In today’s ultra-competitive marketplace, every company whether they realize it or not, is creating multiple digital platforms. Why? Because platforms transcend traditional value chains and enable companies to create new business value. What this really means is companies are moving away from processes to platforms to create competitive advantages. The top 10 Fortune 500 companies are platform companies (Apple, Facebook, Google and Salesforce, for example). Moving forward, companies that master platform thinking and design will be the champions. Such is the power of this new way of thinking that most if not all firms are in the process of assembling and refining., If you and your company are to fully benefit from them, you need to understand why this is happening and how you can take advantage of it.
WHY ARE BUSINESSES MOVING FROM PROCESSES TO PLATFORMS?
Let’s put this phenomenon in context. Companies first organized around functions (IT, HR, accounting, claims, etc.). They built functional expertise with a focus on skills, quality and improvement. But in the 1990s, companies recognized that this created a lot of inefficiency and the results weren’t as strong as they wanted. To aid productivity, they then built tools to support those functions (such as a payroll system).
However, it became apparent that the functional orientation could only take them so far; so, the process orientation emerged, championed by Champy and Hammer in their book “Reorganizing the Corporation.”
By the mid to late 1990s, this new set of philosophies and techniques was in full bloom with most firms switching their organizing principles to focus on processes (order-to-cash, record-to-report, etc.). The processes built on functions. Process-driven organizations managed their companies through processes. The goal of a process was to achieve cost and quality objectives. They found that processes often cut across functions. They decided they needed to introduce technology that supported processes so they could align activities to results. But they then saw the need to develop software to manage the processes, and ERP systems came into widespread use.
As process thinking matured, companies decomposed functions into processes so they could then build standard operating procedure (SOPs) within the processes. Processes were an improvement on functional organizations. But they left still left much to be desired because they were still very inefficient and didn’t focus on things that were truly important. They focused on things and activities, rather than people.
By the early 2000s, it once again became apparent that firms could improve on their process thinking by focusing on the customer experience and dramatically increasing the level of automation to ensure a complete end-to-end result; thus, platform thinking emerged. Just as process thinking built on the old functional structure and disrupted functional status quo, platform thinking builds on process thinking. But in many ways, it is even more disruptive, typically collapsing processes as it realigns technology and organizations away from their process focus toward user experience.
Here’s an overview of the difference between process thinking and platform thinking. See which of these descriptions fits your company.
- FOCUS: Process thinking focuses on the process results. Platform thinking focuses on the impact of the process to the end user (customers, employees, partners).
- OBJECTIVE: Process thinking focuses on the efficiency of the company to execute its goals. Platform thinking looks outward to the end user and focuses on how to best serve the user.
Companies serve people; they don’t just accomplish activities. Platform thinking focuses on the experience of the people the company serves and the technology serving them.
DESIGNING A PLATFORM FOCUSED ON IMPROVING USER EXPERIENCE
Just like function organizing and process thinking, platforms create significant new efficiencies over all that came before. For instance, Google’s cost to service a customer today is a fraction of the cost of the old advertising structure, and the impact is much better. The huge investments in technology combined with Google’s mastery of data allow Google to identify people as individuals and not just personas. This allows advertisers to target individual people and their specific needs and tastes, thus illustrating the power of the new platform thinking. Google is dramatically enhancing the customer experience by providing a personalized offer. As we all know, It’s the most effective form of advertising. And the platform does it much more cost-effectively than the previous vehicle where companies used print and TV to condition people to build brand alignments.
Platform thinking can be applied at many levels within an organization, from the end-to-end customer or employee experience against specific customer sets or employee sets, or even something as seemingly mundane as the mailroom. In platform thinking, companies can reconceive their mailroom to focus on the employee experience. How can they ingest and present mail and information to employees in a way that is easy for employees to consume, anticipates the employees’ needs and requires minimal effort from the employees? Platform thinking around a mailroom process allows companies to provide a huge step forward for employees’ experience and for productivity. It also becomes less costly.
Platform thinking creates far more automation. It also illuminates a lot of inefficiencies that are latent in process orientation. But the automation and efficiencies come at a high cost because they require substantial investment in technology to get there as well as change management as the operating model shifts to align against the new user experiences rather instead of the old processes. This required change management and investment is a major challenge for platform thinking.
User adoption is key to success of digital platforms. Creating super experiences for users determines adoption. I’ll explain how to do this in my next blog post and discuss the role of artificial intelligence in platforms.
What’s common about platforms is they provide a much better result for user experiences, along with productivity and efficiencies, at a fraction of the total cost. These forces are undeniable and irrefutable. So, there’s no doubt companies are moving into the platform era. The question for your company: where will you choose to build platforms and how fast can you do that?
originally posted on Forbes.com by Peter Bendor-Samuel
