What is common to the most successful companies in today’s digital era? Whether it is Apple, Facebook, Amazon or Alibaba, they all use a platform strategy to power their business model.Infact, a Harvard Business Review study done earlier in 2017, showed that digital transformation is paying off for those firms that embrace it.
Digitally transformed organizations (“digital leaders”) performed much better than organizations that lagged behind (“digital laggards”) on not just financial indicators like gross margins, earnings, and net income, but also on operational indicators.
One very interesting revelation from the study is that this digital divide between leaders and laggards is not simply a function of spending money. The best-performing companies surveyed had technology budgets on par with digital laggards – average IT spend as a percentage of revenue was 3.5% for leaders and 3.2% for laggards!
The conclusion then is that, it’s not just about your IT spend, but rather about how you do it – your digital strategy – that matters. So, what’s the secret sauce for a digital strategy that delivers?
The need today is for organisations to move away from a ‘piecemeal, quick-fix technology solutions’ approach towards a holistic platform-based approach that has a bearing over all aspects of the business, if they want to overcome this digital divide. The broad deployment of digital technology requires rethinking both business and operating models.
Taking a ‘platform’ approach to IT often proves to be a good fit because platforms give businesses the power to be:
- Open: Easily accessible for users, ecosystem partners, and businesses to participate in
- Connected: So that they are always-on, always connected
- Intelligent: To use the data generated in the platform to enable more efficient and meaningful transactions
- Scalable: It gives the business the power to scale the platform by number of users, segments, and geography, easily
Driving digital transformation requires organisations to modify existing structures, not merely replacing old business assets and capabilities. It involves reconstructing traditional organisations around digital operating principles, integrating traditional assets to address new challenges and pursue new opportunities. To cross the digital divide, firms need to not just invest in technology but also develop data- and network-centric capabilities, apart from mind-set changes to put digital technologies to best use. For all of these requirements, a platform-based approach fits perfectly.
Recent research by Innosight claims that at the current churn rate, 75% of the US S&P 500 will be replaced by 2027. I suspect that the digital approach will be a big factor in this.
We at Sonata have seen our more proactive customers recognize the value of platforms and roll out initiatives to capitalize on the opportunity. The have included decisions to use emerging platform technology ecosystems from leading vendors to achieve an accelerated digitization of operations, as well as a choice to build custom social commerce platforms for new business models.
If you’d like to know more about Sonata’s technology framework for platformation and the approaches for adoption, you can find it here