Unlocking new growth with a platform approach

It’s no secret that COVID-19 has dramatically increased consumers’ appetite for – and reliance on – digital technologies. Indeed, data shows that in a matter of about eight weeks between March and May of this year, our society leapt forward five years in digital adoption.

This is an unprecedented transformation, and one that we’re seeing every day at Northwestern Mutual. Like many other companies, we were already in the midst of a digital transformation of our own when the onset of COVID-19 accelerated the timeline. In our case, we achieved our year-end digital adoption targets for clients and advisors by August.

This kind of dramatic digital evolution is an exciting, challenging – even fun – opportunity for CIOs leading organizations that manufacture products. And since the pandemic began, I’ve reflected a lot on how consumers’ new expectations will continue to transform how we do business.

From Product to Platform

Of course, not all companies sell products. Some create the marketplace itself, and in recent years, platforms have enjoyed a meteoric rise. Companies like Amazon, Apple, Microsoft, Alphabet and Facebook dominating the S&P 500. Revenues at Airbnb are now higher than Marriott. A content aggregator like Facebook generates more revenue than a content creator like Disney. In 2019, platform companies alone drove 20% of the S&P 500’s net income, while representing just 5% of the companies listed. This means, of course, that traditional product-based companies still represent 95% of the S&P 500. But for that cohort, the potential growth that could be unlocked by shifting toward a more platform-oriented model is alluring.

So, here’s the relevant question for a C-suite leader of a large incumbent product model business: do you toss out everything you’ve achieved to become a platform-based model in the hopes of appealing to a wider variety of customers? Or, do you stay focused on manufacturing the best-possible product for your target market consumers?

Not an Either/Or, but a Both/And  

To me, strong platforms and products are like peanut butter and chocolate: two great things that taste better together. We all must work to deliver exceptional products and integrated, digital ecosystems to meet the needs of a broader range of customers.

If you lead a company that manufactures an excellent product that is beloved by your customers, and your organization has competed well with your traditional peers for generations, you might believe that there is no need to disrupt your company. “If it ain’t broke, don’t fix it,” so to speak. Here’s the problem: the list of untraditional competitors that platform organizations have put out of business is notable—and growing.

Increasingly we are seeing platform-based organizations accumulating market share in more “traditional” industries, from manufacturing to financial services. Furthermore, consumers want companies to understand and predict their preferences as accurately as Netflix’s recommendations or purchase products as seamlessly as their experience with the Amazon app. Companies with established track records delivering top-of-the-line products to their customers must maintain that core competency, while also layering in integrated, digital ecosystems to meet the needs of a broader and evolving set of potential customers. On top of that, leaders must continuously look outside their industries and be vigilant to remain relevant while embracing “platform thinking” to grow their organizations.

Easier said than done, right? Indeed, there are many instances of platform models that didn’t pan out. But it’s not impossible, and the return on investment can be significant. Consider Apple. Steve Jobs and Steve Wozniak didn’t set out to build a platform – they wanted to build an exceptional and differentiated personal computer company. But as the company evolved, they leveraged their lead in electronics to also construct a platform for consumer experiences. Today, while Apple sells phones, smart watches and tablets, they’re also competing to be the container for great app experiences created by outside developers, designers and organizations.

The Platform is the Product, Too

Apple’s strategy is a savvy model for all incumbent companies to consider: take your flagship product and build an ecosystem around it. Northwestern Mutual clearly didn’t set out to be a platform. Our goal has long been to manufacture and sell the best insurance products, and we did it. Our permanent life insurance product is world-class and has been fundamental to our success over 163 years.

But we also recognize the need to go beyond our core products. Today, we’re building a financial planning platform that integrates everything clients need to see a clear picture of their financial situation and a roadmap for their journey to achieve their financial goals.

Along with our own products, our digital ecosystem seamlessly integrates third-party accounts like credit cards, college loans, investment accounts, home mortgages and more to help clients understand the progress they’re making to achieve financial security. And when our advisors see opportunities to integrate insurance or investment products to help clients meet their goals, they suggest possible solutions. Ultimately, our platform is about giving clients the confidence that comes from knowing where they are and where they’re going financially. Isn’t that what we all want from a financial institution?

The environment today is target-rich for technology leaders at incumbent organizations to deliver value. They can help retire legacy tech debt, bolster reliability and stability, automate processes, enhance cybersecurity protections, integrate disparate apps and tools, and develop more elegant customer experiences. All of these are critically important. However, the most successful tech leaders also realize their opportunity to drive the future growth of their organizations. To me, your best opportunity to ensure everyday relevance is to excel at both models: delivering exceptional products along with always-on, digital platform experiences.

If you’re a CIO, CTO or tech leader, I’m interested in knowing: where are you investing your time and resources? How are you balancing the need to perform and transform? Please let me know.