The Harvard Business Review blog recently published a piece exploring the platform as a business model. Honestly, this strikes me as a unique opportunity for IT, because who better understands the power of a platform than the CIO and IT leaders?
The basic idea lifts right from software, and particularly integration platforms, where a platform allows others to develop, expand and connect using tools you’re providing.
The post is written by Mark Bonchek, chief catalyst of ORBIT+Co, and entrepreneur and author Sangeet Paul Choudary, who runs a website devoted to the topic and has written an e-book on the topic.
“We typically think of companies competing over products — the proverbial 'build a better mousetrap,'” Bonchek and Choudary write. “But in today's networked age, competition is increasingly over platforms. Build a better platform, and you will have a decided advantage over the competition.”
It’s easy to identify online businesses that use a platform strategy, including most integration companies, Salesforce.com, Amazon and Facebook. But Bonchek and Choudary point out it’s also playing out in more traditional businesses, such as JC Penney, which now sees its store as an interface for accessing “boutiques” managed by others.
They define a successful platform strategy as one that focuses on:
Connection — How easily others can plug into the platform for sharing and transactions;
Gravity— How well it attracts both consumers and producers
Flow — How well it enables the exchange and co-creation of value.
It’s worth noting that the piece highlights data as a key element of matchmaking, which the writers consider a key building block for successful platforms.
“Data is at the heart of successful matchmaking, and distinguishes platforms from other business models,” they write. “The matchmaker captures rich data about the participants and leverages that data to facilitate connections between producers and consumers. For example, Google matches the supply and demand of online content, while marketplaces like eBay match buyers to relevant products.”
This isn’t a new idea. Phil Simon, author of five management books and a consultant, wrote about it several years ago in his self-published book, “The Age of the Platform.” (Disclosure: I was one of many people who donated a micro-amount to help him publish it and received a free Kindle copy for that donation. Alas, I only recently got a Kindle and it’s still on my reading list!)
Simon’s interests align closer to technology; in fact, he often speaks at technology events. So when he writes about platforms, he talks more about them as “ecosystems” supported by technology and integration.
In particular, he talks about how important APIs and software development kits are to platforms as a business strategy.
Reading through these pieces, I see technology integration as a foundational piece for any business wishing to create a platform. Even in traditional settings such as a retail store, you’re going to need tight B2B integration with business partners and suppliers to pull off a platform-based business model.
“By building a digital platform, other businesses can easily connect their business with yours, build products and services on top of it, and co-create value,” write Bonchek and Choudaray. “This ability to ‘plug-and-play’ is a defining characteristic of Platform Thinking.”
That ability will not just rely on business connections, but on technology integration — and that’s yet another reason why CIOs can use this as an opportunity to prove IT’s value as a strategic partner, bringing your business into the “Age of the Platform.”