Posts Tagged ‘platform’

The aim of most businesses is to create wealth for those working at it. Generally it is preferred to do this in a sustainable, scalable fashion so that wealth may continue to be generated for a long time. The specific methods may involve seeking public valuation in the markets, selling more and more product directly profitably, private valuation and investment and more. The aim of most technology based companies to make the primary activity and product of the business involve technology. Most common understanding of the “technology” refers to information technology, bio technology, advanced hardware and so forth – i.e. tools or methods that go beyond long established ways of doing things and/or analog approaches. So the aims of a technology company are to create and maintain sustainable, scalable wealth generation through technological invention and execution.

Perhaps there are better definitions of terms and clearer articulation of the aims of business but this will suffice to draw out an argument for how technology companies could fully embrace the idea of a platform and, specifically, a technological platform. Too often the technology in a technology company exists solely in the end product sold to the market. It is a rare technology company that embraces technological thinking every where – re: big internet media still managing advertising contracts through paper and faxes, expense reports through stapled papers to static excel spreadsheets and so on. There are even “search” engine companies that are unable to search over all of their own internal documentation and knowledge.

The gains of technology are significant when applied everywhere in a company. A technological product produced by primitive and inefficient means is usually unable to sustain its competitive edge as those with technology in their veins quickly catch up to any early leads by a first, non technical mover. Often what the world sees on the outside of a technology company is The Wizard of Oz. A clever and powerful façade of technology – a vision of smoking machines doing unthinkable things. When in reality it is the clunky, hub bub of a duct taped factory of humans pulling levers and making machine noises. If the end result is the same, who cares? No one – if the result can be maintained. It never scales to grow the human factory of tech facade making. Nor does it scale to turn everything over to the machines.

What’s contemplated here is a clever and emergent interaction of human and machine technology and how a company goes from merely using technology to becoming a platform. Consider an example of a company that produces exquisite financial market analysis to major brokerage firms. It may be that human analysts are far better than algorithms at making the brilliant and challenging pattern recognition observations about an upcoming swing in the markets. There is still a technology to employ here. Such a company should supply the human analysts with as much enhancing tools and methods to increase the rate at which human analysts can spot patterns, reduce the cost in spreading the knowledge where it needs to go and to complete the feedback loop on hits and misses. There is no limit to how deeply a company should look at enhancing the humans ability. For instance, how many keystrokes does it take for the analyst to key in their findings? How many hops does a synthesized report go through before hitting the end recipient? how does the temperature of the working space impact pattern recognition ability? Perhaps all those details are far more of an impact to the sustainable profit than tuning a minute facet in some analytic algorithm.

The point here is that there should be no facet of a business left untouched by technology enhancement. Too often technology companies waste millions upon millions of dollars updating their main technology product only to see modest or no gain at all. The most successful technology companies of the last 25 years have all found efficiencies through technology mostly unseen by end users and these become their competitive advantages. Dell – ordering and build process. Microsoft – product pre-installations. Google – efficient power sources for data centers. Facebook – rapid internal code releases. Apple – very efficient supply chain. Walmart – intelligent restocking. Amazon – everything beyond the core “ecommerce”.

In a sense, these companies recognized their underlying ”platform” soon after recognizing their main value proposition. They learned quickly enough to scale that proposition – and to spend a solid blend of energy on the scale and the product innovation. A quick aside – scale here is taken to mean how efficiently a business can provide its core proposition to the widest, deepest customer base. It does not refer solely to hardware or supply chain infrastructure, though often that is a critical part of it.

One of many interesting examples of such platform thinking is the Coors Brewing company back in its hey day. Most people would not consider Coors a “technology” company. In the 1950s though it changed many “industries” with the introduction of the modern aluminum can. This non-beer related technology reduced the cost of operations, created a recycling sub industry, reduced the problem of tin-cans damaging the beers taste and so on. It also made it challenging on several competitors to compete on distribution, taste and production costs. This isn’t the first time the Coors company put technology to use in surprising ways. They used to build and operate their own powerplants to reduce reliance on non optimal resources and to have better control over their production.

Examples like this abound. One might conclude that any company delivery product at scale can be classified as a technology company – they all will have a significant platform orientation. However, this does not make them a platform company.

What distinguishes a platform technology from simply a technology company is one in which the platform is provided to partners and customers to scale their businesses as well. These are the types of companies where their product itself becomes scale. These are the rare, super valuable companies. Google, Apple, Intel, Facebook, Microsoft, Salesforce.com, Amazon and so on. These companies often start by becoming highly efficient technically in the production of their core offering and then turn that scale and license it to others. The value generation gets attributed to the scale provider appropriately in that it becomes a self realizing cycle. The ecosystem built upon the platform of such companies demands the platform operator to continue to build their platform so they too may scale. The platform operator only scales by giving more scale innovation back to the ecosystem. Think Google producing Android, offering Google Analytics for Free and so on. Think Facebook and Open Graph and how brands rely on their facebook pages to connect and collect data. Think Amazon and its marketplace and Cloud Computing Services. Think Microsoft and the MSDN/developer resources/cloud computing. Think Apple and itunes, app store and so on.

It’s not all that easy though! There seems to come a time with all such platform companies that a critical decision must be made before it’s obvious that it’s going to work. To Open The Platform Up To Others Or Not? Will the ecosystem adopt it? How will they pay for it? Can we deal with what is created? Are we truly at scale to handle this? Are we open enough to embrace the opportunities that come out of it? Are we ready to cede control? Are we ready to create our own competitors?

That last question is the one big one. But it’s the one to embrace to be a super valuable, rare platform at the heart of a significant ecosystem. And it happens to be the way to create a path to sustainable wealth generation that isn’t a short lived parlor trick.

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