How CIOs Can Prepare For The Platform Economy

As the digital economy booms and interconnected users rely more upon each others' contributions, products and services are on the way out; platforms are in.

Joe Stanganelli, Attorney, Beacon Hill Law

June 10, 2015

4 Min Read
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6 Causes Of Big Data Discrepancies

6 Causes Of Big Data Discrepancies

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Are you ready for the platform economy? Do you even know what that means?

At the MIT Sloan CIO Symposium in Cambridge, Mass., last month, subject matter experts convened to discuss the role CIOs can play in the future of business strategy in our new digital economy.

Marshall Van Alstyne, a professor of information systems at Boston University and researcher at MIT, said the digital economy is no longer about products or services -- well, no longer about only those things. It is about leveraging a company's rich data sources -- some new, some old, but more accessible – into a new business model.

In a word, it's about platforms.

[ Talk nerdy to me. Read 10 Smartphone Apps You Can Talk To. ]

Van Alstyne, who moderated the session Platform Shift: How New Business Models are Changing the Shape of Industry and the Role of CIOs, said some of the most successful business models today are platform-centric. For example: Uber owns no cars, Airbnb rents out no real estate of its own, and Facebook creates no significant content itself. In all three of those examples, platform users represent the origin point of the product or service.

"Products have features; platforms have communities," said Van Alstyne.

Panelist Bryan Kirschner, director of the Apigee Institute, said that the technical costs of platform implementation and maintenance are negligible compared with traditional IT infrastructure. "Probably a lot of your business practices and your IT practices [were created when] computing power was thousands of times more expensive than it is today," Kirschner said.

Another of Van Alstyne's panelists, Vivanda CEO and cofounder Jerry Wolfe, saw the wide-open industry opportunity during his time as CIO of food products firm McCormick & Company -- leading the incubation of FlavorPrint, an online recipe recommendation platform for consumers that Van Alstyne describes as "Netflix for food." FlavorPrint, available as an app for iPhone and Android smartphones, now forms the basis of Wolfe's new company Vivanda.

"[Our] inspiration, from Pandora, was: What if we could create for the food space the equivalent of the music genome?" Wolfe said. "What if we could get it to everyone?"

The results: FlavorPrint users, who added value for each other by contributing to the platform. It is this crowdsourcing, then, that represents the true value of the platform economy.

For enterprises such as McCormick, which are traditionally "product" companies, embracing the platform mindset can help extend existing offerings to new associated products and services, and potentially increase revenue. It also opens up opportunities for CIOs to prove their value as the technology experts needed to bring the platform economy to life in their organizations. Here are four ways CIOs can help advance the platform economy in their own organizations:

  • Make CRM your top priority. Speaking on Van Alstyne's panel, Paddy Srinivasan, VP of products for Xively by LogMeIn, emphasized that platforms represent where the customers are in today's digital world. "You need to start thinking about customer relations 24x7," said Srinivasan. "Your customers … want instant feedback on their stuff. They want to be able to just push a button and get instant technical support."

  • Democratize your business model. Nobody knows your customers better than your customers themselves. Platforms can and should be used to leverage customers' expertise, participation, and data. It is this crowdsourcing, then, that represents the true value of the platforms Van Alstyne evangelizes. "There are simply more people outside the firm," said Van Alstyne. "[Platform] users are creating value for other users. That's how we're getting exponential growth."

  • Just because it moves doesn't mean it should be monetized. The panel acknowledged that lots of money is out there to be made from every aspect of a platform, but that the best companies know when to abstain from squeezing out dollars and cents, and understand that the real value of platforms comes from the data that they collect. "Of all the different things you can do, don't monetize everything," urged Van Alstyne. Otherwise, he warned, you may lose out on customer data that can prove even more valuable than the immediate monetary gain.

  • Make IT part of the corporate strategy. IT is no longer a necessary evil that helps keep the lights on. According to Wolfe, IT needs to be included in the corporate strategy, like any other department.
"Stop talking about IT being separate," said Wolfe. "How can IT possibly be any different from HR [or] marketing …?" Wolfe went on to discuss how the IT department has the potential to be an innovation center -- with the CIO leading the charge -- because of IT's ability to focus on new business models, identify customers, and see new business opportunities. Carve out something and sponsor some innovation," advised Wolfe. "Your CIO's actually a great place to put that innovation."

What do you think? Has your organization embraced the platform economy? Do you think this is a temporary fad, or the wave of the future? Tell us all about it in the comments section below.

About the Author(s)

Joe Stanganelli

Attorney, Beacon Hill Law

Joe Stanganelli is founder and principal of Beacon Hill Law, a Boston-based general practice law firm. His expertise on legal topics has been sought for several major publications, including US News and World Report and Personal Real Estate Investor Magazine. Joe is also a professional communications consultant. He has been working with social media for many years, even in the days of local BBSs, well before the term "social media" was invented. From 2003 to 2005, Joe ran Grandpa George Productions, a New England entertainment and media production company. He has also worked as a professional actor, director, and producer, and playwright.

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