February 9, 2018
Question: Should you build a platform business?
Answer: Maybe. Let’s go beyond the ecosystem hype and figure this thing out together.
But first, what is a platform business? I think of it as a company that exposes its capabilities in ways that customers and suppliers (including partners) can embed in their own businesses via digital interfaces. I believe the most interesting platform businesses expose those capabilities through software APIs rather than just through websites or mobile apps. The reason a customer or supplier would use your platform is to accelerate, scale, or streamline their own business.
You know the chart-topping list of platform businesses: AirBnB, Amazon, Facebook, Google, Lyft, WhatsApp, and so on, firms that have disrupted the economics and power of entrenched markets or invented entirely new ways of being.
But there are many others, such as PayPal, Salesforce, Splunk, and Twillio, that have built platform businesses to handle tasks that are vital but don’t differentiate your company, thus freeing you up to focus on what does differentiate you and what customers value from you.
There are hundreds of startups building platforms that radically change the economics to deliver a capability and take a slice of that improvement from every participant. Swift Shift, for example, offers a platform that helps home healthcare agencies recruit and place nurses and caregivers into every available home visit slot.
And now incumbent firms like GE, Schneider Electric, Economical Insurance, Deloitte, and many others are building platform businesses. Should you build a platform business, too?
I’ve been interested in this for 20 years, going back to a report I wrote in 1998 called “Every Company Should Be A Software Company” (sadly, lost in the digital midden). But my interest is ever-new, so together with my colleagues Nigel Fenwick and Martin Gill, we will probe and expose the reality of platform businesses, particularly for incumbent firms in the Global 2,000. We will research and publish a report that will answer three questions:
- Should you build a platform business? (For what differentiating capabilities?)
- Could you build a platform business? (Can you master the dynamics and economics of the software industry?)
- How would you build a platform business? (What is the economic rationale, and what are the resources, structures, and stepwise approach to make building a platform business practical?)
We will bring best practices from chart-topping as well as established and startup platform businesses and apply them to the reality of an incumbent business. If you have a story you wish to share, please reach out on LinkedIn. And check out Nigel’s post here.