
There are also other signs that a platform move is worth: when your reference market is showing a set of weak points related to fragmentation, poor access, rigid pricing (see Table 1 above): all these signs invite you to play a move that “brings order to existing disordered markets” as S. Choudary says.
A platform move often means to design an orchestrating strategy that significantly reduces the complexity of a given market and reduces barriers to entry to that. It means to optimize the overall use of resources in a market and hence ultimately providing lower prices and better user experiences as compared to previously disorganized and fragmented situations, as well as providing unprecedented incentives to other players to join.
WHAT TYPE OF INNOVATION CAN PLATFORM THINKING ENABLE?
Another important thing you should consider before endeavoring into a platform move is to understand whether you’re doing more traditional innovation efforts such as core innovation (serving better your existing customers or improving your existing offering) or adjacent innovation (exploring markets that are adjacent to yours where you can easily leverage on your leading position in core market) or if you’r moving into transformational or systemic innovation where you are creating new markets, and go beyond the customer, exploring new relationships between the brand, the product/service and the contributing ecosystem.
As shown in the picture above, the first two types of innovation both entail a great effort in devising a compelling marketing strategy — as we’re not creating new customer bases but merely re-segmenting, or just entering already existing, adjacent markets. Whereas in the case you want to explore the creation of totally new markets, you’ll be mainly focusing on your business strategy since you will have to develop radically new core assets and products starting from your already existing resources and position in the value chain. By leveraging platform design, organizations can experiment new business lines explorations that can eventually generate exponentially growing revenues that, in the longer term, can essentially integrate and substitute existing core business that may be showing signs of slowing down.
It’s definitely not easy to be an ‘ambidextrous organisation’, thus being able to both exploit your current value proposition while exploring radically new innovations landscapes: merely optimizing and consolidating your current offering is definitely not a satisfactory long term strategy, as any value proposition eventually evolves into a commodity over time.
But what do you need to build such an organization? One able to both look at the consolidated revenue flows and explore new ones — by leveraging on market shaping, platform thinking? Building responsive organisations, that are meant to:
“learn and respond rapidly through the open flow of information; encouraging experimentation and learning on rapid cycles; and organizing as a network of employees, customers, and partners motivated by shared purpose”
(from Responsive.org Manifesto)
is definitely the way to go. Applying platform thinking at the intersection of the organisational model and the business model, beyond consolidated concepts of firms as we were use to think about them, might be a wise solution to a large part of your innovation dilemmas. This approach will anyway require you to nurture a company culture that embraces organisational change, as well as developing radically new competences towards technology and design skills.
ENABLING RESPONSIVENESS AND EXPLORATION
To enable responsiveness and exploration, organizations should stand on three enabling pillars. First among these pillars is solid and elastic technology infrastructure that — as Mark McDonald wrote once — ”represents the ability to generate multiple revenue streams over the same set of assets”.
Furthermore, a truly “platform capable” organization must rely on post hierarchical and networked organization designs to allow for self-organization. These organizations must rely on rituals for real-time strategy-making, toolkits for collective decision making, self-directed teams and individuals that are keen to self-management.Tools already exist for this: from monolithic and encompassing Holacracy® to simpler and more adaptable LiquidO™, approaches to self-management and self-organization have been experimented widely and stories abound on success and failures.
Beyond tools and processes, the most powerful leverage to eventually generate new capabilities for platform thinking and exponential innovation, are definitely your core innovation capabilities and competences: Design literacy (Service Design Thinking, Human Centered Design) coupled with customer driven culture (UX research, Customer Driven Development) can help brands maximize value creation on the user side; a culture of leanness coupled with an agile mindset (attached to the basic agile manifesto principles) can help companies efficiently iterate towards their real time identified objectives.
Generating exponential innovation through a platform strategy it’s certainly about timing and market awareness, as well as it is about tools and processes, but ultimately most of your platform potential comes down to building a new company culture and a new set of competences: in, out and and in-between your company’s boundaries.
[this post was co-edited with Eugenio Battaglia]
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