What is the word in the digital world these days? Looking at the current trends, it would amount to a mix of cloud computing, cybersecurity, Internet of Things (IoT), Artificial Intelligence (AI), 5G and a few others. However, only relying on one or a few of the digital technologies is not enough to complete an enterprise digital transformation. This is why some digital philosophers have an idea that digital platforms are needed to combine and integrate these technologies. Today, many digital superpowers, unicorns and startups make use of the power of digital platforms to reinvent the business models in their industries in order to overtake the existing competition and gather new customers. This is because digital platforms not only generate value by bringing together and connecting clients, providers and various vendors (partners and the wider ecosystem), but also they do facilitate interactions and automated transactions in a new multifaceted model to create that network effect.
A digital platform consists of many building blocks that encompass the software and/or hardware services of a company. The modular platform provides services to the other technologies within the ecosystem, allowing for more adaptable, more flexible business system architecture. This in turn helps inform how companies should best deliver their digital strategy and achieve sustainable value, internally and externally.
The Platform For Change
On a worldwide scale, industry leaders are making the most of technology’s power by developing new technology platforms. But more than just tech, the most profound global change is driven by the platform-based business models and strategies they enable. In our current digital economy, platform ecosystems are nothing less than the foundation for new value creation.
Technology companies and digital organizations like Google, Amazon or Uber have long understood the power of digital technologies. By looking closer into their models, it appears that most of their ground-breaking products and services are based on platforms. The success of digital organisations rests on two key elements: the technology platforms that they have built to support their businesses, and the business models these platforms enable. These platform-based business models fundamentally change how they operate.
Platform Companies Among The Leading Global Brands (Source: Geoffrey Parker and Marshall Van Alstyne)
In that, digital platforms are not only enabling businesses and new businesses but also a complete transformation of the organisations. According to a study by the BearingPoint Institute, companies who have integrated business models organised around a digital platform in their strategy performed better in terms of stock value (+65% in 2016) than companies sticking to a single, traditional, business model. Similarly, their growth rates, for a period running from 2011 to 2016 saw a 2x difference with companies adopting a digital approach seeing a growth of 8% versus a 4% rate for companies keeping a traditional model.
This is where digital transformation becomes more than a concept but a technology-enabled reality. According to a Technology Vision report by Accenture, back in 2016, “81% of executives say platform-based business models will be core to their growth strategy within three years”.
If we would like to run our enterprise in digital platforms, what consideration we need to care about? One of the ICT vendors like Huawei defines a digital platform is one that can integrate 5G, IoT, Edge Computing, Cloud Computing, Video, AI and Big Data, and brings together agility, efficiency, customer experience and business model innovation.
What makes Huawei’s Digital Platform different from others?
According to a media roundtable hosted by Huawei in Shanghai, Lu Qi, President of the Marketing & Solution Sales Department of Enterprise Business Group, Huawei introduced how its “Digital Platform + X + Ecosystem” approach offers customers a long-term strategy to accelerate digital transformation. With the Digital Platform as the foundation, new capabilities (the “X”), such as AI, IoT, Big Data, security, ICP, video; and the industry-enabling platform could integrate those industry sectors. Here are some highlights about Huawei’s brief of a completed digital platform.
As we know most vendors today focus their digital platform only on the PaaS (“Platform as a Service”) layer. However Huawei emphasized it focuses not only on PaaS (Industry Enablement Platform, Video Cloud, Big Data, AI, IoT, ICP and Security) but also the IaaS (“Infrastructure as a Service”) layer. The SaaS (“Software as a Service”) layer is named by Huawei a “fertilized soil” where vendors could build their applications.
- Supporting Multiple Industries
A complete digital platform should support the digital transformation of industries at different stages. Based on current resources and customer requirements, Huawei said its digital platform is be able to support the government, transportation, finance, energy, and manufacturing industries and will cover other industries.
- No Vendor Lock Ecosystem:
As we know that most ICT (“Information and Communication Technologies”) technologies adopted by Huawei are open (or of open-source inspiration), that means no lock-in: The components inside the ecosystem can be provided either by Huawei or its partners and other vendors. Huawei’s role is to build a digital technology platform working with strategic partners for those enterprises who build digital platform and/or blocks for platforms.
By incorporating their products and solutions with those from other providers, Huawei is able to create an open, win-win ecosystem that offers customers the freedom to use the best solutions for their unique requirements. An approach that has led to an ecosystem featuring some 20,000 partners worldwide. They aim to build a digital transformation community with multi-party collaboration to accelerate joint innovations. Their goal being to keep developing their ecosystem from four perspectives, namely industry alliances, business alliances, developer platforms, and the open source community. A true “full stack”, both of technology and partners.
- More Diverse PaaS Components and Capabilities
Digital transformation is no end point. This is why we need to consider a platform provider in the long term. Huawei keeps evolving and transforming in order to keep leading beyond 5G for instance. According to its annual report, its R&D (“Research and Development”) investment for 2017 was RMB 89.7 billion (USD 12.9bn), accounting for approximately 14.9% of the revenue. Figures that place them on the levels of Alphabet (Google) and Microsoft.
How Banks are using Platforms in their Digital Transformation
With the digital transformation trend in the financial industry, financial institutions across the globe need to continuously deepen their digital strategies and transformation initiatives to achieve platform-based strategic transformation. Banks are the platform that connects everything and provides digital financial services in a fully-connected era.
Ma Yue, Vice President of Huawei Enterprise said: “Huawei follows the “(digital) platform + ecosystem” strategy and helps global financial customers develop scenario-based products and services and implement intelligent customer management.”
With the development of technologies such as cloud computing, 5G, Big Data, AI, and blockchain, facial recognition applications for payment authentication, unattended bank branches and cross-border settlement are becoming a reality. Huawei mentioned that its ICT infrastructure is platform-based and offers a prosperous financial ecosystem for China Merchants Bank, Commercial Bank of China and more. In the future, financial institutions will become a comprehensive platform for financial information bearing and transactions and connect all people and things. Huawei focuses on integrating financial values, ensuring better connections and cooperating with industry partners to accelerate the digital transformation.
Leading into the Future
As new technologies and consumer behaviour continue to evolve the way that we do business, organisations will need to evaluate their genuine points of differentiation and their economic sustainability over time. This may mean finding new ways to meet a broader set of customer needs, differentiating on customer experience, or seeking to be a best in class product manufacturer. Regardless of the strategic direction adopted, participating as part of a mobile, digital ecosystem will be inevitable for today’s companies to keep offering value — and adequate responses — to their customer base.
What will matter most, however, is the willingness of these customers to enter the digital era. The differences between companies that succeed in making the digital transition and those that don’t may become clearer as times change and evolution speeds up. If they were serious about successfully adopting digital (and platforms), 20th-century business models should have begun making the necessary technology investments more than a decade ago. For companies that have under-invested in their futures, the ramifications are likely to be difficult to recover from.
Originally published at Samuel Pavin.