As digital continues to drive rapid advancement in the way we do business, very little escapes change. Product development, product delivery, and product support models continue to evolve at a breakneck pace. As once flagship product lines become commodities, many companies now ponder what digital is all about and what it means to their company. As addressed in the previous paper, Survival of the Fittest, digital in a business context can be viewed merely as advancing multiple technologies that work together to allow companies to rethink their products, manufacturing, and services in ways that were not previously possible. One frequently asked question is “where to start?” Whether you are a startup or a Fortune 500 company, one way to begin your digital journey is to redefine the current popular focus on the Three P’s of Management: People, Process, and Product. A more digital-friendly focus of Management is a mix of People, Process, and Platform.
There should be little doubt that people will continue to be vital to the success of business for the foreseeable future. Without good people, proper processes and a deliverable that fills a need can only do so much. Assuming a company has hired the right people, the second element necessary for success is having processes that make sense. How well a business develops and executes its processes will still be essential. These processes will most likely change significantly as the company embraces its new digital reality, but they will remain critical. The real game-changer for a company will be switching from an end product focus to a platform focus, with the product being a subset of the platform. The product is still essential because the end product will need to benefit the end-user. However, now within a platform, the product will need to be redefined in terms of how it delivers value, how revenues are generated, and how malleable the product needs to be for the new business model.
As digital continues to drive business change, it will become even more imperative for products to communicate, share data, and build synergies within the platform. More and more products and services are no longer acceptable as stand-alone deliverables. To avoid the inevitable commoditization of stand-alone products, companies will need products that standout due to the synergies created by making them easy to plug into a platform and connecting them to the world. The platform where products plugin and how that platform interacts with other platforms within an industry will determine the additional value-add a product can bring to the market. A platform focus will allow a business to adapt more rapidly to changing demands, open up new revenue streams, and will allow for a more rapid rollout of supplementary products. In contrast, stand-alone products will continue to become commodities and eventually irrelevant.
Amazon may be the most exceptional example of how a digital platform allows a business to dominate competitors and rapidly expand its business offering with minimal additional investment. Amazon started as an online bookstore and has now completely changed the face of retail. Further, the global pandemic has increased its dominance over non-platform-driven retail competitors.
Apple is another success story for creating value around a platform. Before the iPod, Apple was primarily a computer manufacturer. They realized they needed to change their business strategy away from creating value around heavily commodity-driven personal computer markets towards creating new markets through its digital platforms. When Apple launched the iPod, they didn't invent anything. They merely took an existing data compression algorithm used to compress music files, modified it slightly to make it their own, coupled it with a laptop hard drive, a small display, and created an intuitive way to navigate songs, artists, and playlists. Nothing from a hardware perspective was revolutionary. What was novel was how it allowed a user to shop for, purchase, and store their music. The popularity of the iPod helped drive down the price of solid-state memory, which helped make the advent of the smartphone possible. We all know what the smartphone has done for Apple. The key to all of this happening was the launch of iTunes, Apple's platform for promoting, selling, and storing music. The iTunes platform helped reinvent Apple and ultimately disrupted the entire music industry. This disruption put a significant portion of the revenue into Apple's bank account. And Apple continues to expand its revenue streams through digital platforms.
Adopting a platform-centric business strategy allows businesses to take on a digital-friendly mindset with the following benefits:
Taking the first step is often the hardest part of any journey. It may only be a baby step, but what is important is starting the journey in the right direction. Whether your products are tangible items, software, or services, there are significant benefits to analyzing how your products can plug into the world and what type of platform makes sense for adding customer value. This analysis is a critical first step in your digital transformation journey.