Platform Strategy : Be or Not to Be

Mckinsey released its quarterly briefing study on platform strategy : Five fifty platform plays. Some aspects have to be detailed and some others are missing from my point of view.

Platforms are the favored operating model for 7 of the world’s 12 largest corporations. So why have so few old-line companies followed suit ?

A platform can be a product as car or a plane that share the same hardware platform as stated by Wheel Wright and Clark in 1992. A platform can also be a technology platform as an operating system or a ERP that are the platform of other components which was explained by Bresnahan and Greenstein in 1999 but today's digital platforms are enabling transactions in a multi-sided market allowing consumer and provider to interact like on Ebay, Uber, AirBnB, Facebook, Amazon…

Platforms are characterized by some attributes which are detailed in 2 books "Platform Strategy" from Laure-Claire Reiller and Benoit Reiller and "Platform Revolution" :

1)     Network Effect driven : platform gets more value each time it gets a new consumer or a new provider, as described by the Metcalfe Law which states that the value of the network is proportional to the square of the number of connected users of the system (n2).

2)   Multi-sided business model driven : platforms allow provider, partner and consumer to be mutually attracted and to interact directly without intervention. Each transaction is creating value for the whole platform this allowing also ecosystem monetization thanks to API

3)    Zero marginal cost structure as described by Jeremy Rifkin in "The Zero Marginal Cost Society" : platforms allow customers or partners acquisition cost near to zero, which allows also to capture long tail customer in a friction-less experience, which remove any barrier to entry and it also enable contact-less transaction which is particularity useful in today's world

4) Data driven architecture : platform gather all customer journey data allowing customer experience excellence and improving sales / marketing strategy.

5) Glocal Scalability : platforms are software based and hosted in the cloud , they are can have a global coverage and a local customized touch. Thanks to data, they can automatize process through AI and decentralize operation thanks to API and Blockchain.

Platforms values can be summarize in 3 major benefits :

-      Create or improve a digital value offer allowing complementary revenue stream

-     Create or transform Business Model as described in Odissey 3.14 by Hélène Musikas, Jean-Marc Schoettl and Laurence Lehmann-Ortega or reframe your business model as stated by Peter Wilton

-    Create or improve Customer Experience strategy allowing better customer loyalty, better interaction, better wallet share, better customer conversion or acquisition cost and better revenue stream sustainability also described in Connected Strategy by Nicolaj Siggelkow and Christian Terwiesch

Platforms are first of all a business model approach before being a technology driven approach, they must be the foundation of company transformation or at least a business model innovation. They are the backbone of your company evolution….