Innovation requires creative people who think out of the box and deliver realistic solutions.
Companies spend money on innovation, but the outcome is often disappointing. It’s tough to bring together good employees and collectively think about something innovative. Creativity by command is not effective. Innovation is hard.
What is needed is an environment where potentially everyone can participate in the innovation process. Stimulate ad hoc ideas and don’t underestimate the power of serendipity.
An open environment encourages participation and makes it easy to connect and interact with. Create value to the participants and they stay connected.
These are the building blocks of platform thinking. If you are a business in need of re-invention, think platform. Create an open environment that fosters ideas and realizes new business.
The innovation platform provides value
We all know global platform companies like Amazon, Facebook, Uber, Booking.com, e-Bay, Medium, etc. These businesses don’t make products. They don’t offer direct services either. They bring together people that make products and offer services with those that are in need of these.
Platform businesses provide value to users by offering services in a specific domain. And these services are not necessarily provided by the platform business itself:
Uber doesn’t need to own taxi’s.
Booking.com doesn’t own hotels.
Medium doesn’t employ writers.
Amazon allows third-parties to sell goods through their platform
For a successful platform you need three ingredients: a toolbox, a magnet, and a matchmaker. [https://hbr.org/2013/01/three-elements-of-a-successful-platform]
The toolbox is the underlying technical infrastructure that allows people to connect to the platform and offer or use services. Cloud technology providers are good examples of such toolboxes.
The magnet is needed to attract participants and to keep them attached to the platform.
The matchmaker defines the business and differentiates platforms from one another. Matchmaking can change in time. To keep customers satisfied, each platform needs to add and improve services.
A challenge for platform business is to have a healthy base of both providers and consumers. You need both. A platform without providers is doomed. And so is a platform without consumers. So when you think about creating a platform, you need to think about how to attract both consumers and providers, and to keep both customer of the platform.
Open up the platform and trigger innovation
A closed platform stands in the way of innovation. If you, as platform owner, want to control all services on the platform, you hinder the creation of new and unexpected services.
An open platform allows third parties to add services, which strengthens the platform. Openness is part of the magnet.
Facebook allows third parties to add extensions to the platform. This has given rise to a plethora of apps that Facebook users can use and interact with.
Apple has opened the iOS operating system to allow third-party developers to add apps Apple could never have thought of themselves.
Openness triggers innovation. There are millions of people out there with good ideas. No doubt some of those ideas are brilliant. Wouldn’t it be nice to have them connect to your platform? That’s good as a magnet and adds value to the platform. Co-creation.
Platform scale: allow providers to build onto the platform
You may think that platform business is only for global companies. But this is not true. Innovation and the creation of new business is not limited to the happy few who rule the world.
Even at a company scale, a platform makes sense. And between companies, use platforms to boost each other. Create a platform to provide services to customers, but allow providers to build onto the platform. New inventions and new businesses will spawn.
Customers and providers can be your own employees. So give them access to the platform and let them build onto it.
Every employee can have a brilliant idea that creates a competitive advantage. (Accidentally develop a glue that doesn’t stick as intended, and someone will know how to turn it into a profitable Post-it note. [https://en.wikipedia.org/wiki/Post-it_Note])
Who could have thought about all those wonderful applications when the GPS system was first opened up for third-party use? Would all these applications have arisen in a closed non-platform system? I bet not.
Platform benefits: collect big data and add machine learning and artificial intelligence to the platform
Platforms see vast amounts of data pass through and can therefore collect Big Data. This allows the business to gain market insights of which the value should not be underestimated.
Segmentation and profiling of customers, targeting them with personalized content and recommendations.
Trend watching; where is the market going? The better we know this, the better we can take precautions and act.
Build a good platform, and leverage the knowledge buried in the data. If you don’t own a platform, you will only have a partial view on the market, namely only the part with which you communicate directly. Owning the platform gives the extra insights needed for a competitive advantage.
Collect big data and add machine-learning and artificial intelligence (AI) to the platform. You don’t necessarily need a platform to build an AI, but leveraging an AI through a platform, and allowing it to be used by third-parties gives you the real advantage. Be a magnet for data, and add AI to power the matchmaking.
Smart homes, smart cities, smart things greatly benefit from platforms. Don’t build your own proprietary solution to a small problem. Connect your sensor data to an open platform, and allow it to be used by third parties. This enables the co-creation of services you never had thought of before.
Innovation by design.
Innovation doesn’t come by command. It relies on the right people having the right ideas at the right time.
In this memo we have postulated that by embracing platform thinking, a creative and open environment emerges that encourages innovation and harbours a nursery of ideas.
Companies on the path of digital transformation can seriously benefit from platform thinking.
Companies owning platforms have a better control over their business and market by leveraging the platform data.