Digital Platforms for Business Organizations
Digital platforms, or the collection of cloud-based software and services businesses utilize, have continued to evolve over the past several years, paving the way for more decentralized networks, even further digitalization and third-party partnerships within the enterprise. Companies across various industries started to shift focus and investment to the digital landscape, with PaaS, or platform-as-a-service, and IaaS, or infrastructure-as-a-service, giants like Amazon reaping the benefits.
Data and analytics form the core of digital platforms. Clearly defined roles of data lakes, data warehouses and data hubs, namely the differences between these structures can be of great value to a business. Each of these structures represents trade-offs in processing options, use-case flexibility and semantics, which need to be balanced. Architectures for data lakes, data warehouses and data hubs can be implemented in various ways, with some combinations or patterns being more common than others.
Digital Platforms transform the business landscape
The business implications of platform management are significant because they have a transforming effect on all we do within companies. As technology continues to change the way a business is run, it moves from being internally directed to externally driven. Innovation does not occur inside, rather it occurs through collaboration, engagement and accepting that other people may have better ideas and possible answers. Businesses are looking to combine their expertise with a more radical design that increasingly meets the customers’ needs, which they could never be capable of independently.
The role of the platform is the creation of these connections. To this end, the platform facilitates an accessible, scalable and efficient network of users, services, devices and intermediaries to make the value exchanges happen. It is over this network that value is created, distributed, discovered and consumed. The complementary aspects of platform and network are key to any platform ecosystem business model.
Users of the platform may be consumers, producers or a combination of both. Whatever their role, they connect and interact with each other over the network using the platform. The participants may or may not be required to connect explicitly, depending on the nature of the business model.
The platform consists of core technologies, shared tools and services, and rules and standards that enable producers to create and share at scale with sufficiently low costs of distribution and transaction. It provides a set of interfaces for the participants of the network to communicate, interact and interoperate within the ecosystem.
All platforms are not created equal. Google Search, Facebook, Amazon Web Services, Amazon Marketplace, Android, Uber, AirBnB, Waze, Twilio and even Bitcoin are all platforms. At the same time, these platforms are very different in how they create network effects, interactions they enable, openness levels, growth dynamics, subsidies, competitive strategies and monetization methods.
Building a Successful Digital Platform
Building a successful platform is more about making the right trade-offs than it is about best technology itself. Platform entrepreneurs can understand the tradeoffs, find their role models and learn from numerous examples of other platforms. There are nine distinct platform types:
- Technology Platforms: Provide software components, building blocks or services designed for reuse in a large number of products. Adoption is driven by innovation without need for permission of third-party developers who integrate platform’s technology and services into their products. (AWS, Microsoft Azure, IBM Bluemix)
- Computing Platforms: Connect users of the computing platform and third-party developers typically through an app store. Developers supply apps/extensions for the platform making it more valuable for users. The app store implements discovery, recommendations, activation, monetization and removal of apps or extensions. (Apple IOS, Google Android, Chrome OS)
- Utility Platforms: Attract users by providing a useful service usually for free. Monetize by B2B services that use the data from the user-side service e.g. personalized ads, commissions, aggregated analytics or service fees. (Google Adwords, Google Maps, Duolingo)
- Interaction Networks: Create network of participants and facilitate digital interaction between people and/or businesses. Digital interactions can be in the form of a messages, voice calls, images or money transfers. (Facebook, Twitter, Snapchat, LinkedIn)
- Marketplaces: Facilitate transactions between demand-side and supply-side players. Price is set by the market participants. There is high sensitivity for variety of services/products offered on the platform. (Amazon Marketplace, eBay, Airbnb, Amazon Fresh)
- On-demand Service Platforms: Deliver end-to-end services fulfilled by a network of service providers. The platform integrates matching, order, payment, fulfillment, certification and confirmation. The platform sets the price, quality and the fulfillment processes. Low sensitivity for variety offered, and high sensitivity to availability/quality (Uber, Crowdflower, Instacart)
- Content Crowdsourcing Platforms: Crowdsource content in the form of texts, images or ratings from a group of engaged users and make it available to all users. (Youtube, Pinterest)
- Data Harvesting Platforms: Crowdsource data through usage of a service and use the data to make the service more valuable for users. (Waze, Moovit, Sense360)
- Content Distribution Platforms: Distribute content by connecting owners of user touch-points with content owners. (Google Adsense, Outbrain)
Each platform has unique characteristics with a central effect being the presence and need for building the network effect. The more users engaged, the more increasingly dynamic it gets, offering a self-reinforcing cycle of growth. Platforms as they are today, digital in nature, capture, transmit and monetize data and connect this into the physical world.
If you want to be successful, it’s all about providing the best outcome to your customers. The success of a platform strategy is determined by how easily others can plug into the platform to share and transact, how well the platform attracts participants, both providers and consumers and how well the platform fosters the exchange and co-creation of value.
Impact of Digital Platforms
It is important to understand the implications of the magnitude of what the changing technology will bring and any decision to move towards a platform strategy. It needs deep understanding of the consequences, risks, investment costs involved, and the different resources required.
Organizations need to know what is cutting edge, what works for them and then working through the aligning of often complex IT systems, seeking higher levels of machine learning and investing increasingly in the future around advanced artificial intelligence. It is about exploiting technology that is appropriate to their and your strategic needs.
Platform management has formidable tasks in orchestrating, designing and developing clear and sound governance systems, along with clearly significant organizational capital to have the best chance to succeed. The key takeaway is the huge implication for managers, when making the strategic and operating decisions, fully recognize that technology is central, it changes everything on how you plan and organize yourself. It forms many of the decisions on a platform strategy, its design and eventual business success. It changes organizational design, work flow, and how it has this increasing need to be orientated out into a connected world.
The platform phenomenon is poised to widen its scope even further into the global economy, influencing business models and the market in several innovative ways. Distributed network solutions, like blockchain and new IoT influenced ecosystems, are impacting everything from cybersecurity and financial services to the healthcare industry.
While the term ‘digital platforms’ includes anything from search engines, to social platforms, all the way to IaaS providers and PaaS providers , digitalized business technology is becoming increasingly refined. Within the overarching evolution of digital platforms live multiple granular trends that will continue to significantly impact the way businesses perform and operate.