By Drazen Nikolic, Partner, Advisory, Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft.
When separate entities (both businesses and individuals) converge into rich networks with variable sets of relationships between producers and consumers, businesses have to move beyond traditional industry silos and go from organization-centricity to ecosystem-centricity. This trend led, in the last couple of years, to the rise of the platform as a business and organizational model. Today’s biggest, fastest-growing and most disruptive companies are founded on platform-based business models: Apple, eBay, Uber and Alphabet, to name just a few.
Platforms can connect people, organizations and resources in an interactive ecosystem that helps parties exchange value. Any industry for which information is an important ingredient — and yes, this concerns almost all companies — is a potential candidate for a platform-based business model. One example is the modern health care ecosystem. In the traditional ecosystem, patients relied solely on their physician. But today’s patient, thanks to platform-enabled business, is more empowered to have access to products and services from different providers and suppliers — from sport and fitness, nutrition and wellness, and the technology and data arenas — giving the patient additional sources of expert guidance. This interaction via a platform can provide the health care provider with data that can be used in the development of new therapies and improving current treatments and offerings, thereby improving products and services.
There are several trends to consider when evaluating a change to a platform-based business model, and CIOs can play a significant role in each of them.
Breaking with tradition: Platform principles and designs are counterintuitive to traditional ways of doing business, and to implement them successfully, organizations need to move away from linear supply chains and conventional service models. This shift requires new ways of thinking and implies a new business logic. With their expertise, CIOs can be at the forefront of creating massive opportunities by helping to shape the business architecture, integrating existing systems and defining the right processes.
Focus on the customer journey: Today’s customers are active, independent partners in an ecosystem, sitting at the center of its strategy and reshaping their own needs. Collaboration can be enabled with the right technology, by a digital experience platform that serves providers and consumers along every step of their journey and offers individual value propositions across the networked ecosystem. Consequently, CIOs can help companies to create a digital experience and technology strategy that is informed by the needs and digital behaviors of their stakeholders. In fact, the platform should aim to pinpoint and affect every user’s journey to benefit customers while simultaneously improving the business performance of both the organization, e.g., by automating internal processes with the help of robotics and the organization’s partners.
Dealing with data — part 1: An important element of a platform-based business model is to find the right balance between sharing the company data and protecting it. CIOs could influence the assessment of how much information has to be shared with the participants on the platform or the platform provider, considering business risks. Platforms bring an increased threat of uncontrolled data disclosure; understanding cybersecurity and data protection is, therefore, an inevitable prerequisite for sustainable success in the digital era. CIOs should have a well-articulated security and privacy strategy in place when setting up a digital business platform. They will need to work together with business leaders to ensure data is protected, regulatory obligations are met and that the available data is efficiently used for the business’s benefit.
Dealing with data — part 2: Trade on business platforms generates tremendous amounts of data that can be analyzed to help sell better — and more — products and services. Consequently, companies face the need for new roles in the organization such as data scientists and chief data officers (CDOs) to exploit the available information. It will be important for CIOs to work with these roles to help ensure the available data is generated and used in the best possible way.
Increasing levels of partnership and collaboration: As each individual collaborates for the mutual benefit of the entire ecosystem, this can ultimately lead to more information, allowing more choices and creating more value. Single companies can no longer own or create everything themselves — this would be too costly and time intensive. Consequently, the need to enter alliances and partnerships across the business platform to meet new growth opportunities arises. CIOs are actively helping to assess the technical fit of alliance partners that are complementary to the companies’ own offers, thus enabling them to create additional value to their customers.
With platform-based businesses models, traditional industries, such as hotels and television channels, are in a state of upheaval and disruption. And other industries are not far behind. Businesses that do a better job of harnessing the power of platforms may be able to turn disruption into a competitive advantage. For CIOs, it is important to understand that platforms are business models and not technological systems alone, although technology plays an integral part. Getting engaged in the business aspect of platform-based models allows CIOs once again to position themselves as strong business partners, rather than only gatekeepers of technology.