In the last few years companies have been caught up in the digital transformation madness. It is fascinating the urge every firm has to develop their own digital transformation strategy in order to stay relevant, but what I find odd in this equation is how some of them are attempting to survive by addressing a sustaining innovation approach. From hiring a CDO, training heavily their HR department, leading organisational change or upgrading customer touch points with more digital channels, it seems is not enough if you take into account that the change they are facing goes beyond the improvement of their processes, resources or culture.
Some digital transformation experts even suggests profound business model changes as a key component of success, but disrupting the firm from within and putting into risk the actual profit formula won’t help it survive either, since Disruption is a process not a goal and cannibalising what actually makes the business relevant today will not guarantee its future but only compromise its present.
Other firms embrace digital transformation by applying a disruption innovation approach through the creation of innovations labs, independent business units and investing in M&A programs… But is it enough?
When addressing digital transformation shouldn’t we understand first to What the firm needs to transform into before getting into the How? Is it a platform? A key component for a current ecosystem? A plug and play business? A offline partner for current platforms? Is the firm rethinking value creation? Value consumption? Are they willing to create a new consumer behaviour in the process?
Platform businesses behave very differently from traditional businesses and this represents a reset button and the rise of a new business model that redefine every rule known so far. The fact that Uber is the world’s largest taxi company that owns no cars or Alibaba the most valuable retailer with no inventory, is not a coincidence.
The beauty of a platform is in how it’s built around interactions, how it develops an ecosystem with frictionless barriers of entry and orchestrates resources for networks while encouraging the creation and exchange of value between users. Internet giants rely on common standards, mass adoption + network effects and competing in a demand economy of scale will depend on how you leverage your own data.
“ The Internet, today, provides an opportunity for businesses to create a platform and leverage an external ecosystem of producers to create value. This, in turn, allows the businesses to create and own entirely new markets when consumers come on board. It’s giving rise to a new age of monopolies that do not exercise power through control over physical resources but through orchestration of digital and physical resources using data.”
So how does a species become another without dying in the process of such profound evolution? Or is it not a matter of transforming but finding common ground while fostering new innovations a side? Maybe the question is not how to become another species but how the current model plugs into a new ecosystem while supporting innovations that eventually will evolve in that direction, as Apple did with the Appstore and every service they are embedding into their hardware.
Businesses need to build a platform strategy that leverages their existing assets while staying aligned with their current business, is not just about buying a startup but foreseeing culture match and possible integrations with your current pipeline model.
Can you afford to evolve naturally and create an ecosystem where your business behave as another player of a platform you own? Well, it depends in how much time you have before you can’t play the sustaining innovation or compliance card anymore.
Car OEMs should be looking at what happened to Nokia and Retailers should be looking at Newspapers since digital transformation comes from pipeline to platform > close to open > supply to demand + not disrupting yourself in the process.
Pipelines, Platforms, and the New Rules of Strategy Idea in Brief The Sea Change Platform businesses that bring together producers and consumers, as Uber and Airbnb do… hbr.org Why Platform Disruption Is So Much Bigger than Product Disruption How does disruptive innovation differ when it's applied to a product versus a platform? For the sake of clarity, let's… hbr.org The Businesses That Platforms Are Actually Disrupting Platforms are all the rage these days. Powered by online technologies, they are sweeping across the economic landscape… hbr.org
I'm really fascinated by the whole opportunity space available to incumbent pipeline businesses considering platformization as a strategy. Like you say, how do they innovate their business model without losing their existing sources of value creation? Is a hybrid pipeline/platform approach like Apple's to be preferred or are there other equally valid solutions?