There is no doubt that some of the most successful business models in the world today are platform-centric.
From the manufacturers moving beyond production into digital services, and service providers radically transforming the way their assets are delivered and experienced, through to the development platforms that are completely changing the nature of software development – technology platforms are the foundation for agile and revolutionary business models. They are fundamentally changing how companies operate, with the platform users representing the point of origin for the product or service.
Today, we see entire ecosystems of products and companies built on top of other people’s technology. New value is being constantly created and efficiencies realized, and as more and more users participate in ecosystem interactions, the value of the ecosystem itself increases. New eco-structures of business opportunity are being created with benefits not only for the big players, but also for small and medium-sized businesses. And indeed, whenever I talk to customers – regardless of their size or industry – about what they are doing, these days the phrase ‘becoming a platform’ keeps coming up.
Redefining the Value Chain
So what’s the beauty of the platform model? Platforms can bridge whole industries, allowing companies to reach entirely new partners and communities. Where products have mere features, platforms have communities. More than a common value chain, the platform creates an entire ecosystem around itself.
Today, companies don’t drive their competitive advantage with the software or applications they run, but with the way they can connect, combine, and recompose their digital assets and capabilities into new products and services. They are no longer vertically owning everything end to end, but plugging in to different pieces of the value chain to deliver a new product or service to the consumer. The key is to combine the right technologies to create the right platform for your individual business needs.
APIs: The Enablers of the Networked Economy
One essential ingredient of the platform economy, therefore, is found in the application programming interfaces (APIs) that allow providers to plug their products and services into the platforms. APIs are a crucial first step, providing the means to share, connect, and extend services and capabilities and thus break into the platform world.
As a matter of fact, APIs are not new inventions. What is new is the framework of the digital economy and, in particular, Big Data. APIs are the interfaces that enable the networked economy, and they have also become an essential resource in bringing value to data, whether it’s structured or unstructured. The rapid rise and development of artificial intelligence and machine learning capabilities mean that we now have a wealth of APIs. They can help explore and transform the huge volumes of data that come with the Internet of Things and Big Data into a usable format to provide valuable insights.
For example, cognitive APIs based on powerful artificial intelligence allow developers to unlock the value of unstructured data to quickly and easily create applications and services. Sentiment analysis APIs, for example, enable us to explore and better understand the unstructured data from social media. And the resulting structured data can be exposed via APIs to enable content reuse and create new products and services.
Platforms as the Foundation for Disruption
Which brings me back to the question of products versus platform. While products do not often offer disruptive value in the long term, platforms do. Sustainable platform technology provides features and capabilities that companies can later bundle and incorporate into their products. Rather than the individual products built on top of it, it is the strength and sophistication of the platform that form the basis for a company’s ability to disrupt and dominate a market.
There is no doubt that product-first companies will continue to exist. Many of them will be profitable, and some will even turn entire industries upside down. However, I believe that the companies that are most likely to be successful in the long term are those that start with constructing a platform and then turn its features and capabilities into products, services, and even marketplaces. This does not mean they have to build it themselves – teaming up and joining forces with other experts is, as I explained previously, a key element of success in the digital age.
The best companies will come up with a foundation for other innovators – customers, partners, competitors, or frenemies – to build their own products and marketplaces on top of it. Today, it is no longer about just selling your product. It’s about adding value and building and engaging a whole new ecosystem – so strive to be the platform, not the product!
This story originally appeared on Business Trends on the SAP Community.