Moving to the platform era

Transcription

1 Building a new world: Moving to the platform era Executive summary Business platforms are nothing new steam power, the electricity grid and desktop computer operating systems have all created ecosystems of related businesses, products and services but to compete in the digital era, it s imperative for every business to understand what type of platform will serve it best, how its business model must change, and how to make the transition. Businesses must re-imagine themselves in terms of the experiences they want to provide, rather than the specific transactions or products they want to sell. With this information in mind they can then look to transform their operations by understanding what type of platform should be deployed and which partners to engage, that will allow them to seamlessly provide the experience(s) to their audience. SONIA ELAND Director, Strategic Alliance & Digital CSC Australia and New Zealand A platform is a product or service that helps organisations create new products or services. BUT PLATFORMS ARE NOTHING NEW. In fact, we ve been creating and using different platforms throughout the industrial era. And they ve always led to the creation of new markets, new industries and, ultimately, new platforms. The electric power grid is a good example of a platform. Before grids became widespread, it wasn t unusual for businesses to have their own power plants onsite. Once ubiquitous, power grids became a platform that allowed the creation of multiple new industries based around the reliable supply of electricity. These included manufacturing facilities and the production of electrically powered devices for use at home and at work. In the digital age, platform usually describes a cloud-based service that comprises digitised business processes, data and infrastructure, with internal elements providing back-end processes and external components supporting devices, sensors, user interfaces, app stores and partner services. In 1998, Google was a fledgling platform: a very good search engine built on niche hardware and software. But by building out its stack with services such as Gmail, Maps, Docs, Voice, YouTube and most recently Allo, and by making its application programming interfaces (APIs) available to developers, Google has become a platform. Third parties use its various components to create new products (or enhance existing ones), which has expanded Google s platform into a layered and highly functional ecosystem.

2 A digital business is a platform business Businesses can develop many kinds of platforms. They can start by optimising their existing IT stack, then look further ahead and adopt platforms that will help them create new digital business models. According to the MIT Sloan Management Review, 1 such transformative platforms have three components (see Figure 1): Platform: hardware, software, networks, partners, business processes, data and technology. Experience: customer-facing processes, decision-making processes, tools and interfaces. Content: information and other consumables like software, online services and other digital products. Content What is consumed? Information Product Product information, price and use details, etc. Digital products, such as e-books, e-saver accounts, movies, software. Experience How is it packaged? Consumer experience Experience can include customer-facing digitized business processes, community and customer input, expertise for informed decision making, recommendations, tools and interface. Platform How is it delivered? Internal External Other business processes, customer data, technology. Proprietary hardware, public networks, partners. Figure 1: The three components of a digital business model Source: MIT Sloan Management Review Reviewing how these components function in your organisation allows you to identify which are both high value and have capacity to spare. By making these assets available and accessible as a platform, you can allow individuals and partner businesses to access and use them to develop an ecosystem of products and services to create new value and extend your platform s reach and utility. Why do platforms matter? The predominant business model is evolving towards a platform-based economy. Already today, the economic value and control that is moving through platforms is significant, at $4.5trillion USD 2. The rise of cloud, mobile and social technologies, and their corollaries such as the widespread adoption of smartphones and social media platforms, videostreaming services, big data and the Internet of Things (IoT) has led customers to expect fast, accurate and personalised service online. At the same time, it is increasingly difficult to anticipate and keep up with the pace of change. Kurzweil s law of accelerating returns posits that we ll see a fold advance in human progress in just 10 years time. PwC postulated one example of this type of change, predicting that the rise of autonomous vehicles would mean a 99 per cent reduction in the number of cars on US roads by The ripple effects of such a development are difficult to estimate, but would include reductions in traffic accidents, commuting time and fuel/energy expenditure, and the size of the national vehicle fleet. Associated industries, like vehicle repairers, insurers, logistics, would see their businesses transformed or even eliminated. The social effects of such a change are even more difficult to anticipate. 1. Weill & Woerner (2013), Optimizing Your Digital Business Model, MIT Sloan Management Review. 2. The Center for Global Enterprise, The Rise of the Platform Enterprise Survey 2105 How can we predict what this might mean for business and how can businesses prepare? Platforms give businesses a way to create a more loosely coupled environment that is agile and open. Able to anticipate change and act, without being burdened with legacy IT environments or tech-debt that inhibit innovation today. 2

3 What does a platform business look like? Perhaps the best way to show the difference between industrial and platform businesses is to compare them side-by-side: Creating experiences Business feature Industrial era Platform era Resources Organisational structure Supply chain Procurement Scale and optimisation Planning and goals Governance and control Product Marketing and sales Brand and reputation Loyalty and advocacy Coordinate internal resources to create a product and sell to large, segmented customer base. Hierarchical organisational structure including functional silos with distinct lines of accountability. Warehouse to manage inventory and delivery to match supply and demand. Rigorous procurement process to drive competitive pricing and control suppliers through contractual agreements. Significant capital assets that drive economies of scale for national and global expansion. Three-year strategic planning horizons. Waterfall project management. KPIs and incentives for specific product, P&L goals. Top-down command and control, policies, contracts. Market research, segmentation, customer-centric design, customers come to you, at the point of sale. Linear path to purchase and sales funnel. Marketing and sales operate as separate silos. Brand is managed in silos thought leadership, content marketing, creative agencies and customer service teams. Loyalty programs, structural and informal lock-ins. Orchestrate a globally connected ecosystem (or community) of producers and consumers in an efficient digital marketplace and app store. Flat organisation with cross-functional teams and an agile, accountable culture. Teams are augmented with bots. Manage community producers and consumers of goods and services pay as they use. Open the ecosystem to a wide range of producers and consumers. Plug and play allows many producers to become suppliers. Transparency drives contestability and innovation. APIs and blockchains act as contracts. Network effect of a vibrant and growing community on the platform. The more buyers, the more sellers, will create virtuous circle. Vision, one-year strategy with continuous agile improvement to meet short-term goals. KPI s to drive community interaction and overall ecosystem profits. Community ratings drive adoption, optimising costs and accelerating decision-making. Transparency drives ethical behaviour. Blueprinting policies into APIs and algorithms provides a second line of defence. Human-centred design, real-time curation of experiences using the ecosystem around the platform, matching producers and consumers at any point in their journey. Non-linear user journey requires a single, comprehensive view of the customer to influence via the right channel and content at the right time, where automation allows for easy purchase. Marketing and design teams work side by side with developers and data scientists to deliver a just-in-time 'digital experience. Always-on experiences creating daily habits to bring people back and encourage them to invite their friends to join the community. 3

4 Thanks to the mass personalisation enabled by big data and pervasive online services, consumers now expect highly curated experiences tailored to their preferences and profiles, and this is driving the economy. Thus, the first step for any business that wants to be competitive in the current environment is to decide which experience it wants to be known for, and then determine how to assemble and curate that experience. For example, the current experience of buying a car is a disconnected series of discrete transactions. The customer visits auto manufacturer websites for model and specification information, to access reviews and test drives online, check insurance and finance sites, car dealership sites and more. Insurance, registration and ongoing maintenance are also handled separately. What s interesting here is that each company is competing for business within their traditional scope. For example, the banks are competing with other lenders for the personal loan to purchase the car. They aim to provide a seamless omnichannel experience for the lending component of buying a car. The real business opportunity here is to launch a platform that allows the creation of a single ecosystem where all these searches, purchasing processes, government processes, car sensing for maintenance servicing and transactions can take place seamlessly. Purchasing a new car: OLD: OMNICHANNEL MODELS Car Comparison Auto Dealer Map Bank Loan Insurance Car Registration Auto Service NEW: Car Purchasing ECO-SYSTEM DRIVER BUSINESS MODEL Figure 3: Silos vs Experiences 4

5 Experience journeys The experience any customer has with your brands, products, services or strategy is the new point of entry to sustainable profitable business relationships. These experiences generate the most valuable information any modern enterprise can possess for any client information on individual preferences. This information makes it possible to create detailed customer profiles describing purchase histories, beliefs, habits and quirks. This matters because the traditional sales funnel models are no longer as useful as they once were. Customers still progress from awareness to purchase, but it s no longer a linear journey there are multiple points of entry at every stage and customers may jump in at any point. A referral to your product could come from almost anywhere, thanks to the multi-dimensional nature of social influence; non-linear paths to purchase; advocates who aren t customers; and the shift to ongoing relationships beyond individual transactions. This also means that postsales services are more important than ever as they ll help shape the customer s ongoing relationship with your brand. This means always-on is more important than ever. Businesses need a new approach to carry this out across a network or ecosystem. Such a shift requires a new breed of talent, including: Digital signallers: who can scour the world of search, social and mobile for insights into online habits and digital body language Marketing traders: individuals who think like investment portfolio managers to determine which channels and segments to invest in and what mix will yield the greatest return Content editors: who understand customers and can produce valuable content across an array of media targeted to individuals at key points along the experience journey Big data sociologists: who can combine use analysis with an understanding of the customers context to ensure you re ready to help in their moments of need or decision Agile technologists: masters of Scrum and design thinking who act as change agents, championing experimentation and working across the enterprise Digital enablers: who will partner with sales, marketing and customer service managers on the front line to co-create and curate experiences for the individuals they re targeting Digital workers: Bots that augment the team, speeding up repetitive processes, learning patterns, and providing intelligent advice. Of course they can only succeed if they have access to platforms that provide a single view from sensors, devices, systems and personal preferences and allow that intelligence to be applied by immediately adjusting messages, product configurations, offers and processes at any stage of the user experience journey. 5

6 Operating in the platform era Businesses must harness platforms to create value through connections and interactions rather than ownership of individual resources. The lines between the organization, its suppliers and its customers are blurring, and traditional business structures must be carefully reviewed to determine if they re still fit for purpose. For example, consider the current Plan>Build>Run model that structures many IT teams. This will be replaced by a Plan>Consume framework, that combines IT and Operational Technology (OT) functions. The new Plan function has more focus on strategy mapping user experience journeys, service integration and policies, and partnering within the business and its ecosystem of suppliers and producers. The focus will be on iterating multiple projects that will evolve into a larger offering, rather than on monolithic projects intended to do everything at once. The Build function has effectively been moved to the Platform. New projects are executed by agile, cross-functional teams that can operate in sprints. Or the team can be completely crowd-sourced by providing external developers with access to the platform. The Run function is now all about managing and optimising consumption of IT services to manage effectiveness and profitability. OWN vs rent Enterprises will need to make decisions about when to connect to an existing platform or build their own. The key driver for these decisions is based on the experience the business wants to own and where it will find its competitive advantage. Broadly speaking, organisations should own business platforms that are core to their business model but can rent platform layers that you integrate to make up the parts. For example, if you re a manufacturer, you may decide that your design system and process is your core asset, and create a platform that makes it available to third parties. It could connect to assets all the way from 3D printers for prototyping to heavy machinery for manufacturing, and provide customers with the ability to design products, create specifications, manufacture prototypes, use analytics to improve design, source manufacturing services and so on. In this new business model you can rent most, if not all, of the platform layers such as API development and access to computer, analytics and IoT systems. You own the design system and the unique combination of integrated platform services that allow you to create a totally new form of value. IT partners This new way of looking at IT has significant implications for partners and partner relationships. In the platform era, partners work with you to co-create a solution rather than developing a solution independently based on your needs. This approach also means partners can develop industry-based stacks, with configurable services, applications and processes specifically designed for different verticals. For example, CSC has worked with its technology vendors to develop a banking platform with essential functionality that can be quickly tailored to meet any individual bank s needs. These new business models can also create new ways to pay (and be paid) for services. Rather than large upfront expenditures on materials, operational models like subscriptions, management retainers and consumption-based pricing are coming into play. The transformation here is the move from one-off projects with one-off fees to ongoing relationships with shared revenue models if projects are running all the time, they need to be supported all the time. 6

7 Platform partner ecosystem Different types of platforms and partners will need to be integrated to create each new business model platform. How you select, integrate, manage and orchestrate services and construct commercial models across this entire ecosystem, to ensure seamless platform performance, will require a new breed of Services management. The Things ecommerce Industry Specific Platforms Business/Scale Platforms API/Cloud Services Infrastructure Communication/ Tablet/Phone 3D Printer Insurance Retail/Supply Marketplace iot Database Hardware Lifestyle & Entertainment Home Security Banking CX/UX/Content Dev Tool Storage Network Transport Fitness/ Wearables Healthcare/Medical Tags & Trackers CRM Intelligent/Bott Automation Compute Fibre Home Automation Manufacturing/Building Healthcare ERP Integration Security Data Centre Industrial/Robotic Automotive/Drone Payments Storefront mcommerce Utilities Oil & Gas Big Data Analytics Sales & marketing Automation Workplace Power Integrating your digital platform Orchestration Platform & Service Consumption Governance & Commercial Management Figure 4: Your Digital Partner Ecosystem Map Transforming Australian and New Zealand enterprises For a strong Australian and New Zealand economy we need to see more platform businesses being created here. A recent survey 3 by The Center for Global Enterprise shows that Australia and New Zealand are behind, with only one significant platform making the list Atlassian. Existing incumbent enterprises need to consider how to enter the platform business. This can be particularly challenging for asset-heavy enterprises, typically with many employees, a hierarchal organisational structure and significant capital and physical assets. These companies need to establish new governance models and policies to support a platform business and encourage high-quality community participation. They must also develop new incentives for managers to drive profit across the ecosystem rather than for specific products and services. A well-known example is GE s launch of the Predix platform for the industrial internet, as the business reinvents itself into a software provider to support the IoT. A risk-reduced transition from old world to new world: CSC s role As a next-generation IT services provider, CSC is committed to helping our clients on their digital journey. To do this we are increasing our capability around the major enterprise software platform technologies, in addition to integration capability to create new services platforms. CSC is co-investing and co-engineering with our systems and technology partners. This means our clients benefit from cloud-based services that are available on demand; can access platforms for both configuration and integration to meet specific needs; and gain the ability to manage workloads securely and seamlessly across cloud platforms and legacy systems. We re also building industry-specific platforms that bake in the most important capabilities and offer bespoke customisation and app stores so they can be tailored to a client s specific needs in banking, defence, energy, healthcare, manufacturing and more. We re collaborating with other industry players differently too. We don t see competitors anymore; we see a shifting array of partners. Clients want solutions and they want to take advantage of hybrid IT to improve their agility and responsiveness. The platform era is here, because your customers are demanding it. And if you don t want your organisation to be left behind, you d better start building. 3. Center for Global Enterprise, Global Platforms Survey,

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