Digital platforms transcend technology. They encompass the entire ecosystem from business models and revenue streams to customer experiences, operations and ecosystem alignment.
To understand how to build an effective digital platform that drives value in the enterprise, offers insights into enabling this business enabler.
Defining a digital platform
While digital platforms are a technology-based initiative, digital platforms redefine business models through innovative as-a-Service models.
Digital platforms allow organizations to deliver great customer experience while focusing on business agility and flexibility. Building effective platforms will demand enterprise-level transformation and requires new digital ways of doing business to achieve monetization of existing offerings, while creating new offerings, especially around data. This applies across functions — be it an e-commerce platform, an IoT platform or even an aftermarket platform.
Across industries, established and emerging companies alike, are today investing in digital platforms and, today, a majority of the companies globally already have a digital platform.
“Around 60% of the private companies valued greater than a billion dollars have a business based on a digital platform,” HCLTech Executive Vice President, ERS Sanjoy Ghosh said. “Even a very specialized business like the English Football Club, Manchester United, built a platform to connect with a global fanbase and eventually drive revenue.”
Creating value with digital platforms
Platform-based business models enable companies to build sustainable ecosystems with a technology foundation, which is inherently designed to drive growth. The assistance of these digital platforms can help companies build digital capabilities to reimagine the customer-employee experience, optimize operations and provide a platform of products as-a-Service model, Ghosh says.
From a business model perspective, they can co-create new services with ecosystem partners. Whether it’s building jet engines or manufacturing optical contact lenses, any type of business can leverage these platforms. The best value, however, is derived from the flexibility and agility with which businesses can change directions as new opportunities, new challenges and new competition emerges.
“As an example, probably one of the earliest platforms, which was built—YouTube—has not just disrupted industries, it has also spurred the industry to create an industry-wide response on how to create content platforms and build business models based on that,” said Ghosh.
In terms of value, if we look at value measurements in financial terms, a McKinsey survey recently indicated companies that owned and operated with platforms exhibited 1.4% additional annual EBIT growth versus companies that did not. Another survey indicated that digital first adopters have seen revenue growth of more than 75% because of their digital platforms. Margin expansion and revenue growth can be attributed to adopting these platforms.
Building a digital platform
At a macro level, Ghosh says, there are three main factors which determine the building of a successful digital platform.
- First is connection, which is how easily others can plug into the platform to share and transact with others, whether they are internally within the organization in terms of business divisions, or your supply chain partners or your new ecosystem partners that you're developing.
- Second is gravity. Determine how the platform will attract participants, such as producers and consumers of value.
- Third is flow. How will the platform foster the exchange and co-creation of value?
Fourth is data dimension. How will the platform take into consideration, the various dimensions that are important to the business, such as customers, product and verticals, with a view to making the platform more relevant to the business?
These four factors fundamentally define the key characteristics of the key effectiveness of a digital platform.
“For an industry incumbent, it is extremely important to be informed thoroughly about the business drivers that can help companies better understand where they might need to modernize their technology operations to support an accelerated digital strategy,” said Ghosh.
It's important for industry incumbents to start with a few key partners to work with instead of trying to solve the entire problem in one go and potentially launch with a two-way transaction to gain traction on the platform versus multiple interactions in the beginning.
Focusing first on engagement that drives value creation, then kept capturing a fair share of that value leads to successful monetization. This is not natural to an industry incumbent in terms of how financial management happens. In addition, there are many other aspects which become important around organizational change management, which drives the success of a digital platform.
The Network Effect
Network effects cause firms to invert, meaning firms will shift production from inside the organization to outside. If users are to create value for other users, then they must be aided and rewarded for doing so, which is a very important aspect, especially for industry incumbents.
The emergence of global scale technology platforms makes it easier for subscale or local players to compete. A growing number of companies are leveraging these platforms to build and deliver new platform-enabled business models of their own, by accessing world class technology solutions through standardized cloud-based third-party solutions and leveraging their inherent innovation to get started.
In a digital ecosystem, many largely independent economic players join forces to create a digital offering that is more valuable than what a single company can create, whether it's a product or a service.
“We believe this new collaboration model is not a mere trend, but is the future of business,” adds Ghosh.
For example, hyperscalers are digital natives, bringing the platform infrastructure on top of which industry value chain emerges over a period of time. A recent McKinsey survey stated that 61% of industry incumbents operate from third-party platforms. Going to third parties for maintaining platforms becomes an important aspect of driving this network effect.
The role of Engineering Services Providers
The engineering and R&D services division of HCLTech enables customers across all stages of the transformation journey, from strategizing, defining, building and operationalizing, to supporting and maintaining high-performance, secure and highly scalable digital platforms. The division also enables ecosystem engagement, covering onboarding and managing of the lifecycle of participating developers and the business stakeholders on these platforms.
“Our end-to-end digital services are backed by strategic partnerships with leading hyperscalers and technology partners who are part of our network to drive these results,” said Ghosh. “We have delivered remarkable value to our customers across industries through digital platforms.”
For example, Ghosh notes HCLTech’s omnichannel platform that was developed for a retailer in their transformation journey that has not only optimized operational cost, but reduced checkout friction and pinpoint, in terms of the interaction of their customers or consumers, by 50%.
In another case, one of HCLTech’s intellectual property solutions, Intelligent Tech Support, has been used as a solution which helped a telecom provider improve productivity five percent year-over-year in its support process. It also improved the identification of a solution to a problem by 20% for their support agents.
“These are all things that have been delivered by the capability that we bring to the table in terms of digital platforms,” Ghosh said.
“Our capabilities in platform-building are proven across industries and we bring end-to-end capabilities to the table. We have already delivered complex and unique platforms that are delivering value to customers. We are continuously investing in newer partnerships, new and emerging technologies and in building more AI into the platforms for more intelligent and immersive customer experiences. We believe that platforms are the true game-changers and are excited to build the next one”.