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An extensive overview of a digital platform strategy

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  • November 16 2021
  • 19 min read
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The term, ‘Platform’ isn’t anything new. You must have heard it several times but when it comes to business platforms, it is something to look upon. In order to succeed an organization has to focus upon various aspects with utmost care and attention. So, in relation to that let me bring light into the fact that how important platforms are for today’s businesses. In this article, we will get deeper into the platforms by understanding every facet of it.

What do you understand about a platform?

It is generally observed that there is a lot of confusion in the market regarding the commonly used term, ‘Platform’. But why so? It is because platform is an ambiguous word which is used in multiple levels. For instance, at times it’s just a term used for a suite of applications. Then there are platforms that are well designed to provide support for particular functions or industries. You will find business model platforms such as Apple’s iOS, or Facebook which offers a foundation for everyone to develop on, and some platform business leaders consider that effective platforms can be well defined by their capacity to make other organizations successful.

In true sense, a platform is essentially needed by every business in an environment filled with digitalization, competition and constant change. A foundational technology platform expedites an organization’s capacity to deliver better value for consumers. With the help of a well-built platform, a much more agile approach can be made towards a business. Even though these platforms can be seen as dominated by giant tech companies like Apple, Google, Amazon, Facebook, and Microsoft, it's obvious for the average companies to have a concern regarding their approach towards such platforms. But the panel experts have confirmed that industry domain skills, strong relationships with consumers, and eagerness to cooperate with partners can help the average companies to succeed in their endeavor. So, now the traditional companies are showing interest in capitalizing on such platforms to increase innovation and stay ahead of their competitors. 

Let us now take a look at the different platforms categorized by Deloitte for creating value for the organizations and their participants. 

Aggregation platforms. They help in bringing together a wide array of suitable resources and enable users of the platform to connect with the most relevant resources. These platforms are generally transaction or task based and consist of marketplace and broker platforms.

Social platforms. They include some of the broadly known social networking sites, and are similar to aggregation platforms in bringing together many stakeholders. The long-term nature of the relationships which these platforms provide is really unique. Their goal is more about to align individuals around areas of interest than to complete a transaction.  

Mobilization platforms. They take common interests to action. These platforms tend to go beyond conversations and interests and prioritize more on moving people to act together to achieve bigger goals. Since, there has always been a need for collaborative action over time, these platforms along with supply networks and distribution operations look for prioritizing long-term relationships across short-term and isolated transactions. They cover a wide range of industries such as consumer products, automotive and financial services.

Learning platforms. These are multi sided networks which help in transferring knowledge, bringing together participants in order to share insights over time. These platforms look forward to encouraging deep, trust-based relationships, with participants able to recognize their capabilities only by working together. 

Here are the benefits that can be gained from utilizing the different types of platforms. 

Illustration diagram describing the benefits of using digital platform

Performance enhancement 

A platform is considered to be of a great quality if it is able to make its participants concentrate upon the activities which they do remarkably well and also to shed other activities to the ones whom they connect via the platform. For example, a lot many small focused product vendors and merchants are now dependent on Amazon’s selling platform to manage a variety of complicated and scale intensive activities, also including managing the websites and operations fulfillment. One of the great things about such a platform is that the partners who pick up others’ nonessential work are actually entities who have willingly decided to specialize upon those activities, and will certainly perform better. 

Growth leverage

By following the footprint of their businesses, the firms are seen preferring for either organic growth or growth by acquisition. Some platforms opt for opening up a third path and that is enabling participants to benefit and connect with the abilities of others and also make them accessible to their customers in such a manner which creates important value for both the platform participants and the customers. Here is an example, Li & Fung has successfully grown into a $20 billion global organization in the supply network business although its sourcing business does not get involved in the actual production itself. 

Distributed creativity and innovation

Some of the companies are prioritizing the use of platforms to gain creative and fresh ideas and problem solving from a wide and diverse range of third parties via the help of the contests which provide exciting rewards to the ones who come up with the finest approaches towards opportunities and challenges. For instance, XPrize has supported Spur Innovation in a wide range of areas like space travel, automobiles, and oil spill removal.

Shaping strategies for more value 

Let me here give you an example for better understanding. Just look back at the beginning of the credit card business, when Visa was founded by Dee Hock. Simply by convincing banks to depend on a shared utility in order for the back-office processing of credit card transactions-a platform- he was successfully able to restructure a complete industry. So, for the banks, the platform enabled them to turn a money losing product to a beneficial business. You will today find various opportunities for restructuring entire markets and industries with the help of designing new platforms and providing good incentives in order to motivate third parties for active participation. 

Does your business really need a platform?

Is it really necessary for companies to experience the platform journey? Sometimes the companies can give NO as an answer. But why? Let’s find out. So, basically a company which is trying to examine an idea would like to focus upon developing more softwares to bring that idea into the market and look after the results. While the organizations grow in size and complexity, yet systems are developed to serve specific business functions such as product development or inventory management. It is also seen that the businesses depend on technology to such an extent that they get completely tangled with each other. As, because systems are mostly developed in functional silos, areas of friction start to materialize and the procedures might be repeated throughout the organization, or even become more complex than necessary. 

Addressing these frictions becomes essential to the enterprise’s capability to perform and innovate. Zhamak Dehghani, Thoughtworks Principal Consultant says, “Businesses want to move faster, experiment with new offerings, new markets, new capabilities. At the same time, they deal with a lot of legacy systems that have trapped their data and capabilities in certain functions. To be able to get where they want to go, they need smaller building blocks that play well together.”

Ryan Murray, Director of Digital Platform Strategy at Thoughtworks, expresses, “In platform strategy these ‘blocks’ represent separate capabilities, with steps taken to enhance efficiency and reduce complexity in each so they can be used more effectively by engineers and the business to build, deliver and measure customer experiences, and ultimately serve the enterprise’s growth ambitions. Rather than functional challenges to be tackled, the blocks become “great opportunities to accelerate time to market, bake in security and enable repeatability, for the rest of the organization.”

Therefore, we can conclude that every business regardless of its industry and expertise are in great need of such business platforms which are designed to create better economic value.

How do you prepare for a platform transformation?

For building a platform an organization needs new digital ways of doing business and a lot many major adjustments with people, processes and technology systems have to be made. The most challenging part of the entire process is in knowing where to start and how to bring proper balance upon measured thinking with strong and crucial decisions. For building a platform an organization needs new digital ways of doing business and a lot many major adjustments with people, processes and technology systems have to be made. The most challenging part of the entire process is to know where to start and how to bring proper balance upon measured thinking with strong and crucial decisions. At Deloitte, they approach these issues with the help of the context of the digital industrial transformation framework that acts as a guide for companies looking towards large-scale digital transformation. Their digital industrial transformation framework starts with strategy formulation, then the strategic choices move towards a digital platform business model redesign, next comes the development of required capabilities, later the creation of an operating model comes into being and finally it ends with acquisition of necessary people, process, and technologies. To know more, read about going paperless, enterprise-level digital transformation, how pandemic led the businesses to reimagine their operations, the pandemic-driven digital transformation and digital readiness.

Illustration diagram describing the facts to be known before platform transformation

Prioritizing Business Value 

When you take the decision of building a digital platform, it is actually only the start of your responsibility to support the business value of your digital platform. Although the motivation for a platform strategy might be compelling at a high level, there are many decisions that are taken with great attention and detail regarding finalizing the suitable features and the manner in which they can be offered. Further, the business justification for your features will change over time as the state of technology advances, the requirements of your company develop and both cloud providers and other vendors release new and enhanced offerings which compete with your homemade solutions. 

If you want to deliver the desired value to your company, you will have to plan for a greater proportion of constant enhancement against product innovation than end-user facing products. In order to keep the platform handleable and costs under control, the operability-related items need to be emphasized in the backlog. Since your users value stability, consistency and reliability over a stream of new features, you will have to look after meeting their expectations. Additionally, each product which you deliver must be able to deprecate in favor of a new product on the market. Since, depreciation is a basic part of the platform product lifecycle, and inability to consider it might lead to failure in attaining the business benefits as per decided.

Emphasize Product Thinking

Since with the help of your product development team, you are developing products to satisfy your customers, the developers shall not face any difficulties in using your platform. Even if there is any flaw in API usability or a gap in documentation, it can be an obstacle to the successful accomplishment of the term business value of the platform. You will certainly have to prioritize the developer experience, since any product which no one uses is not a successful product, regardless of its technical merits. Therefore, to attain return on investment for your internal platform, your product development teams will have to utilize it well by understanding, appreciating and being aware of its different features. More details on product thinking and project thinking use cases here.

Operational Competence 

While adopting an internal platform, you are supposed to ask your product development teams for a good deal of trust. Your platform becomes a major dependency of the systems your company uses to achieve its function. Therefore, operational competence requires to be adequate enough to justify the trust. It means your platform teams need to have a proper understanding about the basics of software infrastructure such as networking, scaling and disaster recovery. If your platform engineering teams face difficulty with the underlying technology, then they won’t be able to develop robust products for your product development teams. Additionally, modern operational excellence tends to go beyond infrastructure and also into some practices which provide reliability.

Excellent Software engineering

A platform organization can’t only be considered as a department of operations, consequently, it will require much more than operational capabilities. Let’s say, if you don’t look forward to writing substantial custom applications, your templates, scripts and configuration files happen to swiftly assemble complications. Therefore, if you wish to maintain the capacity to swiftly and securely change your platform, you will have to create it in the correct order. Let us look into the three core practices of infrastructure as code, as described by Kief Morris in his book Infrastructure as Code: 
 

  • Defining everything as code
  • Consistently test and deliver all work in progress
  • Building small, simple pieces which you can change independently

So, if your company is able to continuously apply these practices, you will be able to meet your platform vision. There isn’t any doubt that without them also you will be able to look after your infrastructure well but you won’t be able to sustain the pace of transformation your development teams’ growing needs and expectations will demand.

Good team effort 

Individual skill is always valued but team efforts bring different perspectives and combined brainstorming. It is convenient to have autonomous teams who have clear missions to accomplish, avoiding individual code or system ownership. They are supposed to invest in knowledge sharing, documentation and onboarding in order to successfully maintain their platforms. To know more, read about team building and team health.

To get a better clarity on how digital-native organizations tend to design their strategies to make use of the powerful platforms, McKinsey conducted a survey among 1,600 C-suite executives in organizations over various sectors and major geographies. It was found that there were multiple kinds of platforms. Starting from the platforms which were created by incumbents, industry focused, controlled by third parties, and global players with huge platforms. 

The very first insight which we received from this survey is the extent to which platforms have become an integral part of the business landscape and not just the domain simply of digital natives. Some of the incumbent organizations such as Nike, Daimler and Unilever have successfully launched their own business platforms as their business models mature, even-though it was found that only half of them have possibly taken this way. Over the products, sectors and developed economies, it was observed that a single digital platform prevails 75% of the time. On the other hand, platforms are seen less popular in markets with lower digital maturity, like pharmaceuticals and healthcare (55 percent), than in retail banking (95 percent). Also, business-to-business sectors (with a 65 percent platform presence) and diverse importantly from business-to-consumer ones (85%). 

The common rationale provided by the organizations that are using such platforms (31 percent of all companies) is that they put an effort to successfully combine individual services and integrate them into a full-service offering. One more motivation, expressed by more than 20% of respondents, is the willingness to create a large customer base across categories at scale, also focusing on to drive prices down and collecting data into a shared, cloud-based utility. 

Illustration diagram describing the statistics of digital natives and incumbents using their own platform
Source: McKinsey & Company 


The second observation was that any kind of platform play whether with the help of an organization-owned or a third-party platform, and either collaborating or competing with a global platform is able to improve earnings above the benchmark level of not playing. Organizations with platforms had an annual improvement in earnings before interest and taxes (EBIT) of 1.4 percent, in comparison with the 0.3 percent profits of nonplayers. Also, the organizations which joined much wider cooperative arrangements progressed lightly better than those operating their own platforms. 

The survey estimates recommend that over a period of five years, platform players will be able to capture an additional 10 percent in EBIT growth-an organization’s 2% EBIT growth, for instance, would rise up to 2.2% in the fifth year. 

Illustration diagram describing the statistics of 5 year earning before interest and taxes (EBIT) growth for companies with platforms.
Source: McKinsey & Company


Lastly, the survey wanted to find out how incumbents which deployed platforms have finally engaged with bigger global ones. It was seen that most of them either decided to cooperate with these wider business ecosystems or to compete against them. The rest of the incumbents chose either not to engage with global ecosystems utilizing the platforms they designed, or even had no platform at all. 

Illustration diagram describing the statistics of incumbent companies adopting global platforms
Source: McKinsey & Company


Take the next step: Understanding a digital platform strategy

What is a digital platform strategy? Digital Platform Strategy can be considered as the backbone of digital transformation. With the growing customer needs and expectations, all the organizations felt the need of adapting their business models to become more personalized, convenient and responsive. Thoughtworks expresses that their digital platform strategy offers strategic analysis, prioritization models and communication frameworks in order to maximize investments in modern, cloud-native technology tools, practices and patterns. Their approach helps in co-delivery of mission-critical architecture and software along with the clients, also assuring platform technology strategy delivering tangible value. Additionally, Thoughtworks also provides the required engineering and architecture company upskilling which allows the clients to steer their platform attempts into the future.

The digital platform strategy blueprint

Illustration diagram describing the digital platform strategy blueprint
Source: Thoughtworks


Digital Platform Strategy framework is a blueprint for platform building which consist of five important pillars. Let us view those five key areas.

Delivery Infrastructure. It is a holistic approach taken to infrastructure, develop and release support, and observability. Coupled with simplified build, elastic infrastructure and related tooling, deployment, and monitoring allows engineers to deliver quickly and securely, with suitable controls and audit support. This pillar straight away addresses delivery friction, lessening your time for the latest products and services.

Architecture and API Remediation. Engaging customer experiences which evolve to reach the constantly changing market necessitate increasing the value of the current company assets and business capabilities. The approach to API and platform architectures consist of methods or procedures for building net-new capabilities utilizing modern service-oriented (SOA) and event-driven (EDA) approaches, along with practices for remediating legacy systems so that they can efficiently expose the basic current assets to developers. Platforms of well-factored, self-service APIs which hide the procedure technical, and operational complexity of the underlying capability enables teams to move swiftly to experiment with and production-alize new customer-facing solutions. 

Self-Service Data. Businesses today depend on real-time analytics to power decisions. Data and application architecture can be seen merging increasingly as we create more real-time, data-enabled business capabilities, also supporting advanced data science-driven analytics. The application developers shall focus on contributing to the company data stream and selectively tapping into it. Moreover, your data platform becomes ubiquitous. There is a need to reduce friction by streamlining the utilization, management, and operations of complex data technologies such as Hadoop, Kafka and Spark. It also needs to expose a self-service ecosystem of present data assets, addressing data strategy issues like data ownership, data lake design and authorization issues. More on the business value of having sound data strategies here.

Experiment Infrastructure and Telemetry. Innovation lives and dies by the capacity to learn swiftly via purposeful, measured experimentation. With the help of canary release processes, toggle architecture, and meaningful instrumentation, your experiment infrastructure enables you to make the correct decisions about your experiments and investments.

Customer Touchpoint Technology. Customer knowledge is the foundation of delivering value. Altogether, a constant content strategy, a single view of the customer, and transparent telemetry facilitates unprecedented customer insight which allows personalized product offerings.

The approach

Illustration diagram describing the approach towards digital platforms
Source: Thoughtworks


The approach building competitive digital platforms comprises three steps.

Chart your course

Mature organizations are seen spending years making investments in new business capabilities, integrating business acquisitions, and updating technology stacks to offer the best products and services. In order to protect their investments, they face difficulties in finding ways to patch over the shortcomings of their IT systems. It might sound fine in the short term, but over time, these workarounds either become non-sustainable or too resistant to change. Therefore, this approach enables IT organizations to rapidly iterate, launch customer-facing applications while minimizing changes to slower back-end systems. Rather than looking to enhance those systems, the clients are advised to focus their digital efforts on delivering compelling customer experiences which will drive top-line revenue: prioritizing two or three differentiating customer experiences; identifying what capabilities your digital platform development needs to offer those experiences (also any dependencies on legacy systems); and then provide an advanced environment in which a well dedicated team having proper digital skills can swiftly develop and bring those experiences to market.

Establishing your foothold

It is certainly a challenge to run a traditional production environment, managed for scalability and reliability, along with API facades. At the company level, you are efficiently managing two 'businesses' separated by a wall of seemingly incompatible manners and objectives. On one side, a team immersed in an agile environment and motivated to experiment and iterate (fail, fix, and move on), works on either daily or weekly release cycles, and the other one, an experienced IT team operates at a more moderate pace in order to successfully keep the business running. 

If the digital platform team wants to evolve, it’s important to protect and reinforce the API facades in order to have a proper foundation in place. Let us look at some major key areas which need to be considered while running dual systems.

  • Protection against technical limitations and constraints. The connection between new digital services and legacy back-end is a weak spot. For example, there might be a mismatch in the number of requests every system can handle; you might come across corruption of business logic or data models if changes to backend systems can’t be prevented. Therefore, some of the techniques like throttling and circuit breaking can make your facades stronger, and adapters and gateways can possibly also act as anti-corruption layers.
  • Protecting the platform’s rapid release cycles. The digital platform provides support to release cycles that are considered to be shorter than those of legacy systems. But you cannot allow legacy to drag you down. Rather, techniques like feature toggles and contract testing can provide support to continual delivery while also running legacy systems.
  • Protecting the platform’s value proposition. On the company level, before starting to expand the digital platform with new capabilities, you are required to incrementally develop trust within the broader company. You can make this happen by reinforcing the platform’s value proposition via a series of quick wins. You can possibly keep adding services for strongly developing a platform and avoid challenging companies responsible for back-end fulfillment systems till the digital platform is trusted. 

Forging a new frontier

You can start executing microservices with distributed data management capabilities of their own by maintaining a firm boundary between the digital platform and traditional production systems in place. You can go through some integration guidelines to consider during this final phase of your digital transformation attempts.

  • Applying the “open/closed” principle. You need to extend the capabilities of the digital platform such that “software classes, modules, functions, etc and it shall be “open for extension” and mark the existing system as, “closed to modification.” From here, all improved and net-new business capabilities shall be developed only on the digital platform, as extensions to legacy systems.
  • The change from the system of record to a system of eventual consistency. With a microservices architecture in place on the digital platform, the current ‘system of record’ can be transitioned to a system of eventual stability. At that particular point, the digital platform tends to take on responsibilities more traditionally captured by the aging back-end systems, but information still flows to those systems 'behind the scenes' till they can be replaced. It allows true decoupling of dependencies.
  • Exposing events or messages from existing systems. In order to support the two previous efforts, you will have to open current systems so that their data can be exposed. You may even need to make sure that you have a constant view of data, where fragments can be stored in various systems. Rich integration patterns can be accomplished by exploring noninvasive ways to expose events from legacy systems. For instance, many SaaS, COTS systems provide support to notifications, and many custom-developed systems depend on databases which can push messages or notifications. If these changes are considered through an open/closed approach, external systems can finally be entirely decoupled from the digital platform.

The process

Illustration diagram describing the digital platform strategy process
Source: Thoughtworks


The digital platform strategy process starts with a discovery to understand your consumers’ business priorities, organizational complexity, and technical maturity. It is then merged with the practices, patterns and principles of organization platform building. This further concludes in a much prioritized, lean technology strategy and platform plan tailored to your business needs and expectations. After reaching the execution phase, the partnership of strategy and delivery moves towards the high gear. Next, it begins with the highest priority platform capacities to vet strategy in contrast to the reality. At this stage, the assumptions are tested about company delivery capabilities, degree of technical debt, and remediation complexity. This enables early delivery of platform value which underpins your major business priorities. While the engagement continues, insights from implementation are fed back into continuous strategy development and review to inform the path of implementation. This feedback loop fine-tunes the short- and medium-term tactical moves, at the same time, platform thinking looks after the strategic vision of reaching  your business targets. 

Here is a survey conducted by accenture in regards to the adoption of digital platform strategy. In the survey they wanted to find out how companies embraced digital platform strategies. So, according to the survey, under six in 10 executives confirmed that their company has a basic digital platform strategy and tools, also with half of those executives’ states that their company measures efficiencies on an ongoing basis to consistently enhance their platforms. Moreover, four in 10 companies are yet to successfully build such platforms. Also, 34% express that some basic strategies have only begun to execute tools, and 8% still do not have a digital platform strategy and haven’t seriously thought about it.

Illustration diagram describing the statistics of different sectors using digital platform strategy and tools
Source: Accenture


It was observed that 65% of companies presently today dedicate between 11 percent and 20 percent of their IT budget to digital platforms. Over the next few years, four in 10 companies plan to improve what they already spent on digital platforms by more than 10 percent, while the average investment over all companies is expected to be increased by 3%.

While investing in different types of digital platforms, under seven in 10 executives confirm that they choose to develop the digital platforms by partnering with external vendors. So, among those executives, systems integrators are the first choice, followed by original equipment manufacturers, enterprise software providers, and cloud infrastructure providers. Companies prefer to pay for their platforms through non-traditional pricing models.


Preferred ways to develop digital platforms

Illustration diagram describing the preferred ways to develop digital platforms
Source: Accenture


Preferred payment models for digital platforms

Illustration diagram describing the preferred payment models for digital platforms
Source: Accenture


With the below diagram we can see how the companies are benefited by adopting the digital platforms.

Illustration diagram describing the statistics of how companies are benefited by adopting the digital platforms.
Source: Accenture


Now, it's time to get familiarized with a conceptual paper published on ResearchGate regarding ways to execute platform strategy over time. For a comprehensive understanding, you can refer here. 

Taking you through 5 questions which Forbes has provided in order to help your business in leveraging the digital platform model. Below are the questions.

  • Where is the value?
  • Do you really have the required platform skills?
  • In what ways will you attract your platform?
  • By what means your platform will motivate and support user experience?
  • Will your platform integrate future technologies? If yes, how?

Finally, take a look at the videos below where different organizations, including a business school share their experiences with digital platform strategy. 

 

 


Conclusion

Today platforms are empowering learning and innovation in the businesses. With the right product management, efficient technical execution and correct underlying justification, the platforms can help the product development team and accelerate innovation. Even while building these platforms, you need to invest money, talent and opportunity cost. But the platforms repay such investment by enabling the product development team to effectively and rapidly develop good-quality customer-facing products.

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