Platformation™ - Platform Business Model

Today’s tech giants – Amazon, Microsoft, through its Azure and Xbox services, Apple through its App Store, Uber, AirBnb - operate on a platform-based business model. A well-implemented platform business increases the value delivered to customers while offering a variety of integrated products and services.

Now, more companies are adopting a platform-based approach to business to keep pace with innovation and competitors that operate like tech companies. In the pandemic era and its aftermath, traditional companies have realized that they need to start behaving like digital natives, and this behavioural transformation is essential, not just to thrive, but survive.

Companies are also applying “platform thinking”—an approach that focuses on increasing flexibility and services while providing more value to customers—to transform their business. In fact, organizations can use platform thinking to restructure their tech foundations or optimize their operating model. Yet most attempts at a platform transformation1 fail to reach their full potential. In large part this is because many companies don’t take a strategic and comprehensive view of how building, integrating, or partnering with a platform will affect the business and its technology.

Platforms focus on business solutions to serve clients (internal or external) and to supply other platforms. They operate as independent entities that bring together business, technology, governance, processes, and people management and are empowered to move quickly. They are run by a platform owner, who takes end-to-end responsibility for providing the solution and operating it like a service. Platform teams are cross-functional, with business, IT, and anything else that is needed, such as analytics, risk management, and so on. (Some companies call this a “tribe.”) They work in an agile manner, delivering the solution itself, enabling continuous business-led innovation, and developing and running all necessary IT.

According to consulting firm McKinsey, “A platform-based company will have 20 to 40 platforms, each big enough to provide an important and discrete service but small enough to be manageable. To simplify platform management, it helps to group them into three broad areas: customer journeys, business capabilities, and core IT capabilities”

Many traditional companies are now scrambling to make platforms for this very reason. These traditional companies, which we call “pipelines”, create a good or service and channel it to customers. But as many of the tech giants demonstrate, firms needn’t be one or the other. They can be both.