“Only 48% of digital initiatives meet or exceed their business outcome targets,” found a recent Gartner survey.
Seen in light of analyst observations that digital strategy and business strategy have now become “one and the same,” this success rate is hardly desirable.
In our experience working with enterprise CTOs, we see that the digital transformation landscape is fraught with challenges. A large bank that began its transformation journey with point solutions stumbles to integrate them effectively. A global retailer using legacy e-commerce struggles to scale.
In the above cases—and many others—a robust platform strategy is one of the few effective approaches. Yet, ‘platform’ is one of those words that has warped itself into confusion.
Before we get into why, when and how to use a platform strategy, let’s first be clear on what it is.
What is a digital platform?
A digital platform is a technology foundation and open participative infrastructure that allows frictionless interactions between producers and consumers, compounding value creation through network effects. In the platform business model, value creation happens via interaction.
An online marketplace is a great example of a platform because it creates value by connecting sellers and buyers, offering both the tools to conduct their trade. Another example, albeit internally facing, would be a developer platform with infrastructure, tools and automation to accelerate software engineering.
As a business strategy, organizations can also build platforms that support business capabilities that can be combined and composed in various ways. For instance, if you’re an omnichannel retailer, you can create capabilities, such as customer authentication, product listing, or merchant dashboard, that can be reused and enhanced by other departments within the business.
Why build a digital platform?
Digital platforms provide a robust foundation for structuring the technological backbone of a business, creating significant opportunities for growth and innovation.
Flexibility: A robust platform supports core business capabilities by offering widely available Application Programming Interfaces (APIs). This enables seamless integration of internal and external applications, creating added value.
Reusability: A thoughtfully designed platform, which accurately identifies capabilities at the appropriate level of granularity, encourages the reuse of essential business assets. This approach enhances sustainability, accelerates product development and facilitates the rapid adoption of emerging technologies with minimal disruption to business operations.
Performance: A platform strategy enhances developer experience and productivity. Moreover, it optimizes cloud usage to elevate applications' performance, scalability and security.
Innovation: Organizations can innovate faster when the strategy expands to building business capability platforms. They can mix, match and improve on what exists and take it to market faster. They can adapt to market feedback and evolve with greater efficiency.
Despite its many benefits, platforms are not for everyone. Building a technological foundation as vast as a platform requires significant thought and effort.
Who should consider building a platform?
A platform strategy is a specific and solution-driven approach to software development. Here’s where it’ll work best.
Multi-pronged business models
A platform is great for organizations that offer multiple products with different workflows for various customers.
For instance, a large private bank in India set out to scale its digital lending business, which had a diverse clientele—from the urban professional to the rural farmer. Their existing systems were point solutions and needed extensive customization to support newer products.
Thoughtworks collaborated with them to create a tailored loan origination platform featuring essential capabilities that can be seamlessly integrated to craft innovative customer journeys across various loan products. This platform enabled them to achieve:
40% year-over-year topline growth in loan disbursals
50% improvement in back-office efficiency
90% straight-through processing rate (from 55% before the platform)
15% reduction in customer drop-offs
Omnichannel operations
Another area where the platform model works best is when a business reaches customers across multiple channels, often within a single buying journey.
A global retailer leveraged the platform strategy to scale their e-commerce operations, expanding to all their omnichannel offerings. The team collaborated with the retailer to develop a blueprint for a multi-tenant platform, complete with an incremental build plan for digital channels, physical stores and offices across various locations.
As a result, the retailer saw a 12.6% increase in conversions and a 25% boost in revenue.
A platform strategy is best when the business landscape is vast and complex. It is for organizations that look to compound the impact of their scale through technology. Even if you meet these criteria, remember there’s such a thing as the right time to build a platform.
When to build a digital platform
Before beginning to build a platform, consider these questions to help ensure you’re maximizing the output of your effort.
Can multiple parts of your organization benefit from similar capabilities?
A platform needs to serve more than a tiny group of people. For example, a platform with ledger capability can be used for both lending and banking solutions. Similarly, consider whether you have clearly defined core capabilities that are consistently shared across different verticals.
Are your solutions standardized?
A platform creates small chunks of capabilities that can be remixed and reused. To do this, you need standardization, even if you want some flexibility for individual teams. So, have you found your product market fit and are ready to scale?
Do you have a consensus among cross-functional teams?
A platform will create value only if everyone is on board. If your e-commerce and in-store teams don’t agree on the foundational capabilities, you will have an adoption challenge. Moreover, do you have developers with the expertise to evolve the platform?
Are you ready for the deep investment?
If your organization is looking for quick digital interventions, the platform strategy isn’t for you. You might be better off buying and integrating custom off the shelf (COTS) products.
Are you ready to transition into a platform-driven business?
If you continue to develop features on your legacy system, the new platform will need to incorporate these additional features as well. Managing requirements across old and new systems can be challenging and it can make it difficult for the new platform to take off.
If the answer is yes, then you’re ready to start. Here’s a quick primer on how to get started.
How to build a successful platform?
Currently, the problem is that technology has become too “easy”...We can make things almost trivially, especially in software, but most of the designs are trivial as well. This is inverse vandalism: the making of things because you can.
Currently, the problem is that technology has become too “easy”...We can make things almost trivially, especially in software, but most of the designs are trivial as well. This is inverse vandalism: the making of things because you can.
If there is one thing you can’t do trivially, it is building platforms. We believe platforms need deliberate thinking. Based on our experience developing platforms for businesses, here are the six pillars we recommend you consider.
Start with why
Begin your platform journey with a clear vision of why you’re doing it. We have seen organizations start too big and falter in execution. Or worse, start too small and fail to gain traction.
Make your platform vision a powerful tool to align stakeholders and development teams toward a common purpose. Look at the metrics you aim to move, build opportunistically and think of strategies to de-risk releases.
Instill a product-thinking mindset
If you think, ‘build a good platform and users will adopt it,’ you’re taking a huge risk. In our experience, building a platform not only needs a deep understanding of customers, but also a thoughtful approach to encourage adoption.
Think big, execute small, release often
A good platform strategy creates value often enough that it keeps the users coming back again and again. Create well-defined domain boundaries, reduce complexity, optimize boilerplate work and enhance developer experience to show value as quickly as in 90 days.
Build reusable capabilities to decentralize innovation
Foundational capabilities can be functional or technical as long as they enable different business units to build on top of them. Focus on building your platform with configurable and reusable capabilities to create unique services for customers quickly.
Harness data and AI
Data and AI are integral to your platform strategy. Start small by building data products for an identified use case. By approaching data as a product, you can leverage it to unlock informed decision-making while building your platform without breaking the bank.
Prepare for organizational change
Making your platform strategy successful needs a lot more than just tech. Restructure teams to support and enhance how the platform creates value. Place meaningful constraints on tech choices, sensible defaults on ways of working, developer experience expectations and API guidelines to control the evolution of your platform.
Unlike the previous wave of digital transformation, today’s programs are multi-faceted, complex and impact global scale. For instance, in the past, a physical retailer would have created an e-commerce website as part of their digital transformation. Today, the same retailer is looking for an omnichannel customer experience with deep customizations and real-time interactions. Simple COTS products no longer serve the evolving needs of enterprises.
Not only that, legacy COTS software also does not create the competitive advantage possible with technology. So, it’s no wonder that some of the world’s largest organizations are considering platforms.
Yet, platforms aren’t easy to make. If the business value of your platform isn’t clearly articulated or measured, your development can go awry. Building a platform requires coordination, communication and exemplary planning, which can be a considerable challenge. And that’s where we can help.
Leveraging our experience with leading organizations across diverse industries, we have crafted frameworks, processes, tools and best practices to effectively enhance your platform strategy. Our consulting teams collaborate closely with enterprises to develop the technological and cultural capabilities essential for platform success.
