The platform revolution is here.
That's what Paul Daugherty, CTO at Accenture, and other speakers at this month's MIT Platform Strategy Summit in Cambridge, Mass., are calling the strategy shift many companies are rushing to make -- from a traditional product service model to one based on a digital platform, or ecosystem.
Indeed, the platform economy has become a competitive playing field, said Daugherty, as companies rush to bolster their IT infrastructure with agile technology to keep up with digital consumers' increasing demands for outcomes -- and to reinvent themselves in the process.
However, moving to a platform business model isn't an easy, one-time capital investment, Daugherty warned; platform builders and participants have to consider five major challenges, or "platform dichotomies," before they make the leap.
Compete or partner?
In any given sector, said Daugherty, there will only be a handful of "winners," and General Electric (GE), with its cloud-based Predix platform, is determined to be one of them. "They've clearly chosen the view where they want to set the tone; they want to compete to be the leader," and they're investing at scale to do just that, Daugherty said.
Not everyone has the capital to do what GE is doing, however. A key decision that companies have to make is whether they want to be the platform and create that business -- for example, GE, Siemens and Philips -- or be a partner and adjust their business models to be part of a platform. Getting a handle on the distinction between the two is important, Daugherty said. "One's not better than the other, but they're very different, and I think a lot of companies now are confused about which they want to be in," he added.
Proprietary or open?
Most companies that pursue a platform business model opt to go the proprietary route, according to Daugherty. "They want a differentiated advantage for themselves; they want to create a platform that's different."
Another option to consider, though, is the idea of open participation, which in a lot of cases is supported by open APIs, Daugherty said. He brought up the example of Predix, which started out as a proprietary platform, but which GE has since developed into a more open model.
This dichotomy is a particularly important question for platform builders, he added: "That decision [of], are they going to go proprietary and try to create competitive advantage and lock others out, or are they going to create open platforms? [It's] very important to think through."
Private or shared?
Platforms are made up of multiple participating companies, all of which provide customers service, said Daugherty. The question that arises from the view of the customer is, "Is that data open to all?" In other words, is the customer able to access all the data from the suppliers, or is it the company that owns the platform that gets access to all that data? Daugherty believes this decision is the most important that companies have to make, and that it will be a "tremendous impediment" for them in terms of garnering participants. "Companies are going to be concerned by ownership, data, data advantage, data differentiation and getting delineation rights around ownership," he said.
One solution to this conundrum that Daugherty proposed -- one that he said hasn't been explored enough -- is the idea of open and private swim lanes. "You need a way to get [everyone] -- from regulators to government officials to competitors -- comfortable with the degree of the private swim lanes versus public swim lanes that you'll offer," he said.
Invest or leverage?
This dichotomy is the financial aspect of competing versus partnering, said Daugherty. It's a question of whether you have the "wherewithal," or the resources and investment capacity, to create a commercial platform that can scale over time. "It's not a one-time investment decision; platforms are about entering a business," he said.
Product service or outcome?
"What do you want to offer to your customers? Do you want to still sell tractors … or do you want to sell outcomes?" said Daugherty. He was referring to measurable results like crop yield, indicative of how the purchasing habits of customers -- both businesses and consumers -- are changing.