Guest View: Solving the platform puzzle
Platforms beat products. Every time. Let me tell you why.
At their most basic level, platforms are digital places where companies, suppliers, and customers come together to create value that provides a benefit to everyone involved. Platforms connect software developers and customers in entirely new ways, in a manner that simply offering a product or even a line of products cannot.
The five largest companies in the world — Apple, Amazon, Alphabet, Microsoft, and Facebook — are all platform companies. Together, they have a market value of almost $4.7 trillion. Beyond pure tech companies, car companies like Jaguar Land Rover and Fiat, manufacturers such as Caterpillar, and publishers such as Houghton Mifflin Harcourt, are just a few examples of the companies that expand their reach with a digital-first mindset that includes a platform strategy.
Platforms don’t just belong to the giants, either. There are more than 300 “unicorn” startups, companies with $1 billion-plus valuations, which are largely platform based and add more than $1 trillion to that growing number. While a platform itself doesn’t guarantee success, platforms are well on their way to becoming the solution of choice for companies looking to drive digital innovation, accelerate time to market and deliver a superior customer experience. In fact, more than eight out of 10 executives, 86 percent, say that platforms are the critical factor for success in the digital economy.
For software developers, thriving platforms with an ecosystem of third-party products and services can represent a clear path to monetization. Let’s take a closer look at how the pieces of the platform puzzle fit together:
The power of the platform. Salesforce is probably the most well-known enterprise software platform and developer ecosystem – and it is arguably the most prescient. It recognized the importance of platformization early on. The Salesforce AppExchange launched in 2005 and now offers more than 3,000 applications and components that extend and add value to Salesforce.com’s core products. Intuit is another powerful example of a company that seized the opportunity to become more than a provider of products and services. Intuit’s platform, the QuickBooks App Store, serves roughly 50 million customers worldwide, boosting its online ecosystem revenue by 42 percent in the first quarter this year and helping the company rake in $6 billion in revenue overall in 2018.
The beating heart of a platform company. Platforms may beat products, but a successful platform company starts with a successful product, whether it’s Apple and its iPhone, Salesforce and its CRM, or Intuit and its QuickBooks accounting solution. Here’s a disaster scenario: A company launches a new platform, and no one comes — not suppliers, not customers. To minimize this risk, a platform needs to solve genuine customer problems. Apple, Salesforce, and Intuit all use their platforms as a way to easily deliver new, innovative software to their customers without needing to shoulder the burden of in-house development. Before investing too much effort, it is critical for an enterprise considering a platform approach to understand customer pain points and how a platform can solve them.
An open partnership mindset. It used to be that a winning business strategy meant creating products and building fortress-like walls around them to keep out competitors. No more. Today’s innovators are open to new ways of collaborating to deliver value to customers. Whether it is making part or all of your solutions accessible via open APIs or partnering with a competitor if the value proposition makes sense for each party, partnering should always be a first resort, not the last.
Nurturing developers. One reason the Salesforce AppExchange ecosystem is so successful is that it gives developers tangible ROI for their investment in the platform. For example, Salesforce.com gives its developers tools that enable them to cut development time by 40 percent compared to traditional methods and cut their time to market by 39 percent. Intense competition for developer mindshare makes providing a clear path to monetization and ROI critical to creating a thriving developer ecosystem. Implementing an API-based integration layer to connect existing systems to new monetization solutions is one way to achieve this, and often the fastest, most cost-effective way for an enterprise to become a platform leader in the digital economy.
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