Why Every Business Must Now Transform Itself Into A Platform

Value is derived now less from control of assets and management of efficiencies than from optimization of networked productivity. JL

Greg Satell comments in Digital Tonto:

Companies gain competitive advantage today by widening and deepening connections to ecosystems of talent, technology and information. Rather than thinking in terms of capturing markets, managers today need to think about unresolved problems in the marketplace and what resources they will need to access in order to solve them. Competitive advantage is no longer the sum of all efficiencies, but the sum of all connections.
In 2001, Microsoft CEO Steve Ballmer declared war on the open source community. He called Linux a cancer and argued, essentially, that anybody who used open source resources in their was putting their business at risk. He even went as far as to urge the government not to support open source projects.
From Microsoft’s point of view, it was an understandable position. After all, its dominance of the industry was dependent on protecting its intellectual property. Yet a decade later, it open sourced Kinect, one of it’s most popular products ever. More recently, current CEO Satya Nadella declared that Microsoft loves Linux.
It was an startling shift and one the entire industry has long embraced as well. The reason why is simple: In a connected world, open beats closed and nobody can truly go it alone anymore. That’s why every business today must transform itself into a platform that connects to ecosystems of talent, technology and information outside the boundaries of the firm.

Ecosystems Of Talent

In the late 90’s McKinsey declared the war for talent and argued that, in a knowledge economy, having the right people is even more important than having the right strategy or technology.  Recruiting and retaining the “best and the brightest” became a corporate mantra because, it was thought, if you didn’t you wouldn’t have the skills to compete.
Yet the high flying consultants never stopped to ask, “What skills?” Not so long ago, people who could code in HTML, Flash and PHP were valued highly. Today, however, those who can work in Python or Ruby are more sought after. Other skills in specialized or proprietary technologies, like iOS or SharePoint may only be needed for short periods of time.
That’s why talent platforms have become so popular. On Upwork, for example, companies can find a wide range of specialists who can do everything from UX design to Facebook marketing. Toptal offers a similar service, but focuses on “rockstar” developers with highly advanced skills.
Open source communities themselves can be an effective platform to access skills. For example, when Google open sourced TensorFlow, one of its executives told me that it allowed the firm to access great talent across the world. “Since we made the decision to open-source, the code runs faster, it can do more things and it’s more flexible and convenient,” he said.

Ecosystems of Technology

It used to be that if you wanted to access technology, you had to sign on to somebody else’s proprietary platform. You couldn’t just buy an IBM mainframe, you had to adopt their operating system, application software and so on. Microsoft dominated the PC world for years, determining what capabilities you could access. Oracle and SAP played the same role with enterprise software, controlling the ecosystem through the database.
To understand how things have changed, take a look at Mendix, a company which has built a platform to power digital transformation and allows you to pull in resources from anywhere, including Amazon’s AWS, Microsoft’s Azure and IBM’s Bluemix. The interface is so simple and easy, that line managers can fully collaborate with technical staff to create applications.
So, for example, let’s say you wanted to build an application that could monitor machines in your factory, respond to voice commands and verify users. No problem. You can access Amazon’s IOT platform to integrate sensors, pull speech recognition and voice identification from Microsoft and access IBM’s Watson to help you make decisions based on the data.
A decade ago, even the world’s most sophisticated companies wouldn’t be able to access these capabilities at all. Even if they could, it would entail hiring teams of expensive consultants to spend months working to integrate the technology. Now, it can be done so easily that even non-technical teams can participate in designing solutions.

Ecosystems of Information

Amazon is the 800-pound gorilla of e-commerce. In 2015, it accounted for a full 60% of US online sales growth. One of the reasons that it is able to so thoroughly dominate is, as the largest e-commerce company on the planet, it has access to more data on consumer behavior than anyone else.
BloomReach is a platform that gives traditional retailers a fighting chance. It offers its clients high performance technology that rivals Amazon in sophistication and, just as importantly, it allows them to access more data than they ever could by themselves, which empowers them to derive important insights about what their customers want to buy.
To understand how it works, consider the challenges a retailer faces during the holiday season, which can account for as much as 50% of annual sales. Customers ordinarily shop by searching for general terms, such as “bicycle for 14 year old boy.” Ordinarily, a store like Toys “R” Us, could base results according to sales in its stores, but not much else.
However, by being able to access data from across the web, the company can generate landing pages that showcase the most popular brands, colors and styles and those pages can be updated as trends in the marketplace change. In effect, BloomReach helps even the playing field with Amazon.

Competing in A Networked Economy

It used to be that companies gained competitive advantage through optimizing their value chains. By building up proprietary resources and negotiating power with customers and suppliers, they could leverage power in the marketplace. Those incremental gains would then lead to greater competitive advantage, creating a virtuous cycle.
Yet today, it’s no longer about the resources you control, but those you can access and that’s no longer dependent on building market power, but by widening and deepening connections to ecosystems of talent, technology and information. So you can no longer think about your organization as a collection of tangible and intangible assets, you need to treat it as a platform.
Consider that Google, with all of its technological wizardry, open-sourced its machine learning tools to access talent it didn’t have. Or that even tech giants like IBM, Microsoft and Amazon need to distribute their products through open platforms. Or how major retailers like Toys “R” Us, Neiman Marcus and Williams Sonoma need to use BloomReach to learn about their customers.
Clearly, power has shifted from corporations to platforms and that means we have to think differently about how we compete.
So rather than thinking in terms of capturing markets, managers today need to think about unresolved problems in the marketplace and what resources they will need to access in order to solve them. Competitive advantage is no longer the sum of all efficiencies, but the sum of all connections.