At the TM Forum Live! Executive Summit, Professor Geoffrey Parker, MIT Institute for the Digital Economy and co-author of the just-published book Platform Revolution, shared his practical insights into how to win in the platform economy. Starting with this article, we will share the highlights and top takeaways in a short series.
Startups are leveraging platforms. Incumbent firms, who have ongoing businesses and revenue streams and customers and transactions, already have lots and lots of data. In many sectors, from healthcare firms to agricultural firms like John Deere, established companies are becoming data players. [There is an excellent chapter on this in Industries of the Future by Alec Ross, published earlier this year.]
How do you know when you’re a platform?
There will be a new data layer, facilitated by networks, and you will use data from that layer to model services and create new ones.
There’s a quote that says,
“You’ll know you’re a platform when your customers tell you that you are.”
This will be when someone did something weird and wonderful with the data that you didn’t think of – you are allowing innovation to run on top of your platform.
APIs and different approaches to innovation
One of the critical things in a platform world is have application program interfaces (APIs) to facilitate engagement. Are the APIs you’ve created getting down to commodity infrastructure-type services – services like Microsoft Azure? Or are they APIs higher up the capabilities stack, closer to customer-facing products that can capture some of that upside value/revenue as well as facilitating others?
The comparison between Amazon and Wal-Mart’s use of APIs and their business models is eye-opening. Like Amazon, Wal-Mart is one of the world’s largest retailers and it has thousands and thousands of physical points for logistics and distribution systems, with innovation built on top of innovation. It’s supply chain excellence.
However, if we look through a different lens and compare the two (see graphic below) – you wonder if they are in the same business? Wal-Mart has incredible capabilities (shifting, tracking, data centers, etc.). What if it exposed them to others to leverage and build on top of?
IBM’s Watson platform started out ten years ago as an experiment in how far we can take machine learning and then moved on to Watson Health (for cognitive healthcare) as a new business unit. With acquisitions like the Weather Channel data, it can start building the platform out explosively with a whole set of configurable tools, and with startups and specialist partners to add value. That’s one approach to getting a platform built and out into the world.
In the next article in this series, I’ll look at some of the myths and realities around platforms, and especially their profitability.
In the meantime, here’s a graphic the highly talented Annie Rickard Straus captured to sum up the discussion: