moss, seedling, plant

The largest value-creating transformations in technology involve two things: winning a platform battle, and accelerating growth by either repositioning the core business or extending its capabilities into new domains.

The highest-valued technology companies are all platform winners that established their successful platforms as a market transition unfolded. There’s Microsoft with Azure and Office 365, Amazon with e-commerce and Amazon Web Services, Google with search and Android, Facebook with social media, Adobe with Creative Cloud, and so on.

The term “platform” is often used broadly. Here, we use it very specifically to indicate a product or service upon which others build their livelihood—one that attracts an ecosystem of partners and customers who collectively deliver value. The concept is as old as road widths, but is more prevalent in the technology sector than other industries. Now, it’s becoming more critical as abundant foundational infrastructure such as cloud computing and mobile communications has enabled global, interconnected platforms to rapidly scale up.

The playbook for establishing a successful platform is no secret: mobilize early, offer the best ecosystem economics, win the anchor partners and customers, scale up the business, and extend and deepen customer engagement. However, the specifics of each platform strategy vary, and the journey is fraught with pitfalls. A platform by nature creates so-called network effects that can result in attractive economics and a winner-takes-most dynamic. As a result, platform battles are usually hotly contested, with intense races to scale.

The key to the other half of the value-creation equation depends on where a technology company falls in its life cycle—disruptor or incumbent. When a company already has a mature platform-based business model, the formula for value creation involves repositioning the core business as the market transition occurs. When a company’s platforms are still nascent and growing, the formula for value creation more often involves extending them into new domains.

The core repositioning formula is particularly potent if the market has concluded such a repositioning is unlikely. Examples include Microsoft’s and Adobe’s repositioning around the cloud, and Nvidia’s repositioning from mobile devices to graphics and the data center, as artificial intelligence growth exploded (see Figures 1 through 3).

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top