Industry Insights

Three Critical Steps to Make a Successful Move from Product to Platform

By Dan Saks / August 19, 2019

As digital transformation has gone from buzzword to mission-critical business strategy, many organizations have tried, with varying degrees of success, to put digital technologies at the core of their operations. Some have succeeded; many others have failed. What sets these companies apart? I believe the answer is simple: platforms and ecosystems.

In fact, the results of our recent survey revealed that 86% of executives believe platforms are the clear differentiators for digital transformation success. Moreover, in a separate report from Accenture, 84% of business leaders believe ecosystems are vital to their disruption strategy and 60% said they would “build ecosystems" to disrupt their industries.

These compelling statistics don't make platforms and ecosystems any easier to launch, however. Some companies don't know where to begin, while others start to build elements of a solution but run into an avalanche of complexity when they try to manage the day-to-day realities of a platform and ecosystem.

A platform or ecosystem strategy is a must-have for many companies in today's digital economy.

Despite the challenges, I believe a platform or ecosystem strategy is a must-have for many companies in today's digital economy. Here are three steps that organizations can take to ease the transition from being a product-centric organization to a platform company powered by a thriving ecosystem.

Step One: Determine What You Want Your Ecosystem Strategy To Be

Even though a strong majority of business leaders say that ecosystems are essential to the success of their companies, many have a hard time defining what their ecosystems should be. What is the vision for your ecosystem? How will it disrupt the market? How will it create value?

To articulate the purpose and value of your ecosystem, you should focus on answering these questions:

• Who are your customers? Who have your main customers and other stakeholders been in the past? Are they end users, developers, distributors, systems integrators or hardware makers? Who will they be in the future?
• What do you plan to sell through your platform? Will you sell your own products? Will you offer third-party products and services? Will you purpose-build these offerings for your platform? Will you only offer digital products? Or will you also sell hardware?
• How do your customers prefer to buy? Will you sell directly to customers or through indirect channels (e.g., resellers)? Will you use self-service, assisted sales, a combination or some other model?
• Where do you want to sell? Do you sell domestically, internationally or both? Do you need to consider languages, currencies, taxation, security and other differences in local markets?

Having clear answers to these questions will make it easier to determine key performance indicators, set goals, and have a strategic vision for your ecosystem. Moreover, they can help define your technical requirements in the selection process for your platform technology, whether you build in-house, work with a provider or use a combination of the two approaches.

Step Two: Focus On Your Core Technology Competencies

Strategy is important, but finding the right technology to power an ecosystem can seem like an even higher-stakes challenge. If the technology doesn't work, the impact — disgruntled partners, unhappy customers and revenue disruption — will become very apparent very fast.

Given this, Accenture found that 63% of executives surveyed feel that technology is the most important thing to get right when they're launching a platform and ecosystem. However, just 38% "rate their business a '5' on a five-point scale in terms of understanding their strengths and weaknesses and where ecosystem partnerships would be beneficial." How do organizations solve this conundrum?

Many have built part of the platform technology, which turns "build versus buy" into "build and buy."

In many cases, companies have already built some portion of the platform or ecosystem technology, which can turn "build versus buy" into a "build and buy" scenario. In this situation, it’s critical to find a solution provider that can integrate with your existing systems. To determine which vendor might be a good fit for you, ask about their experience working with the legacy systems you use. Do they have API-based solutions that can work with these technologies? You should also inquire about their product roadmap and make sure it aligns with your long-term vision. The goal of a product to platform move should almost never be to rip and replace.

Step Three: Seek Out The Right Partners For Your Needs

Given the inherent complexity of the platform and ecosystem model, it should come as no surprise that many companies fail to get it right. In fact, it is estimated that more than 80% of digital transformation projects — especially large-scale initiatives like launching a platform and ecosystem — fail. However, given that Accenture found that 46% of organizations are actively seeking ecosystems and new business models, companies simply can't afford failure.

To mitigate the risk of failure, seek out providers that have expertise in digital commerce areas that complement your core competencies.

To help mitigate the risk of failure, your organization should seek out providers that have expertise in digital commerce areas that complement your own core competencies. For example, as part of its Ability platform, Swiss manufacturing giant ABB partners with Microsoft for IaaS and IBM for predictive artificial intelligence (AI). Another example is Zelle, a payments app owned by several large U.S. banks that allows customers at a growing list of partners — such as smaller banks and credit unions that can't afford to develop their own technology — to send and receive money. Working with experienced providers that fill gaps in their own specific competencies can allow companies to focus on enabling their customers, not building existing solutions in-house.

The digital economy demands near-constant experimentation and agility to meet rapidly changing customer demands. More than three-quarters of executives in Accenture's survey believed that "current business models will be unrecognizable in the next 5 years" and that "ecosystems will be the main change agent." In order to stay competitive, focus on creating a thorough plan that puts a platform and ecosystem at the core of your business. This is the surest way to keep your business at the forefront of innovation no matter what the future may bring.

Dan Saks is co-founder and co-CEO of AppDirect.

This article first appeared on Forbes.com. Click here to read it.