A successful platform business model, built on an infrastructure that connects producers and consumers a la Uber or Airbnb, hinges on integration -- and not just technology integration.
The C-suite, particularly the CMO, CEO and CIO, also need to work in tandem to get this type of digital business model off the ground, according to Sangeet Paul Choudary, founder of the think tank Platformation Labs and a co-chairman of the MIT Platform Strategy Summit.
Digital business models need a well-integrated, flexible technology stack to collect and analyze data -- the CIO's mandate. They also require a "network of participants" to create and consume the data (which requires the active participation of the CMO), and a well-governed "ecosystem" to ensure accurate data gets to the right person at the right time (which requires high-level guidance from the CEO).
In this SearchCIO video, filmed at the recent Platform Strategy Summit, Choudary explains why C-suite collaboration is key to a digital business model's success, and he describes why the combination of long-term planning but a short-term business case is essential.
How does the CIO's role change when a company transitions from a traditional to a digital business model?
Sangeet Paul Choudary: When you're running a platform company, digital is central to the business model. It's not just traditional IT, which is running operations. So, fundamentally, one of the key shifts is that the CIO's role is now closely integrated with the CEO's and the CMO's roles.
A platform business model won't work without network participation, that's where the CMO comes in. But when you talk about governance, that's really something where the CEO has to get involved. ... And we're not just talking about data governance. We're talking about ecosystem governance, which is beyond what a CIO would normally look at.
What we see in really good organizations that are moving to the platform model is there's a lot of integration at the c-level, which translates into the integration you need in the business model itself.
A second thing that's important is to understand the initial business case that will drive the shift toward a platform business model. A lot of companies today are moving from pipeline to platform business models. For them, the journey is very different than somebody starting an Airbnb or an Uber. In these cases, there's a three- to five-year road map over which time the platform business model is going to come into effect. But you also need a business case in the short term.
And, so, very often, there are two kinds of business cases. If you're a logistics company, you'll have a cost-savings business case -- to wit, if you integrate all your operations, you're going to save costs. On the other hand, if you're a [consumer packaged goods] company, as a CIO, you need to have a revenue-increase business case. So even though you may not build a platform from day one, what's the value of data acquisition? How are you going to use this new data to drive new business?
So, increasingly, we see that the role of the CIO is not just operational efficiency with IT. It's enabling a new business case around a platform business model.