- October 6, 2019
- Posted by: Ramkumar
- Category: Digital Transformation
Rise of Digital platforms
In today’s competitive world and with Digital euphoria all around, every company has or is in its way to create multiple Digital platforms.
Companies have realized that platforms transcend traditional value chains and hence enable them to create new business value.Hence companies are moving away from Processes to Platforms to create competitive advantage.
When we look at Top 10 fortune 500 companies, most of them – Google, Facebook, Amazon, Apple and Salesforce are Platform companies.We can infer from this that companies that master Platforms and Design thinking are going to be the new leaders.
Why moving from Processes to Digital Platforms makes sense
- Let us understand how companies evolved from the beginning.Initially organizations were built around functions – HR, IT, Finance etc.The functional expertise was built by focusing on skills, quality and improvement.
- Sooner companies realized that this structure created inefficiencies as the results were not to the expectations.Hence in order to improve productivity, firms started building tools like payroll systems.
- When companies evolved further, they realized that functional orientation has it’s own limitations.This resulted in the emergence of Process orientation.
- Hence functions were broken to processes.Important processes like Order to cash became prominent.The goal of the process was to achieve improvements in cost and quality.Since processes cut across functions, technology supported processes in order to align activities to results.Software systems like ERP was built to manage processes.
- Once process thinking matured, companies evolved it further by introducing Standard Operating Procedures within the processes.
- Inspite of these improvements, processes continued to be ineffective. The root cause for this is because they focused on activities and not on people.
Emergence of Digital Platforms Thinking
- In order to become more efficient, companies started to give importance to customer experience.In addition, processes were automated.
- Platform thinking realigns technology and organizations from process focus towards user experience.
Digital Platforms Thinking v/s Process Thinking
- Process focus on the results where as Platform thinking focus on user experience – The impact of process to the end user.
- Process focus on efficiency of the company to execute its goals.Platforms focus on how to best serve the end user.
- Platform thinking focus on the experience of the people serving the user and the technology serving the end user.
How to design Digital Platforms focused on improving User experience
- Platforms create significant new efficiencies.For instance, Google’s cost to service a customer is fraction of the cost of traditional advertising, while at the same time the impact is far greater.This was made possible due to high investments in technology and deriving more value from data which identifies people as individuals and not as personas.
- Advertisers target people based on their specific needs and tastes.This is the power of Platform thinking.Google increases customer experience by providing personalized offers.
- Platform thinking can be applied at every levels and includes not only Customer experience but employee and stakeholder experience.For instance, by using Platform thinking, companies can reconceive their mail room to improve employee experience.This can be done by ingesting/presenting mail information to employees in a way that is easy for them to consume.
- Platform thinking also achieves more automation by eliminating inefficiencies inherent in process orientation.The automation comes at a higher cost due to investments in technology along with change management as the operating model shifts to align against new experience instead of the old processes.This investments in technology and Change management poses a major challenge to Platform thinking.
- Digital Platforms provide superior user experience, improved productivity and efficiency – all at a fraction of the total cost.
- The above benefits is causing more organizations to shift towards Platforms.