Platform Business Power, by Dharmesh Mistry
It’s been a platform kind of year. From prime time coverage in publications like the Wall Street Journal, to keynotes at our own Cognizant Community event by well-known platform evangelist, Peter Evans, businesses everywhere are looking into them.
But what are platforms exactly? HBR defines them as “a structure upon which many variations of products are built.” And the benefits can be immense: enable new insights, relationships, partnerships, and marketplaces, using the power of data and process digitization.
They combine systems of record, systems of engagement, and systems of intelligence, and use recommendation engines and predictive analytics to provide value to partners and participants. Such tools allow organizations to expand their value proposition deeper into the customer lifecycle and adjacent marketplaces. How do platforms make this possible?
The Power of the Platform
The models are characterized by a market-specific, business-function-specific, or cross-industry ecosystem of producers and consumers. They generate value through transactions pertaining to physical assets outside the platform or digital assets (like data, content, APIs, and apps) created on it.
For example, one financial and accounting software provider we work with decided it could better serve small business customers by branching into areas beyond financial management. It developed an open ecosystem for financial services organizations, business customers, and other providers. Its platform integrates multiple third-party products such as customer relationship management and payment tools.
By analyzing data in platform transactions, the company gains deeper insights into the needs of small businesses and can provide recommendations for additional services. As customers derive value from these contextual insights, they drive more transactions through the platform, increasing its value. Its platform model positions the company as a provider of solutions that span the business lifecycle.
A not-for-profit healthcare information exchange (HIE) whose members include more than fifty hospitals, several health insurance plans, and tens of thousands of practitioners sought a more modern, cost-effective, technologically streamlined means of transaction processing. It set a goal of removing infrastructure concerns to allow its members to focus on value-based activities.
As a result, the HIE asked us to design more efficient workflows and smarter ways of processing its nearly twelve million monthly transactions. We helped the network migrate to an Amazon Web Services (AWS) cloud infrastructure, using Cognizant’s TriZetto platform. This allowed members to not only conduct transactions more efficiently, but also discern data patterns using analytics tools. The platform uses open application programming interfaces (APIs) to help members continuously improve cross-institutional interoperability and outcomes along the value chain.
Shaking up the enterprise
The challenges of deciding how, where, and when to participate in the platform economy are systemic, and impact every platform participant. Success depends on the contribution and compliance of ecosystem participants outside traditional organizational boundaries. Platform use cannot be mandated; it is more effective to inspire and influence participants using continuous engagement models that keep the ecosystem vibrant.
Since some participants may be competitors, leaders need to balance their larger aspirations for the platform and the competitive pressures that might exist in a sub-process layer addressed by them. Amazon, for example, partners with logistics companies but competes with them through its logistics offerings.
Effecting cultural change
Organizations also need to rethink business models, and both platform operators and plug-and-play participants also need to rethink their change management conventions, beginning with culture and flowing through business processes and technology infrastructure.
Platforms often replace one-time product licensing or selling models with “freemium,” try-before-you-buy, subscription, or usage-based monetization models. Leaders must empower marketing, sales, and business management to experiment with new models, as well as to address associated revenue predictability and cash flow issues.
Further, they become profitable only after reaching a critical number of participants and a corresponding number of monetized transaction flows. A strong vision and multi-year business plans must support this financial reality.
A data-driven culture is a key aspect of platform businesses, particularly in the marketing and production development realms. To develop targeted marketing approaches based on deep customer insights, organizations must embrace frequent, objective, data-driven decision-making processes that combine science with innovation and the art of marketing. Organizations must dissolve barriers across functional groups and establish quick cycles of “launch and learn.”
Changing processes and infrastructure
Platform businesses need to extend their IT landscapes with systems of engagement for customers, partners, and developers. Typical initiatives include end-user/developer community forums and portals, extension of user experience to mobility platforms, and integration with social platforms.
Platform components encompass a blend of familiar and emerging technologies. Companies should leverage systems of intelligence to glean insights into preferences and behaviors, as well as to uncover patterns in how content and data flows through the platform. Essential sub-components include real-time analytics, open-source NoSQL databases, and real-time data ingestion from sources such as social media and Internet of Things (IoT) devices.
Other important technologies are public APIs to encourage open innovation, microservices architectures to develop and deploy self-contained platform capabilities, and public and private clouds to enable scalability, manageability, and cost efficiencies. DevOps practices speed time-to-market for platform innovations and enable faster insights into platform behavior.
While much platform activity — interactions, engagements, and transactions — is intended to be digitized and automated, internal processes requiring human intervention may remain, particularly to handle exceptions. Because manual interventions can restrict scalability, businesses should strive for relentless automation across the enterprise lifecycle, even for secondary and out-of-the-ordinary business process scenarios. Automating workflows is vital for a platform’s success because as user adoption explodes, even unusual circumstances can become significant in number and cause reputational damage.
To learn more, read our whitepaper, and let us know what you think!
Opinions expressed in this blog are of the author and may not represent Cognizant’s point of view.
Dharmesh Mistry
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Originally published at digitally.cognizant.com on September 23, 2016.
