When Worlds Collide

Post this reporting season when companies finally wake up to the fact that it is better to collaborate than to compete they will also realise that the competition coming their way will probably be from way outside their sphere. 

Writing in Inc. Magazine Phil Simon neatly explains how to build platforms rather than products.

As he notes, these days, you can’t go five minutes without hearing someone talk about platforms. The term is almost a buzzword, 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 some benefits that may motivate you:

Increased Innovation.

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.

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!

Reduced Risk.

What if your company only does one thing? 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.

Greater Brand Awareness.

Even those in the extermination business may worry less about building better mousetraps, and more on building mouse catching platforms. For example, imagine a smart mousetrap with sensors that wirelessly communicate to a cloud-based MouseCatcher service.

Homeowners and exterminators could monitor the status of the trap on their smartphones, receiving a text message when it is out of bait or needs checking. Smart traps already exist. But the shift from products to platforms would focus on building the service (the Trapp Store?) that enables anyone with a smart trap to connect and communicate.

Every business today is faced with the fundamental question that underlies Platform Thinking: 

How do I enable others to create value? 

Building a better mousetrap still might not have the world beat a path to your door. 

But the right platform might just do the trick.

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