How to Become a Platform Company

March 24 2017

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In the early Internet era, we used to say that every company needed to become an Internet company to survive. At that time, many companies either did not know what this meant or were in denial as to the threat the Internet posed to their traditional business. Fast forward several decades, and we find the companies that are thriving are those that successfully extended their business to the Internet. Now, it’s the dawn of a new era – the Platform era. Success in this era may require evolving from a product company to a platform company.

In the software business, we have long known the power of platforms; IBM mainframes, Microsoft Windows, Google search. Leaders in other industries are beginning to understand that in the digital world unfair advantage accrues to companies that become the dominant platform in their market. Platforms generate network effects and provide the opportunity for the market to create the products and services, whereas stand-alone products assume that the company alone knows what the customer wants and can deliver it for them.

While this is understood, what is not understood is how to make the transition from a product to a platform. It’s one thing for Uber, with a green field, to stand up a platform, but another thing if I have an established business to run. By examining today’s ‘Platform Gorillas,’ those who have made the successful transition from product to platform, several key themes emerge.

1. Value Shift

Product to Platform shifts require the enablement of new value chains that facilitate a production and consumption cycle. Faced with eroding margins Amazon moved away from being an online book-seller and toward becoming an infrastructure services play. This meant many existing internal IT services needed to be accessible externally to allow customers to derive value from them. It is key to recognize that that much of the value created by platforms will live outside traditional company boundaries necessitating a focus on external, rather than internal, value creation. This may also mean that profit points over the value chain will shift, requiring a rethink and adjustment to the underlying business model. Book selling is a very different business than infrastructure software!

2. Technology Innovation

While services should enable partners to deliver value, they should hide intellectual property and complexity. Examples, such as Google Maps, and FedEx Shipment tracking illustrate the power of successful packaging of services for external value creation while hiding complexity. Such successes have driven the rise of the API economy. API’s are now the lingua franca for the production and consumption of digital services. In parallel, the development of continuous delivery and containerization technologies have emerged from the need for Platform Gorillas to deliver at scale. The converge of these technologies form an architecture for platform delivery – Microservices.

3. Organizational Transformation

It goes without saying that migrating to a platform has the potential to be disruptive to an existing product. Microsoft, to move productivity tools from stand-alone apps to the Office platform required a reorganization of people and processes to effectively facilitate the delivery of standardized services between applications. Building platforms, like Office, require thinking beyond individual application concerns to envision mechanisms for re-use. To start this journey within a company, core development teams must shift their mindset from that of an owner and operator of services to that of an orchestrator and facilitator to service providers. 

Microservices architectures that deliver platform services are now available for companies to launch their platform initiatives. Above and beyond this, success ultimately rests with a company’s ability to conceive valuable platform services, and their capability to reorder their business models and processes around notions of reuse and external value creation.

To find out more about evolving to a services platform download our Whitepaper https://www.mulesoft.com/lp/whitepaper/soa/it-from-provider-partner


 


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