How CIOs Can Prepare For The Platform Economy - InformationWeek

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Joe Stanganelli
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How CIOs Can Prepare For The Platform Economy

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

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.

(Image: Geralt via Pixabay)

(Image: Geralt via Pixabay)

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.

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 ... View Full Bio
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User Rank: Ninja
6/10/2015 | 7:05:58 PM
Re: How CIOs Can Prepare For The Platform Economy
As I began reading this article, I was a bit puzzled - lots of buzzwords flying around without definitions attached, and dismissals of what seemed like obvious points; are AirBnB's or Uber's smartphone apps not 'products' ? Could the backend systems that help their users pay and get paid, etc., not be called 'services?'. But, as I read on, it became clear what these folks were talking about. Just as you said near the top, Joe, it's not 'only' about Products and Services - it's  about the platforms they sit on top of - that connect the users to them, and to each other, too. It definitely represents a key shift in the way that modern businesses make their money. For startups (like Pandora once was), it can be about finding a gap that exists in current business models, while for someone like McCormick, it can tie back to decades of existing products and expertise. 

The platform economy can be a minefield. Even without monetizing, it can be difficult to get users to try something new, or to stick around. People like what they use already. Look at Steam - it has competitors, but most people couldn't name them. You have to have something really special, and a bit of luck. The less users you have, the harder it is to attract new ones. As for having the users drive the content, think about this - if what your users do for you is more like work and less like fun, you might consider letting them monetize it. Now you're a whole different kind of platform - look at Uber, Youtube, etc. as extreme examples - but, that can backfire if it's not the kind of content people want to pay for. The CIO is instrumental here in explaining how the models work to the business, where the technology comes in, what should be in-housed vs outsourced, and more. There's a lot to chew on.
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