Business - Written by Nick Vitalari on Friday, November 6, 2009 11:26 - 7 Comments
12 Critical Success Factors for Business Platforms
In 2004, Walt DuLaney and I conducted a longitudinal examination of business growth and cumulative revenue performance. Among the success factors, we found that companies with powerful business platforms outperformed peers in cumulative revenue growth over a 15 year period. Our conclusion: business platforms can be a means for organizational renewal, continuous innovation, and sustainable success.
Since then, the sophistication of business platforms and their related ecosystems has expanded and other companies have found success. In the case of Apple, competitors were forced to launch competitive platforms in response (Google’s Android, Symbian Foundation, and RIM) while Apple collected competitive profits. A growing body of experience indicates that business platforms coupled with an ecosystem of partners can produce superior economic value. As those partners cooperate and work together they collectively learn, innovate and expand their options for new product features, additional partnerships, and new platform components. The platform plus the ecosystem becomes a sustainable economic engine for growth and development.
Here are twelve success factors for business platforms based on our work at nGenera Insight. The first seven are business-related success factors. The second five are technology-success factors. The list reflects current understanding and is far from comprehensive. Nonetheless, it provides a starting point for companies interested in sustainable growth.
BUSINESS SUCCESS FACTORS
- Leadership, Vision and Purpose – No surprise. All successful platforms begin with leadership, vision and a clear persistent purpose. Wal-Mart’s logistic system implemented in 1993, now over 16 years old established the foundation to manage an increasingly complex distribution model, provide a basis to involve partners in category management and drive sustainable efficiencies in the retail industry. GE’s aircraft engine maintenance platform supported the collection of real-time in-flight engine telemetry data that in turn provided information to customers and ultimately supported concurrent design of their next generation engines.
- A Vibrant Ecosystem – An ecosystem is an economic community. An ecosystem thrives when all parties experience mutual economic benefit. Apple’s iPhone ecosystem has produced 100,000 apps. In an ecosystem, motivated, persistent participation and contribution is driven by enlightened self-interest which benefits the whole. The business platform provides the architecture, policies, rules, transactional frameworks, and the information necessary for the ecosystem to operate.
- Competitive Velocity – How does a company outcompete its rivals and grow? Move faster. Salesforce.com revolutionized the CRM business, not only providing a better deal, but also delivering more new functionality per unit time than their competitors like Siebel, Oracle and SAP. IBM got platform and ecosystem fever with Linux. By investing in the Linux platform, its world-wide development community, and its related ecosystem, IBM was able to grow a new operating system faster than it could do by itself and enlist more developers than it could possibly afford.
- Extensible Business Architecture — Business platforms must be conceived, from the outset, as an unfinished masterpiece. Extensibility means learning. The difference between an applications project and a business platform is that a business platform is never finished. When a platform is finished it is at the end of its life. Learning creates new directions and options. New options create new opportunities for growth, alternative futures and other avenues for competitive action. Amazon’s original on-line retail platform evolved into other businesses such as Marketplace, Web Services, and most recently cloud computing with their Elastic Compute Cloud offering.
- Transparency — Transparency fosters beneficial contagion and excitement among the ecosystem members and interested parties. An examination of any successful business platform reveals alternative futures. Alternative future means options. Options can be valued and hence the investment community can estimate the expected value of such potential futures and model a resulting perpetuity calculation. Transparency attracts new partners and helps existing ecosystem partners to co-create the future of business platform. As momentum builds, transparency also strikes fear in the competitors.
- Policies and Rules — Policies and rules are essential otherwise chaos reigns and the platform and related ecosystem dies. The business platform becomes the repository and the enforcer of policies and rules. The business platform also communicates changes in rules. Consider the rules propagated and enforced in the iPhone ecosystem, or the Android ecosystem through the hardware architecture, operating system architecture, the business architecture and the rules and policies for these respective ecosystems.
- Analytics — Business platforms generate prodigious amount of data continuously. One of the most powerful advantages of a business platform stems from the collection and analysis of strategic, situational, transactional and detailed usage data. As the data is collected powerful visualization and analytic tools can provide a combination of real-time and longitudinal analyses. The closed-loop nature of the data collection process inherent in the business platform enable the platform leaders and ecosystem partners to run experiments, continuously improve products and rapidly evaluate potential business strategies and directions. It is very difficult to duplicate this type of analytic capability in a non-platform business model.
TECHNOLOGY SUCCESS FACTORS
- Open technology architecture – Open architectures provide the basis for future options and business platform extensibility. Open means that other technological standards can interface with the business platform, even technologies that have yet to be invented. Remember, business value is ultimately determined by the market’s assessment of future viability and the promise of future value. If the business platform is based only on a few proprietary or close technology architectures, future business options will be limited.
- Component based – “assembly required.” Most business platforms consist of a collection of open, custom and proprietary application engines. From a technological perspective, it is cheaper and more effective for a platform to be assembled from the evolving marketplace of technological components. A component based approach in an open source, open architecture and cloud computing environment also means that companies can enter the business platform space for less cost and minimal proprietary software development.
- Scalable – Google has scaled from it beginnings. At the outset the Googleplex consisted of hundreds of servers. Today the Googleplex is estimated to consist of over a million servers. Google’s business platform and technology platform was designed from the outset to scale.
- Sensing capability – Sensors in products (e.g. aircraft engines, cell phones, elevators) and sensing capabilities in key aspect of the business platform’s infrastructure provides a level of detailed data not possible in standard business models. Almost all successful business platforms, whether product based, or service-based have a sophisticated network of sensors that collects real-time data.
- Location agnostic – Business platforms operate to deliver their product or services to the customer at the right place, at the right time in the best possible way. Successful business platforms eliminate the constraint of place. Dion Hinchcliffe notes in a recent post that the popularity of mobile apps is transforming the Internet and replacing the web because they provide the right type of interaction for the user at the right time. Whether it is a mobile app or another delivery vehicle, smart business platforms live by being location agnostic.
Taken together these twelve factors provide a basis to begin a quest for sustainable growth. What is your view? Are business platforms a new basis for business growth and success? Will all companies need to be a part of a platform or a platform leader?
Do you have plans for a business platform in your future?
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