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For the last several months, we at Sonata have been working on our new digital business transformation approach ‘Platformation'. At its core, Platformation is about enabling businesses and organizations to adopt technology backed new business models and drive digital transformation.

While we are just in the process of offering this to proactive customers as of now, it’s been quite exciting for us to see the concept resonate when we look at the world around us. One of our US heads was recently mentioning a range of innovations from Amazon in terms of new services, during a discussion. It struck us that Amazon is perhaps the best example of a company that has embraced the concept of platformation in the true sense.

Our Platformation concept talks about four key dimensions that make any platform based business successful - massive scalability, a partner based ecosystem, open standards and data-driven intelligence. Amazon has been leveraging opportunities on all these counts, and super-successfully too.

Based on Amazon’s relatively recent moves, here are some themes that seem to be jumping out in terms of the kind of opportunities that Amazon has pursued:

1. Ability to enter a new segment in existing markets to challenge incumbents
Recently, Amazon announced the launch of its handmade gift shop that takes on incumbents including established brands such as Etsy. It also announced the acquisition of Wholefoods a few months ago, marking its focus on the grocery segment. Both of these (and other acquisitions) were firmly on the back of the four dimensions of platformation success that I mentioned earlier.

2. Ability to surround a segment to leverage and perfect a current capability
Amazon’s rock-solid logistics capability has always been a big plus. Leveraging it to target food delivery seems quite prominent in its moves over the last few months - from offering delivery for New Seasons Markets in Seattle to a meal kit trademarked “We do the prep. You be the chef” to partnering with Olo - an online food ordering business. It also introduced voice-ordering support for Amazon Restaurants (note the intersection of two capabilities: voice and logistics).

3. Ability to flatten barriers to purchase in a current segment
Based on its data-driven intelligence and strong partner eco-system, Amazon launched a discounted Prime membership for people on government food assistance. Great move to wean people away from both big box grocers and dollar stores. And then there is the provision for teens to use their parents' Amazon account to buy stuff with a workflow for parental authorization. Such an interesting way to take out a barrier in the customer journey!

All the above moves are anchored not only in Amazon's ability to think as a platform business – but they are also clearly enabled by the technology agility that a platform based approach brings. Amazon is also a compelling example of how a company can leverage its technology capabilities to gain value from the larger market, as seen with its offerings such as AWS, AI and Voice enabled solutions.

It is quite fascinating to see how the power of platformation is creating opportunities for Amazon, not just to dominate its existing offerings, but also tailor services that enable it to widen offerings, tap more users and revolutionize the industry.

If you want to explore how your organization might can get started on a platformation approach, take a look at this video to better understand the platformation framework.

The 13th Conference on Web and Internet Economics (WINE) event held at the Indian Institute of Science, Bangalore, in December 2017 threw up some interesting discussions around concepts ranging from the scale effects in Web Search, market and auction mechanism design to pricing of resources in the cloud. Keynote speakers at the conference included Vijay Krishna of PennState, Vijay Vazirani of University of California Irvine, Ariel Procaccia of Carnegie Mellon University and Tim Roughgarden of Stanford University.

WINE has emerged as one of the most prestigious conferences in the field of e-commerce and Internet economics over the past decade, not just due to the high quality of papers presented each year, but also because of the growing impact of Internet economics across all industries. Sonata was honoured to be associated with the event as a Gold Sponsor, along with Microsoft, Facebook and Accenture. The theme at WINE 2017 ties in closely with focus areas at Sonata, with the extraordinary growth of the Internet and technologies further enabled by it such as Cloud, mobile, IoT and Big Data, being important factors shaping our company’s solutions. Enabling digital transformation with next generation technology for business is an important objective of our Platformation approach. Digital platform businesses have created a non-linear growth structure, which allows for free participation of various stakeholders to enter this business model and create value for themselves; as opposed to traditional business models that start from the supply chain at one end and go through a particular flow of business processes to reach consumers. Issues related to massively connected, open, scalable and data-driven systems that were addressed at the conference thus gain immediate relevance to emerging platform business paradigms in this context.

As Sonata CEO, Srikar Reddy spoke at a panel at the event, transforming non-internet businesses into successful digital business is not easy, but highly rewarding. In his talk on the topic, ‘Platformation- the new business paradigm’ he said that while many organizations have now successfully evolved into digital businesses, the real challenge is to find ways for those businesses which still lag on digitization to accrue the many benefits of technology. At the same panel, Dr. Amiteshar Dayal Seth, Managing Director, Accenture shared his thoughts on the ‘AI Framework for Accurate Forecasting of Subscription Based Revenue.’ He spoke about the need for constant learning and challenges involved in accurately predicting the lifetime value of a customer. He also spoke of the need for dynamic programming methodologies and social physics techniques to predict the behaviour of customer groups. Dr. Amit Sharma, from Microsoft Research spoke about ‘designing for the causal impact of online systems,’ where he discussed the challenges in measuring the impact of systems that are built.

The range and complexity of topics discussed at WINE made it abundantly clear that the future belongs to businesses that are able to understand the impact of digital platforms and use them to their advantage. We’re proud that Sonata had an opportunity to associate with the WINE event during its very first edition in India, as such events certainly play an important role in driving thought leadership around some of the most important topics of our time.

The set of 'born digital' companies such as Uber, Amazon, AirBnB, Alibaba have provided lessons in digital disruption to the rest of the world. We live in the digital world where market disrupters are developing platforms that facilitate exchange between the customers and makers, partners or even peers, reshaping industries into interconnected ecosystems.

Digital disruption makes scale inconsequential, it turns assets into liabilities or at best makes them irrelevant, it turns customer loyals into infidels, it upturns every value equation on its head. These are truths that we have seen play out in the last few years.

The Complexities of Digital Transformation

Digital transformation is a complex process; it is an urgent and inescapable journey but without a clear roadmap or definite destination. But a recent Tech Pro Research survey reveals that only 20% of survey respondents said they have a formal digital transformation plan in place, another 60% said they were actively developing one. This means that a majority of organizations are still grappling with their digital transformation roadmap.

With the escalating pressure to adopt digital strategies comes the need to develop a thorough understanding of what the transformation entails, along with its benefits, pitfalls, and how well it's succeeding (or not) for other organizations and industries.

Despite the money spent and resources allocated toward digital transformation, most efforts are seeing abysmal levels of success. According to the report by Couchbase, 90% of digital projects fail to meet the expectations set before them, and are only bringing "incremental improvements." All this is increasing the pressure on IT leaders to continually improve customer experience and productivity at their organizations. There's also money on the line in the future, states the Couchbase report, which reveals that 87% of IT leaders were concerned that their revenues would drop if they couldn't improve the customer experience—the core goal of digital transformation as defined by the respondents.

Born Digital Companies and Platforms

The starting point for digital transformation is to look at what makes 'born digital' companies pathbreaking and successful. Born digital companies adopt a platform-based business model fostering an ecosystem that's most conducive for end-to-end business traction in a hyper-connected world.

What is a platform-based business? Here's the definition: "A business based on enabling value creating interactions between external producers and consumers. The platform provides an open, participative infrastructure for these interactions and sets governance conditions for them."

Platforms are revolutionizing the way we do business. Traditional business models are linear in structure with inputs at one end and output at the other. Unlike the linear mode of generating and consuming value in the pipe model, platforms serve as an ecosystem of value generation and consumption. They create value by tapping into resources that they don't need to own.

The shift from the linear, resource-heavy, producer driven pipe model to a demand-driven, circular networked model is enabling four big outcomes for enterprises – flexibility, scalability, mobility, and availability, through the collaboration of diverse participants.

Platforms— Core Design Principles

Platforms, especially in the digital world, have been powered by a set of technologies such as social, mobility, analytics, cloud, IoT, AR/VR, and artificial intelligence amongst others. Of these, the first four— social, mobility, analytics, and cloud— are popularly referred to as the SMAC stack. When SMAC is compounded with other underlying technology approaches such as PaaS environments, micro-services, DevOps, and automation, true platform based systems can be built.

These technologies yield the basic construct of platforms: three essential stacked layers of infrastructure comprising cloud, networking, applications, content, and APIs; the network layer that facilitates value exchange through social media, marketplaces, and other ecosystems; the data layer comprising analytics, AI, and other refinements; and the enveloping layer of access comprising mobile devices, IoT, AR/VR, and other edge devices.

These layers must be designed to yield the performance characteristics of a platform. According to an HBR article, by building a digital platform, other businesses can easily connect their business with yours, build products and services on top of it, and co-create value. This ability to plug-and-play is a defining characteristic of 'platform thinking'. Further, the success of a platform strategy is determined by three factors:

A. Connection: How easily others can plug into the platform to share and transact

B. Gravity: How well the platform attracts participants, both producers and consumers

C. Flow: How well the platform fosters the exchange and co-creation of value

Platforms are not just stacks of technology layers. Platforms require design thinking as opposed to systems thinking.

The differentiating design principles of a platform could be summarized as:

1. Designed to leverage 'Intelligence' by capturing data and re-populate the platform and gain massive insights.
2. Designed as 'Open Networks' enabling a seamlessly connect with the key stakeholders- customers, vendors, etc.
3. Designed as highly 'Networked Systems' that facilitates them to be hyper-connected
4. Finally, by virtue of the above 3 elements, designed to build a 'scale as you grow model' and be relevant to the market demands.

Sonata Software's thought-leading proposition to apply these principles to accelerate the adoption of digital platforms to result in digital transformation is called platformation. Through various global engagements, Sonata has been able to demonstrate and unlock value by implementing the platformation framework to achieve the successful execution of digital transformation projects across various industries.

Platformation— Under the Hood

We said that platforms are not just stacks of technology layers. That said, building digital platforms requires bringing together various technology platforms and ecosystems together.

According to Gartner, a digital business is supported by technology platforms in five areas:

• Information systems platform — Supports the back office and operations, such as ERP and core systems.
• Customer experience platform — Contains the main customer-facing elements, such as customer and citizen portals, multichannel commerce and customer apps.
• Data and analytics platform — Contains information management and analytical capabilities. Data management programs and analytical applications fuel data-driven decision making, and algorithms automate discovery and action.
• IoT platform — Connects physical assets for monitoring, optimization, control, and monetization. Capabilities include connectivity, analytics and integration to core and OT systems.
• Ecosystems platform — Supports the creation of, and connection to, external ecosystems, marketplaces, and communities. API management, control and security are its main elements.

Together with best practices and domain IP in various verticals, Sonata's platformation framework/methodology incorporates the above concepts along with the design principles of digital platforms. This helps enterprises navigate digital transformation challenges and accelerate digital transformation outcomes.

Digital platforms built using the Platformation framework embodies and delivers the following capabilities and functionalities.

1. The technology environment, application build approach, and the IT operations model work together as one system and to a very different rhythm.
2. Integrated stacks to common standards on the cloud in a highly secure environment, with auto-scaling is the norm for infra.
3. Applications are designed as micro-services, with multi-device and channel-reach capability, with Big Data, AI, IoT, and Telemetry-enabled functionalities for intelligent contextual transactions which can be easily integrated and orchestrated within this standard environment.
4. Operations approaches include full automation with continuous development, integration, and deployment capability for fast, flexible feature releases, as well as in-built operations analytics that help platform self-learning that measure, control, and optimize system performance.

Platformation— Deployment Approaches and Engagement Models

Sonata's track record of engineering SaaS & PaaS systems for leading ISVs, serving digital transformation needs of Fortune 500 enterprises using platforms, and the investments made in building and operating its own mission-critical platforms to support industry-leading businesses underpins its capabilities to deliver platformation.

Platformation is delivered through a set of two skillsets that are at the core of Sonata's capabilities: engineering excellence and operations excellence.

• Engineering Excellence is built on Sonata's product engineering mind-set, distributed agile & rapid delivery tools, and own IP assets in DevOps and Automation areas. Operations Excellence adds value – built on Sonata's ability to design cost-optimized cloud operations, tool-based operations management suite, and its extended security compliance & business continuity services.

In terms of execution approaches for Platformation, Sonata has identified three paths to delivery:

• Deploying industry-specific digital business platforms— An end-to-end business platform approach through industry-specific cloud platforms-
• Deploying industry standard horizontal platforms with added functionality— Popular horizontal platforms on leading ISV stacks that a business is already invested into, can be deployed if time, cost, and risks need to be moderated in going platform, especially with specific business process areas.

Engineering custom digital platforms that are scalable— A very unique set of business features and the willingness to invest time and money in setting up a differentiated platform may mandate an approach where a significant part of the platform is custom-built.

Differentiating features include:

• Sonata Ready — is a platformation approach meant to maximize the speed of your digital agenda with Sonata's pre-built, end-to-end, industry-specific platform solutions. Rezopia is the Sonata platform for digital travel, Brick & Click is a retail industry platform, and the Modern Distribution Platform is Sonata's industry solution for the supply chain and distribution needs of retail, consumer, and industrial goods companies. These solutions come with pre-integrated omnichannel commerce, mobility, analytics, and ERP and pre-built, best in class, industry segment-specific business functionalities that can be deployed on cloud and adopted as the core of a fully refreshed digital IT backbone.​
• Case Study: — Successfully deployed the Rezopia platform for an Australia based Rail Network, which deployed an omni-channel booking backbone cutting across the web, physical counters and call center.
• Sonata Accelerate — is an approach that leverages leading ISV platforms such as Microsoft Dynamics 365, Microsoft Cortana Intelligence, and SAP Hybris omnichannel commerce platforms for digitization. Sonata consultants assess, implement, and support, these platforms to help build and deploy specific digital business processes. This route is used to leverage compatibility with existing stacks and to be ready to leverage further enhancements that these ISVs will make to their platforms in the times ahead.
• Case Study: — A US-based fashion brand successfully leveraged the Dynamics platform and created a seamless omnichannel experience.
• Sonata Custom — is the approach where customers can leverage platform engineering skills to create a custom-built platform that is scalable. Uses platform engineering skills in Digital, Agile, DevOps, and CloudOps, Sonata's IP-led frameworks and methodologies to build platforms that are highly customized to specific business needs and functionalities. This approach also enables businesses to limit their licensing costs even as they scale as they own the IP. Sonata also white-labels its proprietary industry and technology platforms when needed, to boost the speed of custom development programs.
• Case Study: — A US-based travel company innovated on membership-based business models, increasing bookings by 200%, and scaling service 6X to 120,000+ members.

Sonata has established customer-specific centers of excellence (CCoE) in governance and value co-creation with a charter to enhance domain and technical knowledge, knowledge management, innovation, process and capability, and reusability.

3 Phase Customer Value Model

Sonata has also invested in the future through acquisitions that are accretive to the Platformation value proposition. Sonata's acquisition of Interactive Business Systems Inc (IBIS) a supply chain platform running on Dynamics AX solution; Rezopia- a cloud-based travel industry platform; and Halosys an enterprise mobility platform— these acquisitions in conjunction with Platformation act as accelerators for digital transformation.

Platformation— 'Real'izing Digital Transformation

Platformation ushers in true digital capability and transforms the traditional enterprises to operate like 'born digital' companies like Amazon, Netflix and the host of 'click' companies which have created a very successful digital business in a very short span of time. Sonata's Platformation approach for digital transformation clearly unravels the digital transformation complexities and takes on a systematic approach to building digital platforms.

Many a digital transformation project fails to deliver despite the copious use of modern technology components. In an interview with Dataquest, Sangeet Paul Choudary, one of the leading experts in platforms theory in the world said, "A lot of executives see digital transformation as ticking the boxes on setting up a digital presence. It completely misses the point, you are just changing the interface from physical to digital. Instead, digital transformation involves a fundamental redesign of the business model. It is important to pursue digital transformation with a clear architecture of what the digitally transformed business should look like."

This means that digital transformation requires rigor, both in business design and in technology architecture. Add to that the need for speed. Sonata believes that the right digital transformation partner should have the combination of industry-specific domain expertise, platform thinking approach, engineering skills, IP-led frameworks and solutions, industry-ready platforms and accelerators, and powerful engagement models. Sonata's Platformation approach has delivered on these fronts.

Lastly, innovation is deeply tied to people and culture. Says Srikar Reddy, Managing Director, Sonata Software, "Our value proposition lies in the breadth of platforms we offer, our deep industry expertise, quality and processes, proven platformation record, deep client commitment, and global reach. The key to our success so far has been our team, whom we have nurtured with regular exposure to newer technologies, evolving business scenarios, cross-functional expertise, and continuous exposure to clients to assess the business impact of solutions delivered and design thinking as a core approach to execute on platformation. Our flexible working style encourages ideation within broad boundaries and we embrace and promote innovation and agility with deep-rooted corporate values."

With the recent controversy involving Facebook and Cambridge Analytica, there is increasing pressure on companies that are dealing with data to deliver superior business and customer outcomes. Not just social media networks, but any company in the process of digital transformation. This includes firms leveraging new technologies and platforms, such as drones, AI and autonomous vehicles, to deliver value.

The pressure is even more intense on companies operating in countries in which there are no strong digital policy frameworks in place. As a result, the ambiguity around decisions is greater and the impetus for positive action is less.

Based on our experience working with companies and stakeholder groups, we recommend the following five steps to leaders who are driving digital transformation efforts or working with Fourth Industrial Revolution technologies. These will keep them on the right side of any potential ethical issues related to new technologies.

Don’t assume that customers know what they are signing up for
Whenever customers use a free service, the terms of agreement are written in a way that they don’t necessarily understand. Because they want to use the service urgently, they may accept the terms and conditions without reading them. Even if they do read the terms, the legal language is not clear or relatable to the average person. But when things go wrong, it is areas such as this that come back to haunt leaders.

Give careful thought to helping your customers understand what they are signing up for. Most importantly, use simple and relatable language.

Invest heavily in ethics training
Every technology company needs to do this. If you are a multinational company, employees should be made to understand the multiple cultural contexts and associated sensitivities. In a rapidly changing technology world, employees need to be extra sensitive to ethical concerns arising in different ways, whether culturally, legally, or simply through perceptions.

Multinational companies can leverage their diverse workforce to create peer groups for developing an ethics framework. This could then be used to educate employees in multiple geographies and business contexts. Companies that have a homogenous workforce but are working with clients in other countries, or companies whose products and services are used by customers across geographies, should take this aspect seriously in order to avoid problems at a later date.

Embed ethics in your design phase

In this new operating context, leaders need to think about how their products and services will affect individuals, organizations and even societies. Being ethical by design is important. This means anticipating in advance the values and ethics of how your products and services will be leveraged by different stakeholder groups. Many of these cannot be predicted in advance, arguably, but certain actions, taken early enough, can mitigate their impact.

During the design stage, it is also important to involve diverse stakeholder groups who may not be direct beneficiaries of your products and services, but who may be able to expand your horizon and offer a perspective you might not previously have encountered. Companies often leverage lead users to understand how their products can be used in different ways. Now, they also need to leverage diverse stakeholder groups to understand how their product or service can potentially be misused or abused.

Don’t treat your legal team as merely a support team
The days when legal teams were a support function is over. Legal teams are becoming an integral function of every technology organization. When the driver of a ride-hailing service misbehaves with a passenger, or when a resident near Heathrow airport flies a drone near the runway, or when trolls abuse a social media platform, the relevant companies must respond immediately, with appropriate language and action.

Leaders need to understand this shift, and build legal teams that can work in tandem with design and product management teams. Constraints are opportunities for innovation, as we have seen in product development in many different fields. Legal teams present ethical and value-based constraints, which can help product developers keep in mind the implications of what they are making.

Collaborate with policymakers and shape policy frameworks
While some countries and their leaders have proactively put policy frameworks in place to accelerate adoption of new technologies and address privacy concerns, many countries lag far behind. Technology has no borders, and end products and services will be used by citizens everywhere. If you operate in a country with no policy frameworks, it is important to collaborate with key policymakers, raising awareness and a sense of urgency.

As a technology leader, it is in your best interests to have a proper policy framework in place. It will help your business as societies and markets evolve. On a wider level, it is how you collaborate with various stakeholders to shape the ecosystem that will ensure fair play.

To succeed in this new operating context, leaders should adopt a systems approach. Rapid changes in technology, and the scale of their impact, mean business has greater responsibility for protecting customer interests.

Finally, a recap of the five steps that leaders can take to ensure everyone wins from new technologies:

- Be transparent, simple and fair with your customer terms

- Design ethics into your product or service

- Invest in building a common understanding of ethical issues within your organization, especially when working across different geographies and cultures

- Use legal and policy frameworks proactively, as part of your business approach, not just in crisis management

- Shape your ecosystem to keep the best interests of every stakeholder in view

Originally published on Weforum

Artificial intelligence (AI) relies on big data and machine learning for myriad applications, from autonomous vehicles to algorithmic trading, and from clinical decision support systems to data mining. The availability of large amounts of data is essential to the development of AI. Given China's large population and business sector, both of which use digitized platforms and tools to an unparalleled extent, it may enjoy an advantage in AI. In addition, it has fewer constraints on the use of information gathered through the digital footprint left by people and companies. India has also taken a series of similar steps to digitize its economy, including biometric identity tokens, demonetization and an integrated goods and services tax.

But the recent scandal over the use of personal and social data by Facebook and Cambridge Analytica has brought ethical considerations to the fore. And it's just the beginning. As AI applications require ever greater amounts of data to help machines learn and perform tasks hitherto reserved for humans, companies are facing increasing public scrutiny, at least in some parts of the world. Tesla and Uber have scaled down their efforts to develop autonomous vehicles in the wake of widely reported accidents. How do we ensure the ethical and responsible use of AI? How do we bring more awareness about such responsibility, in the absence of a global standard on AI?

The ethical standards for assessing AI and its associated technologies are still in their infancy. Companies need to initiate internal discussion as well as external debate with their key stakeholders about how to avoid being caught up in difficult situations.

To read the full article: Click here

This blog was originally published in the World Economic Forum.​

Born digital companies that have created platform-based business models such as Facebook, Uber, Amazon, Airbnb, etc. have become tremendously successful and created immense value. Accustomed to the new enhanced "digital way of life", consumers are less tolerant towards user experiences that do not offer interactivity, convenience, and compelling pricing models

The key to these successful digital businesses is their platforms that are open, scalable, connected and intelligent. They are using technology to channel consumer frustration into inspiration by offering their consumers an opportunity to create, exchange and engage with fellow participants. Harnessing data from their platforms, digital businesses are disrupting existing business models; most traditional organizations are now abruptly subjected to an unanticipated competitive clash. The non-platform companies have realized the far-reaching implications of the platform business models and are defending their market share by creating their own platforms.

The charge is led through "digital transformation programs" but, surprisingly, most companies struggle to defend their turf and transform themselves. While most leaders are now well aware of what needs to be done, major challenges occur during the implementation and integration of platform business models into the existing organization.

Fundamentals of digital platforms are usually well understood

The leadership in most established companies is fully aware of the vast opportunities that digital platforms can offer. As part of their "digital transformation" initiatives, they have set priorities around better customer understanding, enhanced proximity, exceptional customer experience, and new service/product offering.

Beyond technology, the leaders also understand the need for transforming their organizations and relinquishing obsolete business practices, processes, and models. They are transforming their organizations, bringing in agility, speed, flexibility, and innovation akin to their tech counterparts.

To achieve this, leaders recognize key transformation levers:

Why success is still elusive?
Armed with the realization of limitless possibilities of digital platforms and their own aspirations for change, the transformation journey should have been relatively easy. Astonishingly, most companies fail to successfully translate their aspirations into reality fast enough.

The answer lies in organizational "myopia". It is the rendition of the organization's bold objectives into "business as usual" initiatives. Most companies create end-to-end processes with clearly defined roles and responsibilities to ensure that strategy, product/service development, distribution, and sales are delivered. It is this very operating model that fosters a short-sighted mindset and a culture of compliance to rigid processes and rituals focused on established ways of working. The moral justification for these rituals is usually deeply rooted in success stories stemming from previous periods of growth. It makes it all the more difficult to propose new alternatives – however logical and successful they may be elsewhere.

Traditional companies who now want to build similar digital businesses based on platform models face the difficult situation of running two different business models and processes concurrently; they must run the existing declining business model while simultaneously conceiving and growing a new platform based business. Even a company like Apple has faced a similar dilemma with its music business. The entry of Spotify and Google into the music industry has completed the shift towards a subscription-based model. Apple had no option but to give up its iTunes business in favor of Apple Music, its subscription business.

Why is it so difficult to implement what is common knowledge?
The main issue, in a nutshell, is the effect of mandated myopia which thwarts the effective implementation of new platform-based businesses

Applying existing organizational structures and operating models to new platform business – The setup of digital labs to design new products and experiment with digital platform models is now fairly common practice across all industries. These initiatives are incubated as start-ups and rightly run quite independently from existing businesses. The challenge occurs when concepts successful in a lab setting are being applied more widely within the organization. The tendency is to run new concepts as one of the business units under the existing organization structure. The "new" quickly succumbs to the weight of the existing organizational rituals and processes

Well-meaning key performance indicators - Another convention is to measure the success of new platform models using the same yardstick applied to existing businesses - especially in terms of revenue. New models often appear to be unviable business ventures during the initial gestation period leading to quick disappointments and consequent actions that are short-sighted.

Triumph over "organizational myopia"
Translating new platform concepts and aspirations into reality entails overcoming organizational myopia and the creation of capabilities, systems, processes, structures to translate concepts into a thriving business.

Start with organizational values, culture, and mindset – As digital transformation often requires fundamentally changing customer engagement and current business models it also demands a deep examination of the existing organization. This may require the frightening task of identifying and adopting a new set of values to drive organizational culture and behavior.

Measure of success - The measure of success should be aligned with how a company is able to remove obstacles and create value for end customers by quickly adopting new concepts. While not immediately a revenue driver in terms of new customers, new concepts completely change the way the company can interact with customers and open the way to new business models on their digital platform.

Operating model, structure and roles - Rather than forcing the integration of successfully incubated platform concepts into the existing organization, many successful transformations concentrate on ring-fencing the old business and letting new business models and leadership expand. The key to success is the identification and enablement of people who have the vision and can translate an idea into a business. The market now has many successful examples of such transformations. When Microsoft acquired Linkedin, it could have been integrated in the overall portfolio as just another HR solution. Instead, Linkedin was left to keep its own culture and promote digital business models closer to its own core.

In the end, such defining decisions will be what it takes to prevail in the digital era!

1. Integrating technology into business and implementing a modular organization structure and operating model – Creation of new digital platforms must eliminate split between business and IT organizations. Technology becomes the backbone that drives business transformation and new business models. It requires the integration of business and technology teams. This seamless coupling of business and technology is exactly the unique differentiator of many born digital companies that enables them to drive platform innovation.
   
   Monolithic structures and silos must be dismantled to create modular empowered business clusters that are organized in a tech products model. This has the benefit of enabling agility and releasing organizational innovation. Platform companies are typically organized into smaller business clusters that enable multidisciplinary individual teams to work on creating successful digital platforms.


2.  Adopting a flexible technology architecture –  The spread of new technologies and architectural styles (e.g. microservices) creates new opportunities. In the past, large enterprises built complex monolithic systems which were cumbersome to manage both development and operations. New technologies allow companies to execute the modernization of legacy systems through the adoption of microservice and API architectures. This allows them to fragment monolithic systems into smaller logical components that are easier to manage and facilitate creating faster change to business models and processes aligned to market needs. Smaller teams are now dedicated to distributed components without the heavy dependency on large projects and associated release cycles enabling them to continuously drive platform innovation.

Why success is still elusive?

Armed with the realization of limitless possibilities of digital platforms and their own aspirations for change, the transformation journey should have been relatively easy. Astonishingly, most companies fail to successfully translate their aspirations into reality fast enough. The answer lies in organizational "myopia". It is the rendition of the organization's bold objectives into "business as usual" initiatives. Most companies create end-to-end processes with clearly defined roles and responsibilities to ensure that strategy, product/service development, distribution, and sales are delivered. It is this very operating model that fosters a short-sighted mindset and a culture of compliance to rigid processes and rituals focused on established ways of working. The moral justification for these rituals is usually deeply rooted in success stories stemming from previous periods of growth. It makes it all the more difficult to propose new alternatives – however logical and successful they may be elsewhere. Traditional companies who now want to build similar digital businesses based on platform models face the difficult situation of running two different business models and processes concurrently; they must run the existing declining business model while simultaneously conceiving and growing a new platform based business. Even a company like Apple has faced a similar dilemma with its music business. The entry of Spotify and Google into the music industry has completed the shift towards a subscription-based model. Apple had no option but to give up its iTunes business in favor of Apple Music, its subscription business

Why is it so difficult to implement what is common knowledge?

The main issue, in a nutshell, is the effect of mandated myopia which thwarts the effective implementation of new platform-based businesses

Applying existing organizational structures and operating models to new platform business – The setup of digital labs to design new products and experiment with digital platform models is now fairly common practice across all industries. These initiatives are incubated as start-ups and rightly run quite independently from existing businesses. The challenge occurs when concepts successful in a lab setting are being applied more widely within the organization. The tendency is to run new concepts as one of the business units under the existing organization structure. The "new" quickly succumbs to the weight of the existing organizational rituals and processes

Well-meaning key performance indicators - Another convention is to measure the success of new platform models using the same yardstick applied to existing businesses - especially in terms of revenue. New models often appear to be unviable business ventures during the initial gestation period leading to quick disappointments and consequent actions that are short-sighted.

Triumph over "organizational myopia"

Translating new platform concepts and aspirations into reality entails overcoming organizational myopia and the creation of capabilities, systems, processes, structures to translate concepts into a thriving business.

Start with organizational values, culture, and mindset – As digital transformation often requires fundamentally changing customer engagement and current business models it also demands a deep examination of the existing organization. This may require the frightening task of identifying and adopting a new set of values to drive organizational culture and behavior.

Measure of success - The measure of success should be aligned with how a company is able to remove obstacles and create value for end customers by quickly adopting new concepts. While not immediately a revenue driver in terms of new customers, new concepts completely change the way the company can interact with customers and open the way to new business models on their digital platform.

Operating model, structure and roles - Rather than forcing the integration of successfully incubated platform concepts into the existing organization, many successful transformations concentrate on ring-fencing the old business and letting new business models and leadership expand. The key to success is the identification and enablement of people who have the vision and can translate an idea into a business. The market now has many successful examples of such transformations. When Microsoft acquired Linkedin, it could have been integrated in the overall portfolio as just another HR solution. Instead, Linkedin was left to keep its own culture and promote digital business models closer to its own core.

In the end, such defining decisions will be what it takes to prevail in the digital era!