Thursday, January 7, 2021

"Platform" is Overused, Misapplied and Difficult

Almost no word gets tossed around as a business “strategy” as “platform.” Becoming a platform often is touted as the key to success and a way to create brand value and escape commodity pricing. Compounding the problem are the likely different definitions people seem to use. 

In computing, a platform is any combination of hardware and software used as a foundation upon which applications, services, processes, or other technologies are built, hosted or run.

Operating systems are platforms, allowing software and applications to be run. Devices are platforms. Cloud computing might be said to be a platform, as systems are said to be platforms. 

Standards likely are thought of as platforms by some. 

In other cases components such as central processing units, physical or software interfaces (Ethernet, Wi-Fi, 5G, application programming interfaces) are referred to as platforms. Browsers might be termed platforms by some. Social media apps are seen as platforms as well. 

Platforms, in this sense, are a foundation upon which other things are built or created. That is true enough, but arguably too broad an interpretation to be useful when used with reference to business strategy.  

For purposes of business strategy, a platform earns revenue in a different way than most traditional products have done. Traditional products are sold with a “pipeline” business model, where one firm creates a product and then sells it. 

The platform business model requires creation of a marketplace or exchange that connects different participants: users with suppliers; sellers with buyers. A platform functions as a matchmaker, bringing buyers and sellers together, but classically not owning the products sold on the exchange. 

Perhaps the best models are multi-product e-tail firms such as Amazon, Alibaba or eBay; ride hailing companies such as Uber or Lyft; content exchanges such as YouTube; payment services such as PayPal; lodging exchanges such as airBNB; food delivery services such as GrubHub;  messaging platforms such as WhatsApp or social networks such as Facebook. 

source: Innovation Tactics 

A pipe business creates and then sells a product directly to customers. Amazon is a platform; telcos and infrastructure suppliers are pipes. So you can sell the enormity of the challenge. A connectivity provider would be a platform if it enabled a huge ecosystem of suppliers creating and delivering apps over its platform, in nearly all cases without owning any of those apps, or even earning direct revenue, except in the form of a commission or fee for each transaction. 

Platform creation is not especially easy for a connectivity services provider. If you think about every business as either a “pipe” or a “platform,” then most businesses are “pipes.” They create a specific set of products and sell them to customers. That is a classic “one-sided market.”

This taxonomy illustrates why it is a challenge for any connectivity services provider to become a “platform.” Not only must “connectivity” (the current function) be provided, but also all the other functions that allow third parties to build applications on the platform. Note that the “networking” function is the foundation, but only that. 

source: Adnet 

A platform often creates value because of the scale and scope of the interactions between members of the ecosystem, so the range and depth of interactions might be a better metric for a platform. In other words, the platform is easy to join, easy for participants to use and easy to federate. 

Effective application program interfaces are one aspect. But effective logistics, settlements, data exchange, payments and information on ecosystem participant behavior might be other important aspects for ecosystem transactions and interactions. 

All that suggests any substantial connectivity provider platform would necessarily be built by some entity other than a single telco, no matter how large its operations. Among the reasons: creation of the ecosystem and platform would necessarily require adding roles and functions far beyond connectivity. 

In fact, the obvious paradigm already exists. The internet ecosystem functions with connectivity as an abstraction. It is assumed to exist. In that sense, the internet is the platform. 

What might remain to be created are industry platforms for apps and services with specific communications requirements that possibly are dynamic. Platforms for industrial use cases; healthcare or automated vehicles might provide examples. Or so many hope.

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