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Why should every enterprise have a digital platform strategy?

April 30, 2019

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A new phenomenon in global enterprise valuations

The last few years have seen a significant change in the valuation of companies across the globe. If you look at the top 10 companies in the world by their market capitalization from 2011 and onwards, you would notice that there has been a shift in the positions of these enterprises. A noticeable exit from the list has been that of Wal-Mart. The retailer’s spot in the top 10 appears to have been acquired by another retailer, Amazon. There are new entrants for the top spots who did not even exist in the last decade. Companies Facebook & Alibaba, have rapidly scaled compared to its peers.

What is the secret? 

‘Born digital’ companies such as Amazon, Airbnb, Uber and Alibaba have built multi-billion dollar business at a never-before-seen speed in the corporate world. In achieving this, they fundamentally disrupted many traditional industries. If you carefully examine these companies, they all have one thing in common. They have a digital platform strategy through which they have been able to scale at such rapid speed. Let us step back and understand what we mean by a platform. Contrasting from the traditional pipe businesses which embody a linear value chain to transfer value (goods or services) downstream from factory to customer, a platform facilitates the interaction between producers and consumers and derives value from the interaction. Let us examine a business operating in the pipe business model, say Marriott. Marriott owns (or in some case leases) and manages the facilities where it operates. Marriott is also responsible for all aspects of service delivery for its guests: the accommodation, restaurants, room service, facilities at its hotels, etc. All services are also branded under the Marriott brand name, and recognized by guests, suppliers, regulatory bodies, etc. Contrastingly, a platform business such as Airbnb does not own any of the properties on its platform. Instead, it brings together three elements:

  • An ecosystem of value seekers and value providers
  • A system of exchanging value i.e. the transactions, and lastly,
  • Data that empowers the platform

How to create a Digital Platform Strategy?

Enterprise businesses cannot change their business model overnight in order to compete with born-digital companies. However, they do enjoy certain distinct advantages when selecting adigital platform strategy.

Firstly, having been in the industry for long, enterprises often have the required relationships with customers, suppliers, and ancillary partners that can help them succeed in the platform age. Secondly, enterprises would also have deep knowledge and understanding of the market: of customer needs, segments, price points, and profitability. Lastly, enterprises can be expected to have good financial control and, more often than not, deeper pockets.

Given this context, many enterprises have already made a move to set up platforms, perhaps not to disrupt industries the way Uber and Amazon are doing, but to create value through more meaningful interactions which were previously not possible. An example of this can be seen in General Electric’s efforts to build Predix, its IoT and Analytics enabled industrial asset management platform, into an industry standard service that could make it pivotal to all future manufacturing models.

Is there a framework or concept that can help achieve a successful digital platform strategy?

Digital transformation of businesses can be achieved through a platform-based approach that is focused on the nuances of the vertical or industry of operation. However, the ‘born digital’ players have been disrupting business not only with their platform business models — but also with their underlying platform approach to IT too. The technology environment, application build approach, and the IT operations model work together as one system.

For example at Sonata, we have a unique approach to Digital with Platformation™ that helps enterprises create a digital platform strategy by helping them becoming

Open – Easily accessible for users, ecosystem partners, and businesses to participate in.

Scalable – It gives the business the power to scale the platform by number of users, segments, and geography, easily

Connected – They are always-on, always connected

Intelligent – To use the data generated in the platform to enable more efficient and meaningful transactions

As a part of the initiation of ‘Platformation’, one would have to examine the opportunity that can be capitalized and then embark on a business as well as technology readiness assessment. The business maturity assessment would encompass three key dimensions — leadership and talent, vision and business model and execution approach. Similarly, the platform maturity assessment is also made on three dimensions — digital capability, data, and architecture. The existing system’s capability to manage an ecosystem of stakeholders, the ability to leverage data for decision making and the level of flexibility in the application and infrastructure are assessed at this stage.

You can find out your organization’s digital maturity with this assessment. We will take your inputs and share a complimentary custom report within 7 working days from taking the survey.

It is time that for proactive business leaders, all significant new initiative be seen through a lens of platform-based business and technology models. Any attempt to launch it as a standalone siloed project will have a limited shelf life and potentially give a false sense of comfort in being prepared for the emerging digital economy. Since this is easier said than done, the key to successful digital transformation is to have a concept like ‘Platformation’ — in order to provide the road map that is required to get there. Successful digital business can only be built on a robust framework like ‘Platformation’ that appropriately combines the business and technology foundations needed to make a fundamental impact.


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