Business as a Platform

by Richard Veryard

A business can be regarded as a platform of services. This has important implications for the (variable) geometry of the single firm, as well as the interoperability of multiple firms.

Amazon is a platform. eBay is a platform. (See report on eBay by Dare Obasanjo). Their business model involves providing services that other companies can build upon. Following this thinking, we end up with a stratified business stack, with businesses building upon other businesses. This is the world of the mashup – but it is also the world of serious enterprise interoperability.

Many businesses are trying to turn themselves into platforms. In his post on Disney, Pixar and Jobs, John Hagel argues the point for media companies. (I mentioned this briefly in my post on Disney, Pixar, Apple and Jobs.)

In a world of scarce attention, creators of media products will need to compete with those who re-conceive media products as platforms. What is the difference? Products are designed to be used on a standalone basis – you buy it and you view it or listen to it in the specific way the content creator intended. Platforms are designed to be built upon – they create opportunities for the original creator, third parties or the customers themselves to extend, enhance and tailor the content in ways that the original creator never anticipated. Offered as a platform, content can create far more value than any equivalent standalone product.

Many companies already have a platform, but they are trying to raise it. For example, the traditional role for telecoms companies is as a platform of telecoms connectivity. But it has been obvious for ages that there is no long-term profitability for telecoms from providing services at this level. So telecoms companies have long understood the need to raise the platform, to offer higher-value services. But they are still struggling to formulate and implement this strategic change. Why is it so difficult?

One reason for the difficulty comes from the asymmetry of demand, which generates complexity in the business stack. The height and configuration of each platform is a difficult strategic question: too low and you leave a value deficit, too high and you lose the economies of scale or scope, too inflexible and you can’t respond to change.

And how is the whole stack going to be organized, for whose benefit? This is a key question for asymmetric design.

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