4 Reasons Why Corporations Are Losing in the New World of Platforms
By William Aimone/
July 14, 2017

We have all witnessed countless examples of new technology platforms turning traditional industries on their heels. Uber is wrecking the taxi industry. Amazon is shuttering big box stores. Hotels.com is boarding up travel agencies. What industry is next? Realtors? Technology? Consulting? Energy?

The burning question is: why aren’t traditional corporations at the forefront and winning the platform race? The traditional companies have a clear advantage over the upstart. Traditional corporations have money, an existing base of customers, customer data, and the staff. Not to mention, the traditional companies have the physical assets and infrastructure to manufacture, service, and deliver to the customer.

Why are the traditional corporations losing to the new guys on the block? And what can they do differently?

Assign the Right Champion – All too often, corporations will hand the platform challenge over to the CIO. It’s technology right? The CIO approaches the challenge not unlike the last ERP implementation, gathering existing requirements and implementing the system that meets most of them. The system is not as user-friendly, and adoption is met with resistance. This approach is problematic for several reasons. By definition, a platform eliminates resistance and friction. The purpose of a platform is to make the connection between buyers and sellers easier, with little to no resistance. Platforms are built with “ease of use” and engagement as the primary driver, not by a list of requirements. Building a platform begins with mapping and understanding the customer’s journey. Journey Mapping is a fundamental starting point. Platforms don’t start with technology, so punting the development to the technology guys is a big mistake. Find an internal champion who is forward-thinking and intimately knowledgeable of the customer – no prior technology experience required. Most importantly, the champion should be able to select his team out of the business rather than asking the business to elect people.

Pretend as if the Corporation Does Not Exist – Corporations tend to build platforms around what already exists or what is known within the organization. The MVP (minimum viable product) becomes over-engineered. Most of the time and effort is wasted trying to integrate the platform with the legacy systems and the data inside the company. Traditional corporations have an array of products, inventory locations, transportation mechanisms, etc.. It is very easy for a company to fall into the trap of trying to mirror the data and information already existing within the company into a new platform. Dell Corporation was one of the first traditional companies to jump on the early eCommerce bandwagon. How did they get there first? Their eCommerce platform started with a simple customer interface. All customer product and order data was manually entered in their internal systems for processing. Building a platform for collaborating with external parties should start with integrating the customer experience – not the internal technologies. Internal integration can come later, once the platform is proven to attract customers.

Get the Board Excited about It – Entering the platform world is not for the faint of heart. The corporation will want to get endorsement and encouragement from the board. Why? Because it is that important. The long-term costs associated with launching a platform will likely be well within the purview of your board’s spending approval. More importantly, the strategic benefits will be enormous for the corporation. Furthermore, once the rest of the organization realizes the new “platform initiative” has the board’s support, every executive are encouraged to contribute in a positive way. Every board deserves to hear about the fun and exciting stuff the corporation is doing. The endless discussions on cyber security and Sarbanes-Oxley controls are not what get board directors excited about the company they are representing.

Eat or Be Eaten – In every industry, there is an entrepreneur out there with a new platform idea already in the works. The concept has been developed, but the entrepreneur might be struggling to get the traction needed to take the platform viral. The platform may need to integrate with a larger existing companies’ distribution, manufacturing, or service network – or the entrepreneur may just be out of funds. Why not buy out the entrepreneur or join forces with him? Then, the corporation will at least have a starting point with a concept to build upon with their industry expertise. Or, the corporation can follow the Whole Foods model and wait for the platform to eat them up with an Amazon appetite.

Large corporations are well poised to enter the platform economy. They already have the legal, technical, financial, and human resources to accelerate an entry into a platform model.
For further reading on Platforms, please click here to read Five Tips for Building the Right Multi-Sided Platform for Your Company.