The platform age is upon us..will you be a landlord or tenant?
How important is the so-called ‘platform revolution’? I’d say it’s going to be pretty fundamental for the continued growth of many economies in the near term. Digital platforms make it possible for the world to obsessively ask itself this question at night: “Wouldn’t it be cool if there was an app that …?”
But platforms are so much more than that. I’ll let the literature do the talking:
- “Technology platforms are increasingly redefining how companies build, connect and deliver new products and services, providing a whole new digital blueprint for growth that is outpacing Gross National Product (GNP) growth.”
- “Rapid advances in cloud, mobility and application development are eliminating the cost and technology barriers associated with platforms, opening up this new playing field to enterprises across industries and geographies, whether big or small, established or new, tech or non-tech.”
- As a result, finds MIT, 14 of the top 30 global brands were platform-oriented companies in 2013. And IDC predicts there will be more than 100 new digital industry platforms from non-tech companies as early as 2016.
It’s settled then. Platform-based ecosystems are the new plane of competition.
For a basic understanding of platforms, think Apple, Google, Facebook and the mobile networks. Their basic business model is that of landlords in a mall, and the companies that market their wares on their various platforms are tenants. Anyone making something of value available on their platforms, such as an app or personal data, can benefit greatly by sharing in their reach and resources. Facebook, for example, has 1.4 billion active monthly users and a business community of tens of thousands, and Apple is now offering its own payment engine that seeks to disintermediate the traditional payment process.
It’s a simple collaborative arrangement: The tenant gains access to a ready-made digital delivery channel for its offering. In addition, it gets to share in the ‘goodwill’ of the platform business, and in return pays ‘rent’ — hosting fees, network charges or advertising fees. Let’s run through that again: the tenant can, for example, be Angry Birds, Whatsapp or a corporate advertiser, leveraging a digital channel such as an app store, mobile platform or Web-based map, to ‘expose’ a hosted game or messaging service or expose a marketing message. In addition, they stand to benefit from the vendor’s business footprint, e.g. Apple’s gigantic fan base, the mobile network’s millions of subscribers or Google’s dominant presence on the Internet.
So which will you be — a landlord or a tenant?
Is that even a serious question? We all know what giants these companies are, so we’d be excused for thinking it is game over before we even began; that our only hope of success is to stumble upon a cool and unique idea for an app and to slug it out against more than a million others on the Android or Apple store.
Admittedly, it can be hard. A colleague was looking around for job opportunities in another country to help an expatriate friend. Then it hit him — wouldn’t it be cool if there was a Tinder-style app for job seekers and employers? His friend would swipe left until he found a handful of perfect jobs, and thousands of employers would do the same, and sooner or later there’d be a match. He then googled his idea and found no fewer than two apps doing exactly that — but neither had any users to speak of. Oh well, delete.
That’s how terrible it can be. But in reality many platform-based businesses get it terribly wrong. It’s a chicken and egg situation in which you need to attract both the users who produce value and the consumers who consume value. In the ‘Tinder’ example, if you don’t attract both corporates and job seekers who produce job listings and profiles, there’s no value for the corporates and job seekers who consume profiles and listings. You can’t grow a platform business by building with only the consumer in mind (in the traditional way), because the product doesn’t exist yet. You’ve got to build stuff for the producer to do too, e.g. video hosting functionality on Youtube.
Another reason platform businesses are more accessible than one might think is that the scope is much wider than just apps, and it goes way back. Leveraging a digital platform can be as simple as buying Google AdWords, as complex as leveraging the Internet of Things to give enterprise value chains new life with automation and intelligence, or as pioneering as Uber — a mobile app that connects users in two groups — those looking for a ride, and those offering one.
But the best part of the opportunity is that digital platforms level the playing field for landlords of all stripes. Over the last decade, technology and Internet-born companies have dominated the platform headlines. Now, it is basically up for grabs.
Whatsapp, a startup of 55 people, manages to take money from the all-powerful mobile networks with a product based on the very platform and subscriber base that makes its business possible. Its business can best be described as a (messaging) platform on a (mobile) platform. In 2014, it was sold to Facebook for $22 billion.
Uber and AirBnB are likewise going toe to toe with the big guns on the strength of the digital platform revolution. Digital makes it possible for them to forego the infrastructural investment of old, insular business models, and leverage ready-made communities. And they’re winning.
Now even non-tech industry companies are launching major strategic platform initiatives — as landlords. Every industry — old and new — is in the mix.
Threatened by low-cost suppliers, John Deere built the MyJohnDeere agricultural industry platform linking farmers, bankers, grocers and governments in a wholesale push towards precision agriculture that would improve productivity, efficiency and yield. The platform helps agricultural producers consolidate the management of equipment information, production data, and farm operations, ultimately improving yields and ensuring farms are better run.
As industry platforms revolutionise all businesses — big and small, old and new, tech and non-tech, across all industries — the time has come to get on board.
Platforms will fuel the acceleration of digital disruption during the next three to five years, leaving less and less time to get on board. And remember that building a digital industry platform — along with the ecosystem that fuels it — is a multi-year process.
Standing idly by is not an option.