Rethinking Digital Products – The Shift to Digital Platforms
- 5 minutes read
- Author: Audrey Ronis-Tobin
Innovation leaders and product teams look to remain competitive by developing new digital products and services that drive value. But building a digital product or developing a software application is not the same today – not even as it was before Covid. As IT teams will confirm, digital transformation has shifted software application development toward digital platform development.
Instead of apps, organizations today are looking to build digital platforms. Instead of a stand-alone product, think about developing the capacity for incremental innovation and ongoing improvement. Instead of just worrying about how your product features compare to competitors’ features, you now need to be concerned about how your systems fit into the larger framework of a digital ecosystem.
What does that mean in terms of delivering business value and innovation? It means that it is more important than ever for business and IT teams to work hand-in-hand. Here is what your IT team wants your business and marketing teams to know about the future of application development.
The Rise and Evolution of Apps
Circa 2009, Apple came out with the iconic iPhone ad: “There’s an app for that.” Their message: regardless of the problem, was that there was an iPhone app to solve it – whether it was checking on ski conditions, tracking the calories in your food, or remembering where you parked your car. Since then, both mobile apps and web apps have blossomed. In 2020 alone, there were an estimated 592 million daily app downloads.
Users love apps for many reasons, but primarily because they are useful, or they provide entertainment. At the same time, marketers love apps because they provide a means of engaging with users, whether via push messages or simply through the use of the app. Furthermore, companies can track usage to gain insight that may lead to personalized offers (e.g., you might like this new product); or personalized, timely messages (e.g., it is time to check into your hotel room); or even timely, location-specific information (e.g., Covid vaccines are now available at this location.)
IT initially loved apps because… well, because they were cool and the latest technology; but also, because they were relatively easy and inexpensive to build. However, that was as much due to the fact that the early apps were like self-contained islands: fast and efficient at solving a single problem but limited in scope and not interconnected with the rest of your tech environment. They were “bounded” by the framework that was established when the app was created. Because of this, in order to expand the app’s capabilities, it has become necessary to build additional “plug-ins” or even redesign the app.
Since those early days of apps, the amount of data being generated by the apps, as well as other sources, has continued to grow. Business teams today are looking for the best way to extract value from the data. This has led to the emergence of data and analytics (D&A) tools and practices aimed at finding insights to drive efficient decision-making. Apps that were developed as self-contained islands or without consideration for a broader D&A ecosystem have resulted in fragmented application platforms and architectures, where silos of data produce inefficiencies and stifle the flow of data. This, in turn, perpetuates “technical debt” (cost to maintain) and drives up the cost of ownership. As such, many of these apps are now being reconsidered as part of application modernization projects, where IT teams must decide how application development fits in with the digital platforms that are available today.
What is a “Digital Platform” and why should it matter to you?
Digital platforms differ from apps in that they provide a systems approach. This means that they 1) support multiple software applications and/or digital products, 2) facilitate integration with other digital platforms (such as ERPs, CRMs, etc.), and 3) enable information flow for D&A. Building a digital platform enables your organization to reuse core assets, adopt emerging technologies more readily, and make technology updates and changes with minimal impact to other parts of the business.
In addition, digital platforms encompass a more diverse set of users. Because they are integrated, IT can “string together” technology capabilities to create added value for customers, partners, operations, and IT. Thus the digital platform becomes a central hub for conducting business and sharing D&A that were previously not available. This network effect enables transactions that create value (e.g., by providing visibility to the supply chain or to external partner organizations.)
From a marketing and/or sales perspective, you may be thinking that digital platforms will slow you down; which, of course, is unacceptable when time-to-market often means the difference between success and failure.
However, to the contrary, digital platforms can actually speed up the end-to-end development process because components are built on a common framework. Moreover, they also make it easier to measure/track success, because the data flows can be established from the beginning and embellished along throughout the evolution of the platform. In this sense, digital platforms can actually make your company more nimble and profitable.
~ Digital platforms can boost earnings – McKinsey & Company reports that annual EBIT growth for companies that own and/or cooperate on digital platforms is 4.5x higher than companies that don’t (1.4% vs. 0.3%).
To Build or to Buy? That is the Question
There are as many types of digital platforms as there are use cases. A digital platform might provide an innovative service to the market, or streamline internal processes in order to scale growth. Platforms can be big or small.
Common Digital Platforms
Deloitte has identified four common types of digital platforms:
- Aggregation platforms – that bring together a broad array of resources for a transaction (i.e., marketplaces, broker platforms)
- Social platforms – that bring together individuals to facilitate relationships around common interests
- Mobilization platforms – that facilitate a process to enable people to accomplish larger goals (i.e., supply chains, or distribution operations)
- Learning platforms – that facilitate the transfer of knowledge
There are many, many off-the-shelf digital platforms available, including: CRM platforms like Salesforce, digital experience platforms (DXP) like Adobe, learning platforms like Udemy, ERP systems like SAP, Applicant Tracking Systems like Taleo, social media platforms like LinkedIn, payment processing platforms like Stripe, and many others. Generally, assuming you have some existing platforms, there will be some assembly required to create a fully integrated architecture.
Despite the availability of off-the-shelf platforms, you may choose to build your own, custom, digital platform because a mature product does not exist; you do not need all the bells and whistles (or costs) that the public, enterprise platforms offer; or you desire a platform that supports your unique processes and way of doing business. Here are just a few examples:
- One media agency built a novel digital platform to streamline its ad ordering and scheduling process and open service to a whole new set of customers
- One homebuilder built a digital platform to streamline communication and planning with its vendors and trade partners and improve efficiency
- One parking lot operator created a new digital platform to allow travelers to schedule parking at airport lots
Regardless of the platform or reason that you forego the off-the-shelf platforms, there are a few factors that you need to consider.
Considerations Before Building a Digital Platform
Building a digital platform demands enterprise-level transformation. It may require completely new, digital ways of doing business. And it certainly may require significant adjustments in your people, processes, and technology systems. For instance, having field reps log their reports differently, or unifying product terminology across multiple vendors.
Equally important, digital platforms require ongoing product management and investment to keep them current, both from a functional and technology perspective. Business leaders who fail to consider these ongoing costs, or simply choose to ignore them in order to save money, will accrue “technical debt” over time, which can erode functional value/efficiency, lead to increased maintenance costs, and/or introduce risk (e.g., security risks).
Finally, you will need to continue to assess how your digital platform fits into the larger digital ecosystem.
Fitting into the Larger Digital Ecosystem
Digital ecosystems include the much broader context of companies, partners, customers, competitors, employees, and influencers who have a stake in the ecosystem. A digital ecosystem is mostly the same as an old-fashioned business ecosystem, except that the participants create, deliver, and capture value using digital technologies. By its nature, that means that everything, including change, happens at a much faster rate.
~ Today, IT leaders must decide what digital ecosystems their enterprises will build, participate in, and compete against.
It is challenging enough to understand how digital technologies can improve your own internal processes, products/services, and business models. Keeping abreast of the broader digital ecosystem adds another layer of complexity. Yet failure in this regard can impact the relevancy of your digital platforms, and/or cause you to miss opportunities for additional innovation and growth.
Together, business and IT leaders can look more broadly at the digital ecosystem to appraise new and unique ways to engage other players (buyers, sellers, or partners) and to generate revenue. For example:
- Improving your supply chain ecosystem with a digital platform to improve collaboration, cycle times, cost, quality, and information exchange
Monetizing your information or other assets by developing a larger marketplace (See how this fintech company added value by supplying market data to deliver insights on where products are selling) - Building industry-wide technology standards through a consortium of like businesses (financial transaction standards, HIPPA compliance standards, etc.)
As your organization matures and shifts from software application development to digital platform development with an eye toward digital ecosystems, CoStrategix can help you map out your digital strategy. We help businesses elevate the technology conversation above and beyond just the tactical elements to encompass your business processes and digital ecosystems into your strategic planning. Contact us to get started with a Technology Assessment Workshop and build your roadmap to deliver business value.
