The platform era, which has begun, will ultimately be one of shockingly total domination by shockingly few players.
The dominant platform player achieves massive returns to scale. Its platform grinds competitors, middlemen and other intermediaries to dust, as the 90s word “disintermediation” suggested. The term wasn’t wrong; it just failed to acknowledge that in many cases one supreme intermediary would be left standing. The control of data and processing assets is turning out to be late modern equivalent of control of distribution. It creates a position of great, seemingly unassailable, and relaxed power. The “relaxed” part is important — because a power that is relaxed and not tense can take its time, pick its targets, and generally do as it pleases.
There are already dominant platform players operating in broad daylight, and they are well-known: Amazon for retail, Google for search, Apple for mobile platforms and applications (and Google successfully imitating them with Android). As HBR correctly summarized a couple of years ago, the strategy of such platform players is to play “matchmaker” between a group of producers and a group of consumers. But a truly dominant platform player goes well beyond this. While it may cloak its intentions in friendly (especially consumer-friendly) rhetoric, in reality it creates a broad and steadily growing ecosystem with the express purpose of controlling and exploiting it. The platform player achieves this objective through ambition, stepwise strategy, and purposeful design.
Platform dominance starts with a broad and ambitious goal, such as Bezos’ plan to create an Everything Store or Page and Brin’s mission to “organize the world’s information and make it universally accessible and useful.” The platform player’s first concrete step is to dominate a relatively limited niche (say, books); the subsequent steps are to leverage advantages created in the first niche to take new territory (clothes, electronics, toasters, watches), and then use those new learnings to launch into newer territory altogether (Internet infrastructure). No move is random, though it might appear so from a distance.
The details of platform design may be complex, but the axioms are simple. Create a service-oriented, component architecture that is highly scalable and highly modular, with strict separation of concerns. Build numerous APIs that can be made available to internal and external clients whenever tactics dictate. Make the analysis, understanding, and applied use of collected data a core part of the business strategy from day one.
What must a company have to achieve these types of platform objectives? First, as we’ve said, ambition. The end objective must be big enough to make the incremental steps individually worth the effort. Second, a dearth of things to lose. Disruptive platform players have little or nothing to defend, which makes them fearless and able to draw powerful conclusions that incumbents are afraid to see. Third though, and this is perhaps most important, a platform player must be led by engineering talent.
A common conceit of the dot-com era was that wild-eyed visionary kids would found a company, and then “mature adults” would be brought in to run it. How has that worked out in practice? Consider a couple of platform players where the alleged adults were brought in (AOL, Yahoo), and contrast them to a couple where the visionaries are still in charge (Amazon, Google). Who is doing better? Who is still growing and expanding? Who is moving effectively into adjacent and even non-adjacent industries?
It would seem that adulthood is overrated. Or that perhaps the entire conceit is incorrect. It is not a matter of adult vs. child; it is a matter of engineer vs. business manager. The latter increasingly looks like a relic of late 20th-century capitalism, which is now well over a decade in the rearview mirror. The 20th-century business manager suffers today from having too many things to unlearn. For a great illustration of this, read the 2006 book Enterprise Architecture as Strategy, by Weill, Ross et. al. The book is an extended argument made to mature executives about how they need to rethink their businesses, build flexible and enabling technologies, exploit the value of data, and so on. The book also explains the complex journey from their current state to this end state, including how to talk individual business units along for the ride, placate executives who prioritize their own functional needs over those of the enterprise, and so on.
Does anyone at Google need to read this book? Would anyone at Google be able to stifle laughter at the idea of having to talk executives into understanding basic enterprise architecture? I say no and no. That is why I say that the platform era is the revenge of the enterprise architect. The principles the architect has tried to preach to traditional companies are not only correct; they are the entire foundation of the future of business.
You may feel I’m overstating the potential of platform players or their ability to expand their spheres of influence. Very well then. Tell me, what are the obstacles to Apple extending Apple Pay and becoming a full-service bank? To Google leveraging its user data and becoming a highly-informed insurance company? To Amazon using its logistics knowledge and becoming a manufacturer? I would say habit, convention, and certain temporary advantages of incumbents, including legal underpinnings. But all of these obstacles can be overcome with time, including the legal ones. And the war chests that platform players are accumulating provide all the resources needed for these future battles. I could close with a comment about how you need to start listening to your enterprise architects, but if you really need to hear that now, it is quite likely too late.
Rob Lawrence 