These days, you can’t go five minutes without hearing someone talk about platforms. The term is almost a buzzword. As I explain in The Age of the Platform, a platform is merely a structure made up of “planks,” or integrated features. For instance, Google in 1998 wasn’t a platform; it was a really neat search engine. By adding planks such as Gmail, Maps, Docs, Voice, YouTube, and countless others, it became a true platform.
By comparison, a traditional business based on a 20th-century model produces one or more closely related products or services, then uses marketing to try to attract customers. This business model can no longer compete with 21st-century, platform-based companies that have learned how to integrate an ever-widening universe of consumers and partners into their ecosystems. Consumers are driving today’s economy–not enterprises. Consumer-driven platforms matter more than ever.
Wondering whether to investigate – and invest in – the platform as your company’s business model? Here are five benefits that may motivate you:
All companies face limits; not even Google has infinite resources. But you can dramatically expand those limits. Building a powerful platform lets you cultivate an ecosystem of developers, partners, users, and other collaborators who contribute to – and may drive – innovation at your company.
Think of Apple’s app tsunami. By inviting thousands of users to develop apps for its iPhone and iPad, the company generated billions in new revenue. It has tapped into an endless stream of inventors and innovation.
Tip: Offering tools such as application programming interfaces (APIs) and software development kits (SDKs) only gets you halfway there. You have to create incentives for prospective partners to extend your platform and build different planks for your mutual benefit.
Quicker Response Times
Platform companies move faster than their traditional counterparts. When your core products and services frequently change, it forces your employees and your organization to embrace change quickly. Bad habits are less likely to get ossified.
Think of Amazon. First it sold only books. Soon it started selling virtually everything. In 2007 the company launched the Kindle. In 2010 it started publishing books to read on the Kindle. In 2011 it introduced the Fire, to compete with the iPad. The Fire brings everything together – shopping, reading, and consuming media – and introduces more e-commerce and social networking opportunities. Can the company handle all this change? No problem!
Tip: Find employees who are comfortable with change. To build a platform, you can’t rely on people who consistently resist new ways of doing things.
What if your company only does one thing, as mine did in 2008? What if the market for that thing suddenly dries up? Platforms encourage diversification and thus reduce risk.
Imagine if Apple had remained only a maker of stylish but expensive computers? Chances are it would be struggling for its very existence right now. But with its multi-pronged platform extending into music, telecommunications, media, commerce, entertainment, and education, Apple is beautifully positioned to withstand any surprises the market sends its way.
Tip: Try to find potential partners with complementary interests–and don’t be greedy. Grow the pie together.
Greater Brand Awareness
Platforms and ecosystems mean that customers are out there extending your brand in innovative ways.
Facebook is a beautiful example. Although it began as a social networking site for college kids, Facebook, through continual growth and invention, has expanded its offerings to include business and marketing sites, community gaming sites, email, instant messaging, groups, blogs, advertising, consumer data mining, and much more. More than 50 million Facebook “likes” are clicked daily, and by some estimates one out of every eight people on the planet will be a Facebook user soon.
Tip: Think about innovative ways to extend your brand. Survey trusted customers and clients to find out what services or products they wish you offered.
A Bigger Customer Base
This one is simple. More products and services mean more customers.
Tip: No, a local butcher can’t also offer ballet dances. But what if he creates an app? What if he blogs about recipes and cooking tips? What if he cultivates a tribe?
About the Author
Phil Simon is the author of four management books. His fourth, The Age of the Platform: How Amazon, Apple, Facebook, and Google Have Redefined Business, is his most ambitious yet. A recognized technology expert, he advises companies on how to optimize their use of technology.