Digital platform strategies are stepping into the limelight and leading mainstream business change.
At the MIT IDE Platform Strategy Summit last week, Paul Daugherty, CTO of Accenture, (pictured, left) reinforced this concept to more than 150 industry and academic leaders talking about how much platform services are redefining ecosystems and industries. They are becoming so prevalent, he and other speakers noted, that by next year 100 new digital industry platforms will be launched in sectors like retail, manufacturing, healthcare and law.
That’s a significant shift from the first wave of primarily high-tech businesses–Apple, Amazon, Facebook and Microsoft–that moved toward open networked partnerships versus products to create revenue and value.
And while there’s lots of buzz about disruptive platform upstarts—notably Uber, Lyft and Airbnb—taking on established markets without any products or infrastructure, Daughterty said that old-line businesses such as John Deere, Home Depot and Accenture’s own cloud business are also rethinking their business models around service offerings. Many want to avoid the failures of Fortune 500 companies–think AOL and RadioShack–or the precipitous decline of BlackBerry’s market share. The new models create network-effect value for customers and the business by collaborating with others. Tractor company John Deere, for example, is turning its main product into a platform for improving crop production.
Marshall VanAlstyne, an IDE organizer of the summit and platform expert also highlighted the dramatic change caused by network effects. He contrasted Kodak’s decline with Instagram’s rise, for instance, and Toyota’s huge resources versus Uber’s determination and moxie. Platform providers are “knocking off established market cap leaders” by offering “rich, industry building blocks and services,” he said. (View his slides here). Later in the day, panels examined the healthcare, education and legal industries, in particular. Apigee CEO Chet Kapoor, also discussed how traditional firms like Walmart, Burberry and Nike entered the platform ecosystem, as well. (See full agenda here.)
Naturally, there are still many challenges to overcome and dichotomies that every business will have to balance. Among these, Daugherty offered several key challenges to consider: how much to compete or to partner; whether to keep business and APIs proprietary versus open; the dilemmas posed by data sharing and openness, and how much to fund new investments or leverage existing resources.
Ultimately, platform businesses must shift their mindset and models to selling outcomes, not products, experts said. And that involves lots of self-examination about what business you are in now and where you’ll be in the future. It also means that just as industries figure it out, a new crop of upstarts—with even newer technology tools– may take the limelight tomorrow.