Business Platforms – An Unplanned Revolution

By: Haydn Shaughnessy

The rise of business platforms is changing the rules of competition almost unnoticed. Given a bad name from customer lock-in during the 1990’s the new generation of cloud based platforms are revolutionising business.

Innovation comes in different flavours: incremental disruptive, design-led. Readers here can complete the list. I want only to draw attention to an unplanned and unheralded innovation – new business platforms, an unplanned revolution but a revolution nonetheless.

In the 1990s business platforms had a bad name because they generally stood for a type of business that we innovators don’t and won’t admire – customer lock-in. Think ERP systems. Times have moved on though. The ERP vendors had also moved on as SAP’s Streamwork platform shows. Streamwork is an enabler. It lets partner companies – many of them small and just past the start-up phase like Box.net, co-sell their collaboration technologies with SAP.

So now you have one of the world’s biggest software vendors side by side with some of the smallest. And the business model is pure cloud. Companies don’t have to install Streamwork and won’t be paying for updates. It is software as a service.

These business models and the growth of cloud infrastructure are both permitting and encouraging large platform vendors to refresh how they relate to customers – and indeed which customers they should address. They illustrate a strange democratization at work. a customer of Streamwork could as well be a Fortune 50 global company or a local design shop. And the cost of entry is extremely low. You are not buying a software package. You are paying as little as $10 a month for a service.

But taking the idea of platforms as a revolution further, the success of Apple is almost entirely down to the performance of its apps platform. Yes the iPhone is an iconic design but if the platform had not encouraged and enabled developers, the iPhone would be just another nice phone. Rumour has it Apple has invested in excess of $5 billion in the smooth functioning of its Apps and iTune platforms.

LinkedIn and Facebook are also platforms, both of them pioneering new forms of scale with tens of millions of users and seamless, push button responses to all of them whether they are looking to connect with a friend or search out a possible customer.

I’m constitutionally opposed to gushing about any new development or brand and so it’s true to say platforms have their issues. For one, it looks as though the web is singling out the platforms that will not only succeed but also dominate. There is an unhealthy lack of competition for Facebook and for LinkedIn. The web has a mob-like dynamic which seems to pull people in one direction en masse but that’s hardly the fault of the platform owner.

Leaving aside the rights or wrongs of dominant positions, the reality is a new form of innovation and management is among us. We rightly focus our attention on planned innovations. What to do at the front end, how to ideate, and how to select. But the reality is innovation happens. it is not always intentional. It can even be a muddle. But right now the business platform is a major innovation and its importance will grow as the ease of creating platforms grows with cloud computing.

Companies that are not looking at how to generate strong platforms heed this: your cost base will go up while your competitors’ go down. As the cloud becomes pervasive, the ability to create and aggregate new services at ultra low cost will be a defining moment for business. Without this your ecosystems will crumble. And your customers will see you as a dinosaur. Step 1. Understand the new business platform.