Platfirm. How Platform Disruption is Redefining the way Business is Conducted

Platfirm is a new term that emerged with the most recent developments of the application of platform thinking.  The term “platfirm” is the fusion of “platform” and “firm”. It refers to a new approach that looks at organisations through the metaphor of the “platform”. This is a concept that comes from digital technologies and surpasses the traditional metaphors of biology (organism) or mechanics (mechanism).

Not only digital companies like Facebook, Ebay, Google, Uber, Aibnb, started as platforms, but also manufacturing companies like Nike, are being structured as a network of interaction platforms.  As a  result, the company benefits from the intensive co-creation of value, rapid scalability, the effect network, openness to ecosystem actors and communities (not just consumers, but developer communities, solution accelerators, etc.).

Even the physical places (think of Apple stores), are designed as platforms for social learning, involvement and customer support activities. In a platform-oriented perspective, the mantra of being “customer-centric” is misleading. Organisations seen as platforms can obtain benefits and advantages such as:

• accelerate the creation of opportunities and growth;
• reduce risk and operating costs;
• optimise investment in capital and resources;
• rapidly scale learning and knowledge processes.

One of the most important aspects is that the platform enables interactions between producers and consumers of value outside the company – like in the cases of Airbnb and Uber. This represents a clear discontinuity with regards to traditional economic models, activating non-linear pathways of valorisation which can benefit, in different forms, both product/service providers and users, and one of the best part of this is that you can keep happy employees.

The strategic and organisational implications of the transformation of many businesses into platfirm is strong and disruptive. The model is useful for understanding the business evolution also from the point of view of the Economy of Experience. As quoted by Brian Solis in his latest work “X, When Experience Meets Design“: “Coca-Cola and Nike are not just creating individual experiences: they are generating common spaces where consumers and brands share meaningful experiences. When experience is at the heart of the way products are made and sold on the market, relationships with customers and brand loyalty are stimulated “.

Using the stimuli coming from the experiential world of people and the experiential benchmarking activities, consists of three main components as described by Mauro Ferraresi and Bernd Schmitt in “Marketing esperienziale. Come sviluppare l’esperienza di consumo“:

• Experiential positioning: describes what the brand or company represents. It should be both tangible and intriguing, in order to immediately convey its practical usefulness while leaving space for innovative developments.
• Promise of experiential value (PVE) specifies in detail the value that the experiential positioning has for the customer. It thus serves as a standard under which the organization cannot position itself if it wants to continue to please people.
• Implementation theme: is the expression of the experiential platform, able to summarise the style and contents of the main messages used by the company or the brand in all the declinations of the experience to the public.

As the main dimension of platfirm, the experiential platform becomes the foundation for the design of the overall brand experience and for the dynamics of relationship and interface with the customer.

Different analyses of experiential marketing and tribal marketing propose a vision of organisations as actors in the Economics of Experience, no longer only as entities organising experiences, but instead as realities proposing artefacts and contexts that lead to experiences, which can be properly used by consumers to co-create their own.

The role of companies and brands is to provide the right environment and context to bring out the right experience, that is, the one desired by people.

Some realities can even be defined as true business experience-based: the likes of Apple, Siemens and Disney, which have made the experience a lever of strong differentiation. Vodafone, an international telecommunications giant, has also started a path that – while remaining adherent to organisational idiosyncrasies – has strong connotations of platfirm: from the redesign and transformation of digital assets into “meeting places” defined by the interaction between specific categories of users, the ability to make different users experience different experiences through advanced analytics and on the basis of data collected online and at the point of sale.

There are three broad approaches to problem solving that innovators take:

The ‘Stuff’ Approach

The approach of the industrial age to solving customer problems has been to create more stuff. If there’s a customer problem out there, you set up factories and build more stuff. And once consumers have their needs satisfied but you’ve still got excess production capacity, you put in some marketing and convince consumers that they want more stuff. The default model for solving business problems has been the stuff approach. If you’re dealing with goods, you’re churning out more goods while if you’re a services-based company, you’re putting more people on the job. The approach to scaling a solution has been creating more of it.

Most problems today do not need to be solved by throwing stuff at them. We’ve been solving problems by creating more stuff largely because we didn’t optimize distribution and access to the stuff that already existed.

The ‘Optimisation’ Approach

Enter algorithms. You have stuff out there which is sub-optimally distributed. Here’s a two-step approach to solving the problem:

• Aggregate all the information on the stuff out there
• Leverage algorithms to optimally match the right stuff with a consumer’s desire

Google built one of the fastest growing companies of all time applying the optimisation approach to the world’s information problem. Most internet businesses create value through optimization. A shift to optimization relies on a shift in thinking from a stuff-first to an information-first mindset.

The ‘Platfirm’ Approach

Platform Thinking adds one more step to the optimization approach. Instead of merely aggregating information on stuff out there (Step 1 above), it enables creation of more inventory without creating more stuff. That sounds paradoxical but that is exactly what Twitter does to news. The media industry has a limited number of journalists. Twitter enables anyone out there to become a source of news without having to become a journalist. YouTube increases the inventory of content without setting up new media houses. eLance allows companies to get work done without having to hire people to do the job.

The stuff approach creates supply, the platform approach uncovers new sources of supply. The goal in this case is not only to optimize but also to redefine the input (inventory) that you are optimising.

In essence, every consumer problem out there can be solved in one of three ways:

• The “stuff” approach: How can we create more stuff whenever the problem crops up?
• The “optimisation” approach: How can we better distribute the stuff already created to minimize waste?
• The “platfirm” approach: How can we redefine stuff and find new ways of solving the same problem?

The Accommodation Problem

Problem: I’m traveling to city X and I need to end myself some accommodation.

The “stuff” approach (Sheraton): Create more stuff. Build more hotels, set up more BnBs. If there are fewer rooms than tourists, buy some land, put up a hotel and create more rooms.

The “optimisation” approach (Kayak): There are a lot of hotels out there but travelers do not necessarily have all the information to make the choice they want to. Let’s aggregate this inventory and create a reliable search engine. Let’s build review sites to help make the right decision.

The “platfirm” approach (AirBnB): How can we redefine travelers’ accommodation? How about enabling anyone with a spare room and mattress to run their own BnB?

The Transportation Problem

Problem: I need to figure out a reliable and safe way of getting from point A to point B whenever I want to.

Stuff (GM, Toyota): Create more cars. The greater the number of people with this problem, the more cars you need to create.

Optimisation (Avis, Cab Aggregators): There are many taxi operators but consumers aren’t aware of all the choices. Let’s create a search engine and help them figure the best route to their destination and the modes of public transport that will take them there.

Platfirm (Lyft, ZipCar, ZipRide): Let’s redefine the problem space. What if we drastically expand the number of cars available to choose from for commuting from point A to point B?

The Computing Problem

Problem: I need a mobile phone with all the bells and whistles but every mobile phone has a different feature set and I can’t figure the best one for myself.

Stuff (Nokia): Create more phones and more models. Conduct your market research, figure out what consumers want, bucket them into groups and design new models for these groups.

Optimisation (comparison shopping): There are a lot of phones out there. Why don’t you enter your parameters and we will spew out the best phone models that satisfy your needs.

Platfirm (Apple): Let’s rethink the phone. We can’t build everything. What if we just built out the tools that others could use to build apps that consumers could then use to extend the functionality of their phone?

The News Problem

Problem: I need to know about what’s happening around the world.

Stuff (NY Times): Put more journalists on the job, churn out more content and get the news out to more channels.

Optimisation (Google News): Rank news stories and serve readers with the matches closest to what they’re looking for.

Platfirm (Twitter): Redefine the journalist. Everyone can create and distribute news now.

Challenges

The platfirm approach is new. Much of this problem solving has come up only in the last ten years and few solutions have demonstrated the kind of success that the stuff approach and the optimization approach have. Hence, one might be tempted to dismiss this as a fad.

While execution challenges continue to exist, they are, by all means, solvable.

Inventory: When you redefine inventory as AirBnB or oDesk does, you need to ensure you have a clear strategy for encouraging users to create the inventory. This often leads to a chicken and egg problem as producers won’t create inventory unless there’s a ready market of consumers and consumers won’t participate without inventory to consume. I’ve written a lot about how to solve this problem in earlier posts.

Quality: When an entirely new set of producers gets created, quality control can be a problem. Platforms need to have robust quality control mechanisms to separate the good from the bad.

External forces: We need new regulations for these new models. Über has already had problems with regulations. We need to solve for trust in the virtual world. Airbnb has already come under the scanner on this count.

Platfirms, though, are here to stay and redefine the way business is conducted.