Transformation Doesn’t Happen From The Sidelines – Business Intelligence Info

WhenoutspokenventurecapitalistandNetscapeco-founderMarcAndreessenwroteinTheWallStreetJournalin2011thatsoftwareiseatingtheworld,hewasonlypartlycorrect。

Infact,businessservicesbasedonsoftwareplatformsarewhat’seatingtheworld。

CompanieslikeApple,whichremadethemobilephoneindustrybyofferingappdeveloperseasyaccesstomillionsofiPhoneownersthroughitsiTunesAppStoreplatform,arechangingtheeconomy。

However,theseworld-eatingcompaniesarenotjustinthetechworld。

Theyarealsoemerginginindustriesthatyoumightnotexpect:retailers,financecompanies,transportationfirms,andothersoutsideofSiliconValleyareallattheforefrontoftheplatformrevolution。

Theseoutsidersaretakingplatformstothenextlevelbybuildingthemaroundbusinessservicesanddata,notjustapps。

Companiesaremakingbusinessservicessuchaslogistics,3Dprinting,andevenroadsideassistancefordriversavailablethroughasoftwareconnectionthatothercompaniescanplugintoandconsumeoroffertotheirowncustomers。

Therearetwokindsofplayersinthisbusinessplatformrevolution:providersandparticipants。

Providerscreatetheplatformandcreateincentivesfordeveloperstowriteappsforit。

Developers,meanwhile,areparticipants;theycanextendthereachoftheirappsbyofferingthemthroughtheplatform’svirtualshelves。

Businessplatformsletcompaniesoutsideofthetechnologyworldbecomepowerfultechplayers,unleashingatorrentofinnovationthattheycouldneverproduceontheirown。

Goodbusinessplatformscreatemillionsinextrarevenueforcompaniesbyenlistingexternaldeveloperstoinnovateforthem。

It’sasifstrangersarehandingyouentirelynewrevenuestreamsandbusinessmodelsonthestreet。

Poweringthismovementareapplicationprogramminginterfaces(APIs)andsoftwaredevelopmentkits(SDKs),whichenabledeveloperstoeasilyplugtheirappsintoaplatformwithouthavingtoknowmuchaboutthecomplexsoftwarecodethatdrivesit。

Developersgetmoretimetofocusonwhattheydobest:writinggreatapps。

Platformprovidersbenefitbecausetheycanoffermanyinnovativebusinessservicestoendcustomerswithouthavingtocreatethemthemselves。

AnycompanycanleverageAPIsandSDKstocreatenewbusinessmodelsandproductsthatmightnot,infact,beitsprimarymethodofmonetization。

However,theseplatformsgivecompaniesnewopportunitiesandletthemoutflanksmaller,morenimblecompetitors。

Indeed,theplatformeconomycangenerateunbelievablerevenuestreamsforcompanies。

AccordingtoPlatformRevolutionauthorsGeoffreyG。

Parker,MarshallW。

VanAlstyne,andSangeetPaulChoudary,travelsiteExpediamakesapproximately90%ofitsrevenuebymakingbusinessservicesavailabletoothertravelcompaniesthroughitsAPI。

InTechCrunchinMay2016,MattMurphyandSteveSloanewrotethat“thenumberofSaaSapplicationshasexplodedandthereisarisingwaveofsoftwareinnovationinAPIsthatprovidecriticalconnectivetissueandincreasinglyimportantfunctionality。

”ProgrammableWeb。

com,anAPIresourceanddirectory,offerssearchableaccesstomorethan15,000differentAPIs。

AccordingtoAccentureTechnologyVision2016,82%ofexecutivesbelievethatplatformswillbethe“gluethatbringsorganizationstogetherinthedigitaleconomy。

”Thetop15platforms(whichincludecompaniesbuiltentirelyonthissoftwarearchitecture,suchaseBayandPriceline。

com)haveacombinedmarketcapitalizationofUS$2。

6trillion。

It’stimeforallcompaniestojointherevolution。

Whetherworkinginalliancewithpartnersorlaunchingentirelyin-house,companiesneedtothinkaboutplatformsnow,becausetheywillhaveadisruptiveimpactoneverymajorindustry。

TotheBarricades

Severalfactorsconvergedtomakemonetizingacompany’sbusinessserviceseasier。

Manyofthefactorscomefromtheriseofsmartphones,specificallytheriseofBluetoothand3G(andthen4GandLTE)connections。

Theseconnectionsturnedsmartphonesintoconsumptionhubsthatweren’tfeasiblewhenhigh-speedmobileaccesswasspottier。

OnegoodexampleofthisisPayPal’srise。

Intheearly2000s,itfunctionedprimarilyasastandalonewebsite,butasmobilepurchasingbecamemorewidespread,third-partymerchantsclamoredtointegratePayPal’spaymentprocessingserviceintotheirownsitesandapps。

InPlatformRevolution,Parker,VanAlstyne,andChoudaryclaimthat“platformsareeatingpipelines,”withpipelinesbeingtheold,direct-to-consumerbusinessmethodsofthepast。

Thefirststageofthistakeoverinvolvedmuchmoreefficientdigitalpipelines(thinkofAmazonintheretailspaceandGrubhubforfooddelivery)challengingtheirofflinecounterparts。

WhatMakesGreatBusinessPlatformsRun?

Thequalityoftheecosystemthatpowersyourplatformisasimportantasthequalityofexperienceyouoffertocustomers。

Here’showtodoitright。

Althoughtheplatformeconomydependsonthem,applicationprogramminginterfaces(APIs)andsoftwaredevelopmentkits(SDKs)aren’tmagicbuttons。

They’retoolsthatorganizationscanleveragetoattractusersanddevelopers。

Tosucceed,organizationsmustensurethatAPIsincludeextensivedocumentationandareeasyfordeveloperstoaddintotheirownproducts。

AnotherpartofplatformsuccessisbuildingageneraldigitalenterpriseplatformthatincludesbothAPIsandSDKs。

Agoodplatformbalanceseaseofuse,developersupport,security,dataarchitecture(thatis,willitplaynicewithacompany’sexistingsystems?

),edgeprocessing(whetheranalyticsareprocessedlocallyorinthecloud),andinfrastructure(whetheraplatformprovideroperatesitsowndatacentersandcloudinfrastructureorusespubliccloudservices)。

Theexactformulaforwhichelementstoembrace,however,willvaryaccordingtotheusecase,theindustry,theorganization,anditscustomers。

Inallcases,theplatformshouldofferavaluepropositionthat’sacutaboveitscompetitors。

Thatmeansaplatformshouldofferacompellingbusinessservicethatisdifficulttoduplicate。

Bycreatingopenstandardsandeasy-to-work-withtools,organizationscangreatlyimprovetheplatformstheyoffer。

APIsandSDKsmaysoundcomplicated,butthey’rejusttoolsfortalentedpeopletodotheirjobswith。

Enablethesetalentedpeople,andyourplatformwilltakeoff。

Inthesecondstage,platformsreplacepipelines。

PlatformRevolution’sauthorswrite:“TheInternetnolongeractsmerelyasadistributionchannel(apipeline)。

Italsoactsasacreationinfrastructureandacoordinationmechanism。

Platformsareleveragingthisnewcapabilitytocreateentirelynewbusinessmodels。

”Goodexamplesofsecond-stagecompaniesincludeAirbnb,DoubleClick,Spotify,andUber。

AllstateTakesAdvantageofItsHiddenJewels

ManycompaniestakingadvantageofplatformswerearoundlongbeforeAPIs,oreventheinternet,existed。

Allstate,oneofthelargestinsurersintheUnitedStates,hastraditionallyfocusedoninsuranceservices。

Butrecently,thecompanyexpandedintonewmarkets—includingtheplatformeconomy。

AllstatecompaniesAllstateRoadsideServices(ARS)andArity,atechnologycompanyfoundedbyAllstateinlate2016,haveprovidedtheirparentcompanywithnewsourcesofrevenue,thankstonewofferings。

ARSlaunchedGoodHandsRescueAPIs,whichallowthirdpartiestoleverageAllstate’sroadsideassistancenetworkintheirownapps。

Meanwhile,ArityoffersaportfolioofAPIsthatletthirdpartiesleverageAllstate’saggregatedataondriverbehaviorandintellectualpropertyrelatedtoriskpredictionforusesspanningmobility,consumer,andinsurancesolutions。

Forexample,VerizonlicensesanAllstateGoodHandsRescueAPIforitsownroadsideassistanceapp。

AndautomakersGMandBMWalsoofferroadsideassistanceservicethroughAllstate。

PotentialcustomersforArity’sAPIincludeinsuranceproviders,sharedmobilitycompanies,automotivepartsmakers,telecoms,andothers。

“Arityisanacknowledgementthatwehavetobedigitalfirstandthinkabouttheservicesweprovidetocustomersandbusinesses,”saysChetanPhadnis,Arity’sheadofproductdevelopment。

“Thinkingaboutourintellectualpropertysystemandsoftwareproductsisakeypartofourtransformation。

Wethinkitwillcreatenewwaystomakemoneyintheverticaltransportationecosystem。



OneofAllstate’smajorchallengesisachangeinautoownershipthatthreatensthetraditionalautoinsurancemodel。

No-carandone-carhouseholdsareontherise,ridesharingservicessuchasUberandLyftworkonverydifferentinsurancemodelsthanpassengercarsortraditionaltaxicompanies,andautonomousvehiclescoulddisruptthetraditionalautoinsurancemodelentirely。

ThismeansthatcompanieslikeAllstatearesmarttolookforrevenuestreamsbeyondtraditionalinsuranceofferings。

TheintangibleassetsthatAllstatehasaccumulatedovertheyears—amassiveaggregatecollectionofdriverdata,anextensivesetofriskmodelsandpredictivealgorithms,andanetworkofgaragesandmechanicstohelpstrandedmotorists—canalsoserveasanewrevenuestreamforthefuture。

ByofferingtwodistinctAPIservicesfortheplatformeconomy,Allstateisalsoabletoseewhatcustomersmightwantinthefuture。

WhiletheGoodHandsRescueAPIsletthird-partyusersintegrateaspecificservice(suchasroadsideassistance)intotheirsoftwaretools,Arityinsteadletsthird-partydevelopersleveragehugedatasetsasapieceofother,lessnarrowlydefinedprojects,suchasautomaintenance。

AsAritygainsinsightsintohowcustomersuseandrespondtothoseofferings,itgetsapreviewintopotentialfuturedirectionsforitsownproductsandservices。

FarmersHarvestCashfromaPlatform

Anotherexampleofinnovationfuelingtheplatformeconomydoesn’tcomefromaboldfacedtechname。

Instead,itcomesfromarelativelysmallstartupthathasnimblybuiltitsbusinessmodelarounddatawithaninterestingtwist:itturnsitscustomersintoentrepreneurs。

FarmobileisaKansasCity–basedagriculturetechcompanywhosesmartdevice,thePassiveUplinkConnection(PUC),canbepluggedintotractors,combines,sprayers,andotherfarmequipment。

FarmobileusesthePUCtoenablefarmerstomonetizedatafromtheirfields,whichisoneofthesavviestroutestosuccesswithplatforms—makingyourplatformsoirresistibletoendconsumersthattheyfomenttherevolutionforyou。

Onceinstalled,saysCEOJasonTatge,thePUCstreamssecond-by-seconddatatofarmers’Farmobileaccounts。

Thisgivesthemfinelydetailedreports,calledElectronicFieldRecords(EFRs),thattheycanusetoimprovetheirownbusiness,sharewithtrustedadvisors,andselltothirdparties。

ThePUCgivesfarmersdetailedrecordsfortrackinganalyticsontheircrops,farms,andequipmentandcreatesamarketplacewherefarmerscanselltheirdatatothirdparties。

Farmersbenefitbecausetheygenerateextraincome;Farmobilebenefitsbecauseitmakesacommissiononeachpurchaseandbuildsagiantstoreofaggregatedfarmingdata。

ThislastbitisimportantifFarmobileistosuccessfullycompetewithtraditionalagriculturalequipmentmanufacturers,whichalsogatherdatafromfarmers。

Farmobile’sadvantage(atleastfornow)isthattheequipmentmakerslimittheirdatagatheringtotheirexistingcustomerbasesandsellitbacktothemintheformofservicesdesignedtoimprovecropyieldsandoptimizeequipmentperformance。

Farmobile,meanwhile,istryingtoappealtoallfarmersbysharingthewealth,whichcouldhelpitleapfrogthegiantsthatalreadyhavelargecustomerbases。

“Theabilitytobringdatatogethereasilyisgoodforfarmers,sowebuiltAPIintegrationstoputdatainoneplace,”saysTatge。

FarmerscanreselltheirdataonFarmobile’sDataStoretobuyerssuchasreinsurancefirmGuyCarpenter。

Toencouragefarmerstooptin,saysTatge,“wetoldfarmersthatiftheyrunourdeviceoverplantingandharvestseason,wecanguaranteethem$2peracrefortheirEFRs。



Sofar,Farmobile’scustomershavesenttheDataStoreapproximately4,200completedEFRsforbothplantingandharvest,whichwillserveasthebackboneofthecompany’sdatamonetizationefforts。

Eventually,FarmobilehopestoexpandtheofferingsontheDataStoretoincluderecordsfromatleast10timesasmanydifferentfarmfields。

UnderArmourBingesonAPIs

AnothermodelfortheemergingbusinessplatformworldcomesfromUnderArmour,thesportsapparelgiant。

Alongsideitsverysuccessfulclothingandshoelines,UnderArmourhasputitsplatformattheheartofitsbusinessmodel。

Butratherthanbuildaplatformitself,UnderArmourhasuseditsgrowingrevenuestocreateanindustry-leadingecosystem。

Overthepastdecade,ithaspurchasedcompaniesthatalreadyofferAPIs,includingMapMyFitness,Endomondo,andMyFitnessPal,andthenlinkedthemalltogetherintoamassiveplatformthatserves30millionconsumers。

ThisstrategyhasmadeUnderArmouranindispensablepartofthesprawlingmobilefitnesseconomy。

Accordingtothecompany’s2016annualresults,itsbusinessplatformecosystem,knownastheConnectedFitnessdivision,generated$80millioninrevenuethatyear—a51%increaseover2015。

BycombiningexistingAPIsfromitsdifferentappswithoriginaltoolsbuiltin-house,extensivedevelopersupport,andarobustSDK,third-partydevelopershaveeverythingtheyneedtobuildtheirownfitnessapporwebsite。

Dependingontheirneeds,third-partydeveloperscansignupforseveraldifferentpaymentplanswithvaryingaccesstoUnderArmour’sAPIsandSDKs。

Indeed,thecompany’stiereddeveloperpricingplanforConnectedFitness,whichisseparatedintoStarter,Pro,andPremiumlevels,makesUnderArmourseemmorelikeatechcompanythanasportsapparelfirm。

Asaresult,UnderArmour’sAPIsandSDKsaretheunderpinningsofavastplatformcooperative。

UnderArmour’sappsseamlesslyintegratewithpopularserviceslikeFitbitandGarmin(eventhoughUnderArmourhasafitnesstrackerofitsown)andarelicensedbycorporationsrangingfromMicrosofttoCoca-ColatoPurina。

They’reevenusedbyfitnessappcompetitorslikeAthletePathandLoseIt。

AlargepartofUnderArmour’ssuccessisthesheeramountofdataitsfitnessappscollectandthenmakeavailabletodevelopers。

MyFitnessPal,forinstance,isanindustry-leadingcalorieandfoodtrackerusedforweightloss,andEndomondoisanextremelypopularrunningandbikingrecordkeeperandroute-sharingplatform。

OnewayoflookingattheConnectedFitnessplatformisasacombinationoftraditionalconsumerpurchasingdatawithinsightsgleanedfromUnderArmour’ssuiteofapps,aswellasfromthethird-partyappsthatUnderArmour’sproductsuse。

Indeed,UnderArmourgetsabonusfromtheplatformeconomy:ithelpsthecompanyunderstanditscustomersbetter,creatingavirtuouscycle。

AsendusersusedifferentappsfueledbyUnderArmour’sservicesanddata-sharingcapabilities,UnderArmourcanthenusethatdatatofuelcustomerengagementandattractadditionalthird-partyappdeveloperstoaddnewservicestotheecosystem。

WhatSuccessfulPlatformsHaveinCommon

Themostsuccessfulbusinessplatformshavethreethingsincommon:They’reeasytoworkwith,theyfulfillamarketneed,andtheyofferdatathat’susefultocustomers。

Forinstance,Farmobile’smarketplacefulfillsavaluableneedinthemarket:itletsfarmersmonetizedataanddevelopanewrevenuestreamthatotherwisewouldnotexist。

Similarly,Allstate’sArityexperimentturnslargevolumesofdatacollectedbyAllstateovertheyearsintoarevenuestreamthatdrivesdowncostsforArity’sclientsbygivingthemmoreaccuratedatatointegrateintotheirappsandsoftwaretools。

Meanwhile,UnderArmour’sConnectedFitnessplatformandAPIsuiteencourageuserstosignupformoreappsinthecompany’secosystem。

IfyoutrackyourmealsinMyFitnessPal,you’llwanttotrackyourrunsinEndomondoorMapMyRun。

Similarly,ifyou’reanappdeveloperinthehealthandfitnessspace,UnderArmourhasareadilyavailablecollectionoftoolsthatwillmakeiteasyforuserstoswitchovertoyourappandcheaperforyoutodevelopyourapp。

Astheplatformeconomygrows,allthreeoftheseapproaches—Allstate’sleveragingofitslegacybusinessdata,Farmobile’smarketplaceforuserstobecomedataentrepreneurs,andUnderArmour’sone-stopfitnessappecosystem—areextremelyusefulexamplesofwhathappensnext。

Inthecomingmonthsandyears,theplatformeconomywillseeotherbigchanges。

In2016forexample,Apple,Microsoft,Facebook,andGoogleallreleasedAPIsfortheirAI-poweredvoiceassistantplatforms,themostfamousofwhichisApple’sSiri。

TheintroductionofAPIsconfirmsthattheAItechnologybehindthesebotshasmaturedsignificantlyandthatanewwaveofAI-basedplatforminnovationisnigh。

(Infact,DigitalistpredictedlastyearthattheemergenceofanAPIfortheseAIswouldopenthemupbeyondconventionaluses。

)Newvoice-operatedtechnologiessuchasGoogleHomeandAmazonAlexaofferexcitingopportunitiesfordeveloperstocreatefull-featured,immersiveapplicationsontopofexistingplatforms。

WewillalsoseeAI-andmachinelearning–basedAPIsemergethatwillallowdeveloperstoquicklyleverageunstructureddata(suchassocialmediapostsortexts)fornewapplicationsandservices。

Forinstance,sentimentanalysisAPIscanhelpexploreandbetterunderstandcustomers’interests,emotions,andpreferencesinsocialmedia。

AslargeprovidersofferAPIsandassociatedservicesforsmallerorganizationstoleverageAIandmachinelearning,thesecompaniescaninturncreatetheirownplatformsforclientstouseunstructureddata—everythingfrominsightsfromuploadedphotographstorecognizingauser’semotionbasedonfacialexpressionortoneofvoice—intheirownappsandproducts。

Meanwhile,theever-increasingpowerofcloudplatformslikeAmazonWebServicesandMicrosoftAzurewillgivethesecomputing-intensiveappplatformsthejuicetheyneedtobecomedeeperandricher。

Thesebusinessserviceswilldependoneasywaystoexchangeandimplementdataforsuccess。

Thegoodnewsisthatfindingeasywaystosharedataisn’thardandtheAPIandSDKofferingsthatfueltheplatformeconomywillbecomeincreasinglyrobust。

Thankstotheopportunitiesgeneratedbythesenewplatformsandthenewopportunitiesofferedtoendusers,developers,andplatformbusinessesthemselves,everyonestandstowin—iftheyactsoon。

D!

AbouttheAuthors

BerndLeukertisamemberoftheExecutiveBoard,ProductsandInnovation,forSAP。

Bj?

rnGoerkeisChiefTechnologyOfficerandPresident,SAPCloudPlatform,forSAP。

VolkerHildebrandisGlobalVicePresidentforSAPHybrissolutions。

SethuMisPresident,MobileServices,forSAP。

NealUngerleiderisaLosAngeles-basedtechnologyjournalistandconsultant。

ReadmorethoughtprovokingarticlesinthelatestissueoftheDigitalistMagazine,ExecutiveQuarterly。

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