The Power of a Platform

We receive a lot of inquiries from CIOs and CTOs who want to explore platform development. Many are wondering how they can monetize assets they have more extensively, achieve massive scale, and unlock value cooperatively with partners and collaborators.

They’re right to be thinking in this direction. Platforms and ecosystems that work together to create new marketplaces are not only financially fruitful, they can also provide amazing value to consumers, companies and communities. That’s why we’re continuing to see record-setting demand for infrastructure as a Service (IaaS) offerings, which act as the scalable backbone for new platform builds. Gartner projects 38% growth in IaaS and 24% in PaaS in 2021.?

There’s just one caveat. To build a great platform, you have to go all in, and there’s still a very good chance you won’t succeed.?

The good news: There are actions you can take, variables you can control, lessons you can learn before you begin to increase your chance of success. Here are some of those actions and lessons we've learned building quite a few globally scaled platforms at Google that reach billions of users and millions of businesses.

The exploratory vs. precision model

There are essentially two approaches to platform development, let’s call them exploratory and precision. Some firms have a strategy to find partners, seed the ecosystem and explore what they can do together. I call this the exploratory model of platform development.

Others are more constrained by a finite number of choices and by the finite number of investments they can make, with an emphasis on evaluating trade-offs at every decision point. I call this the precision model of platform development.?

The reality is that most companies will find they need a bit of both models. There is always a level of exploration when you’re partnering in an ecosystem because it consists of variables, such as other companies and technologies, beyond your control. At the same time, you must be incredibly focused and aligned on your mission and vision. And you must consciously weigh the trade-offs and make decisions that support that direction.

Alignment is critical

Alignment is probably the most important factor that will increase your probability of success. I learned the importance of this from my former colleague Tim Noonan. By alignment, he meant the consistency between vision, mission, strategy, structure, operations and resources. You need a singularity of focus, and you need to stick to it—down to your organization's governance and incentive structure.

This may seem intuitive and obvious for companies that build products. In platform development, though, you have the complexity of involving many players that have their own incentive structures, governance and levels of risk. Some companies are public, others private; some are small and local, others large and multinational; some are agile dev shops, some do business in highly regulated industries. You may not even be able to communicate with all of these different players, so it can be that much more challenging to harmonize your intention, strategy and vision. But it’s just as important.

Shared destiny and DNA

What you’re looking for in an ecosystem partner is a sense of shared destiny and DNA. Your companies may have very different cultures, which has its own diverse value. Yet part of ensuring you’ll have strong alignment is having a conversation upfront in terms of what you're trying to accomplish, how committed each company is to alignment and consistency, whether each company has the operations and processes needed to achieve alignment, and whether companies have similar risk tolerances to let the platform have a chance of gaining mass adoption and succeeding. Underpinning all of this is whether each company can tolerate the grueling invisible work it takes to make the platform a success.?

The importance of people and culture cannot be overstated. Recent research from Boston Consulting Group (BCG) found that 70% of large-scale digital initiatives fail, and it’s primarily because of organizational inertia from deeply rooted behaviors.

Scale quickly

To succeed, your platform has to reach a crazy degree of scale. And unfortunately, this is a common breaking point for complex platforms and ecosystems. BCG found these platform ecosystems failed at a staggering rate of 45% during the scaling phase. There are a few reasons for this. One is just the competitive nature of the ecosystem. Similar platforms are competing to scale not only in terms of users but also in talent and partners, driving network effects that result in platforms edging each other out.

There are also the challenges of interoperability and vendor sprawl. Companies tend to shift their technology stacks toward solutions and platforms that work well together to reduce complexity while enhancing productivity and collaboration. Natural walled gardens develop. Lastly, the economics involved in this space mean that regardless of competition, platforms depend on critical mass adoption for survival. If they don’t establish a baseline level of awareness and use, the platform becomes too risky for new users and too costly to maintain.

Be data-driven

You’re probably wondering, then, how do I scale quickly? You analyze your data and make data-based decisions again and again. At Google, we analyze everything. We’re the company that created Google Trends, a kind of global Frequently Asked Questions, and opened it up to everyone. We are constantly iterating, looking for opportunities to create mutual success, and empower more and more data-driven value. ?

Also, you don’t have to be the first to market. You can observe first, and orient your approach based on what you see, scaling methodically, or maybe not at all. A useful framework I've used over the years leading a number of applied technology teams is the OODA loop:

(diagram credit Patrick Edwin Moran)

I consider Google a fast follower. When we started, Salesforce had already started to prove the SaaS model. Amazon had begun to do the same with IaaS. And yet, there was a gap. We thought that gap might be interesting to explore, so we pursued PaaS. Fourteen years later and an immeasurable amount of work and iterations later, our big bet paid off.?

The sweet and the sour

The pain of platform development is going through all the work of creating a custom platform, sustaining the maintenance and operations, going all in and footing operational costs that comprise 85% of your outlay (versus new product development) and then being left stranded without a viable long-term future.

Let’s avoid that scenario. If insufficient conditions exist along the lines of the factors we outlined above, let the market evolve a little more and see if a better opportunity emerges, where your core competencies, vision, partners and market align. And then jump in, all in. Hopefully, you'll get to experience the power of a platform, and the compounded effect of partners and ecosystems aligning to produce unexpected and exciting innovation and disruption.