By Barry Libert, Megan Beck & Yoram Wind
Network businesses have always been around, from matchmakers to real-estate brokers. Digital platforms, like Airbnb, Pinterest, Snapchat and Uber, add another dimension. They operate quite differently from traditional product and service providers. Here are three ways that a legacy organization can build a digital platform.
1. Use existing tools. Free platforms, like Facebook, Instagram and Twitter, all offer opportunities for two-way, collaborative communication. Camera manufacturer GoPro maintains a much-followed Instagram account where the company, and GoPro users, share photos and videos. The Instagram account engages consumers and lets GoPro know how they use its products.
2. Find a partner. General Motors (GM) recently introduced digital platforms to its portfolio with a $500-million investment in ride-sharing company Lyft. GM has rolled out a short-term car-rental product called Express Driv, through which Lyft drivers can rent GM cars. Down the line, GM intends to use Lyft and Cruise (a driverless-car start-up) to help shift its business to autonomous vehicles.
3. Build it yourself. For most established players, platform development is intimidating. It can take years to close the technology and skill gaps. Jeff Immelt, CEO of General Electric (GE), has decided that GE needs to navigate its own digital transformation. He has led the company to create Predix, a platform for the industrial Internet, which in 2015 generated $5 billion in revenue. As Immelt has noted, GE’s transformation required bringing in new talent throughout the company, with new leadership and cultural styles.Building digital platforms also requires a deep understanding of your customer base. Most companies that go this route, including GE, are focused on better serving current customers, a group they understand well. Companies that want to use digital platforms to reach new customers are better off finding partners.
Barry Libert is the CEO of OpenMatters and a senior fellow at the SEI Center at the University of Pennsylvania’s Wharton School. Megan Beck is a digital consultant at OpenMatters and a researcher at the SEI Center. Yoram Wind is a professor of marketing at Wharton.