Platformication - the new business model

The industry heavy weights are not only developing new technologies every month, or day in some instances, but they are revolutionizing a new concept of platformication (is I like to call it), or simply put - the platform based business model.

But before we get into the crux of it all, there are some principles to be aware of when looking at platform technology. Accenture believe that the following building blocks need to be mastered before truly unlocking the power of platformication:

• Foundation: Cloud services
• Digital glue: API strategy and architecture
• Accelerator: Open-source and reusable software
• Digital treasure chest: Mobile development platforms
• Real time business models: Driving by the Internet of Things
• Containers: Independence and portability of software

By embracing the transformational power of platforms, enterprises across all industries are capturing new growth opportunities and changing the way they do business. Giants such as Amazon, Google, and Alibaba who were born digitally, have long understood the power of digital technologies. However if one really looks closer, most of their groundbreaking innovations are not products or services; they are the platforms on which these products and services are built on, and the business models that these platforms enable.

If you don't believe that platformication is here, have a look at the picture below. It represents the market cap valuation of internet vs platform companies, along with the market cap of unicorns (a venture capital term used to label a start up that is valued at $1bn or more).

Three new rules of the platformication business:

1. Network Effects/Two-Sided Market: Exists when two user groups generate network value for each other, which drive demand-side economies of scale.
2. Distribution Power Law: Must enable scale by allowing others to generate profits in the ‘long tail' of the distribution curve thereby avoiding diminishing returns associated with the traditional value chain model.
3. Asymmetric Growth an Competition: Based on driving the demand of a core market through complementary markets which are often subsidized (or free) to users and which cross industry lines. Asymmetric competition exists when two companies go after market opportunities with very different approached and resources.

What is important to understand at this point is that it's all about the ecosystem that these platforms are housed in. The most powerful platform ecosystems of the digital economy will emerge from global  heavy weights that not only embrace digital transformation of their organizations, but also learn how to unleash the power of platform ecosystems.

The below is a great depiction from a recent Accenture research paper which shows the shift in "asset heavy" to "asset light" business models, and the types of companies that follow each model.

What is clear is that we are at a tipping point for organizations not looking at implementing some sort of platform business model. The same Accenture research showed that 83% of executives believe the digital economy is driving a major shift in power from the supply-side economies of scale to demand-side economies based on the power of ecosystems of customers, partners, developers, and other stakeholders.

The strategic use of platformication will create new business models that will drive unprecedented growth opportunities in this ever expanding digital economy.

Is your company ready for platformication?