Software Platform and its Business Value
When we hear the word platform, often we usually think of Uber and Amazon. Have you ever wondered what is Software Platform? Do Organizations need Platform? What is the business value out of the platform?
Let me start with small use case story of a fictional character Visalakshi, My Friend Visalakshi looks to become home chef. To start with she looks to prepare food on her own, deliver to consumers in her neighbourhood, later her plan is to expand it to cities and aggregate it with other home chef.
She starts the business and enables digitization to automate the processes of her chef business by building a software application. Good now that she can focus on her business and she started earning revenue out of her business. Now he decides to expand her business further for which she need to find ways of reaching her business to wider consumers(demand) and chefs (supply) in the city, colloborate with delivery provider to deliver the orders, track the order delivery, collect payments digitally, targeted marketing, order management, search menu, provide support to consumers and also expose APIs for others to integrate with her business on revenue sharing model.
Vow thats more! Do she need to product or platform. What is the difference?
What is a Product and Platform?
There is a biased assumption of what is platform, by its name. There was poll in twitter and below is the result surprisingly.
Product is a consumable or usable piece of software you sell or offer, while a platform is a system that enables a product to work or communicate with another product. Products can stand alone or exist on platforms.
A product can evolve in to a platform, but NOT vice-versa.
Product mostly focuses on a business value, Platform on other hand can generate multiple business values. In the above example, a Platform can
- Generate business value out of providing ways to integrate with other business
- Onboard other chef for revenue generation on commision basis.
- Colloborate with B2B business for selling her software solution (plus her food products)
Platform model offers Visalakshi multiple ways of generating revenue.
Value Proposition of a Platform
The value proposition for platform owners. Platforms enable platform owners to innovate on a scale that they could not by themselves. It enables platform owners to explore new business models and initiatives capturing of the underexploited long-tails of its core market. In our example Visalakshi can use the data collected in the platform to identify the health style patterns of the individuals across cities and provide better menu across multiple chefs in each cities. She enahnces healthy food style for consumers through the platform.
The value proposition for app developers. Platforms enable app developers to use the baseline capabilities of the platform as the foundation for their own work. Instead of replicating the functionality that their apps share with other apps, their upfront investment is therefore limited to functionality that their apps do not share with others. It makes viablity to target long-tail markets and provides advantages to scale without the cost of ownership of platform. Again in our use case once Visalakshi identifies healthy food style needs of the consumers, she can build an premium app targeting niche consumers who are healthy freaks, which enables her to generate premium revenue.
The value proposition for end-users. The primary value proposition of platforms for end-users is that they can more uniquely customize their instantiation of a platform to their idiosyncratic needs by mixing-and-matching from a diverse pool of apps that augment the utility of a platform. This would lead to expose our API, on top of which external developers can build solution customized to a segment and to geography, a home made pasta delivery app. Which in-turn generates commission based revenue for Visalakshi.
Types of Platform
Foundational technology Platform
This is where we deploy our applications, Linux or Mac or VMs. Even Public cloud providers are platform. Amazon S3 is storage platform. Organizations builds these kind of platforms to enable their teams to deploy the apps in standard way.
Digital Business Platform
A Digital Business Platform is built on top of Foundational Platform by adding and exposing APIs for external participation. So now if Visalakshi builds an app for targeting premium users for selling healthy menu, still she can use the same tracking, customer support and order management from the platform via APIs. The components in this layer may also be termed as business capabilities.
Experience Offering / Service Platform
At the top end of the stack we have the platform business model. The purpose of this type of platform is to connect producers with consumers or supply with demand. Now Visalakshi can connect Home Chefs across cities with the potential customers.
What Comprises a Platform?
A platform comprises of various stake holders, Platform owners, Developers, Operations & Support personnel, Cloud Provider, 3rd Party APIs, DevSecOps, Consumers, Suppliers, Business APIs and public Apps & APIs.
Challenges in evolving to a Platform
Culture Shift — It starts with mindset shift towards platform, to understand the value proposition it can provide for the business.
Cost vs RoI — Building a platform requires cost and budget, and the revenue realization of the platform can happen only over the years and not immediate.
Developers — Thought Process of the developers should focus on leveraging the platform while building business features, remember platform cannot provide all business needs out of the box. It provides foundation to build new feature rather re-inventing the wheel.
Platform thinking works by:
- Removing friction from delivery teams by focusing on high quality, self-service access to foundational technology.
- Creating an ecosystem of technology and business capabilities. Using domain-driven principles, carefully-factored business capability interfaces (APIs) are critical components of an effective, modern Service Oriented Architecture (SOA) strategy.
- Explicitly investing in a foundation for experimentation which ensures every delivery team has access to tools to make testing new ideas and validating learnings easy.
Do Organizations Need Platform
Business which needs to consistently innovate, explore new opportunities in core domain, disrupt with a business model and vision of long tail market or strong growth trajectory can benefit out with platform.
However one must understand that one platform doesnt solve all business needs, like one-size doesnt fit all. A Retail organization would need multiple such platforms one for Analytics, for CRM, for online shop etc. Its a myth that if an organization builds a platform it can solve all the business needs. Answer is Absolute NO.
Final Thoughts
Though a platform provides lot of business value, some time it may also be over kill if the decision is without business facts and projections. Simple digital automation or piece of software could help business which may not need a heavy platform to be built.
Always if there is identified business potential, opportunities to tap market potential with innovation and new apps (including suffcient funds) platform is a wise option.
Next Steps…
Ecosystem, how can we introduce network effects in the platform through ecosystem model.
