ecosystem

What's the difference between a platform-based business model and a platformed enterprise?

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A lot is being written about platform-based business models. I differentiate them from platform-based businesses as follows:

  • Platform-based business models (PBBM) are transactional in nature-- focused on bringing parties together on a platform to exchange products and services for money; it can also include additional value including content and data to accelerate the network effect. Simon Torrance offers many good articles on this topic, including this recent interview with Sangeet Chaudary. In this model, about 25% of Apple's revenues come from platform-based services (think iTunes.)

  • A platformed enterprise (PE), however, is more about strategic alignment -- focused on orchestrating all elements of an enterprise (including its extended ecosystem) around differentiated, sustainable value creation. With this definition in mind, I'd argue that 100% of Apple's revenue comes from being a PE. Just like a technology platform that defines the standards and rules for applications that sit on top, Apple has applied a brand- or enterprise-level platform (Think Different) that defines the rules and standards required to seamlessly interconnect everything that sits on top; all of its products behave according to the rules of the platform, enabling flexibility and endless extendibility into new markets. A PE is an apple tree that grows apples (PBBMs). But a large, complex organization can't take a solitary apple (PBBM) and expect it to produce more fruit anytime soon.

Disruptors born in the internet age are accomplished at PBBMs precisely because they are also PEs. They serve specific customers with specific jobs to be done, and orient their entire business around differentiated value creation across a wider ecosystem. The PE enables organizations to simplify complexity, and therefore expand far beyond the boundaries of traditional firms. Platformed enterprises require a fundamentally different mindset than traditional business -- it's a shift from a mechanistic, linear "machine-based" metaphor to a biological, living-systems metaphor. A living system is inherently adaptable and resilient, able to self-organize around shared purpose and complementary value exchange.

If a large, unwieldy traditional enterprise wants to evolve to a future-ready, platform-based world, it must first become a platform -- a tree planted in fertile soil with the right growing conditions. If you tackle PBBM without becoming first a PE, then yes, you can temporarily reap some benefit. Some good examples include:

  •  GE's Predix Platform, a critical operating system for the Industrial Internet of Things that connects industrial equipment, data analysis, and delivers real-time insights

  • Target's acquisition of delivery marketplace Shipt

  • P&G's Connect and Develop, an older example, which fuels their innovation pipeline

However, these "tack-on" PBBMs do nothing to evolve the overall organization to succeed in today's complex, fast-paced environment. The underlying platform-based mindset and operational approach must be applied to the entire business.

If you're not jiving with my tree metaphor, think in terms of operating systems. You can't run Apple's Keynote on a typical PC. You can either run Keynote on a stand-alone Apple computer that's disconnected from your network, or you change your entire operating system so that everything plays by the same rules. If your organization is running off of the traditional operating system that we inherited from Henry Ford 100 years ago, tacking on a platform-based business model will only get you so far. You'll need to shift your business to an entirely new operating system to compete head-to-head with Internet-era-born disruptors.

For more on platformed enterprises, start following our series on the Value Platform, a strategic model designed to help traditional businesses evolve to a more future-ready operating system.

Platforms & Ecosystems: Why Growth is Challenging

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Platforms and ecosystems. These terms are being thrown around a lot these days, for good reason. Most of the high-growth and high-value firms -- Apple, AirBnB, Uber, Amazon -- have been built on these concepts from the ground up.

But what do these terms mean exactly? Can any organization evolve to this mode of thinking, and should they? What is a useful strategy framework that can handle and simplify the complexity of business and ecosystems? We'll be exploring these questions in a series of articles. Let's start with the groundwork of definitions.

Growth today requires a new mindset

Let's back up and take a critical look at how business works today. We inherited our business practices from Henry Ford over 100 years ago; Ford taught the world how to transcend individual craftsmanship and evolve into mass production and scale. But this model is only effective for linear manufacturing processes; it's not effective within a fast-changing, complex world where businesses must deliver loyalty-building experiences. Linear processes and silos have become barriers to growth and agility. We need a fundamentally different way of working to make our organizations fit for the future.

Let's find an analogy. What could give us insight into how to manage a lot of moving parts (departments, business units, regions, partners, value chain, etc) for a variety of customer types (consumer, small business, enterprise, cultural variations, demographic and mindset variations) and knit them together into a coherent whole to achieve a set of outcomes?

Consider a natural ecosystem like a coral reef, in which numerous unrelated species coexist in harmony. A coral reef doesn't require coordination; it's self-sustaining because one species' waste is another species' food. The value generated within the ecosystem is the engine that maintains and grows the entire system. It serves as a magnet, attracting others that want to participate in this value exchange.

My current working definition of ecosystem is "self-sustaining value creation across interdependent entities with shared goals," and I'm very open to groupthink to evolve this definition.

Why doesn't your organization operate like an ecosystem?

Technically any business today should be an ecosystem. All your departments, business units, partners, etc. are (or should be) "interdependent entities with shared goals." The system should be easily self-sustaining; growth should be natural. And yet most leaders struggle to gain alignment and move their business forward. Numerous transformation efforts (digital! CX! innovation!) are applied more as band-aids without much impact, because the root cause hasn't been addressed.

Any ecosystem is an emergent property of a set of conditions. A coral reef cannot exist without the right location, water temperature and nutrients. Therefore, to get any set of diverse participants to begin operating as a singular whole, we need to look to the properties of complex systems for guidance. That means focusing on the conditions that allow growth to occur naturally... it can't be forced or even directly guided.

Defining the conditions for a self-sustaining ecosystem

I'll tackle this one in a subsequent post, but here's where I'm headed: Condition #1 for a self-sustaining ecosystem is shared value. For example, survival is the core value in a coral reef, and the currency of value is food; different types of food, or nutrients, are exchanged across species.

If your organization is not growing naturally and easily, I'd argue that you haven't defined value - and how to create that value - in a way that is relevant and meaningful across all parties, both internally and externally.