Peter Boggis and David Trafford explore how over the past decade technology-enabled business platforms – the likes of which include Amazon, iTunes and Facebook – have had a significant impact on our personal and professional lives. The thing they all have in common is that they ‘pulled’ us into a different future to the one we might have envisaged. This approach is equally applicable in organisational strategy and change where technology-enabled business platforms can be used to ‘pull’ an organisation into its desired future.
In a previous Formicio Insight article How Information Technology Drives an Organisation to its Default Future, we discussed how past technology decisions can have a major impact on what organisations can and cannot do to change their trajectory. Not only did we examine the impact of legacy technology and systems, we also explored how the mindset and organisational capabilities of the IT function can have a profound effect on an organisation’s ability to change its future.
In this article we will explore how technology, and specifically technology-enabled business platforms, are ‘pulling the present into the future’. We will give some examples of where this has happened, and how it continues to evolve. We will also discuss some of the risks of taking this approach.
Over the past decade, our personal and professional lives have changed significantly as a result of the emergence of technology-enabled business platforms, the most obvious examples being Amazon, eBay, iTunes, Facebook and LinkedIn. Each is an excellent example of how we have been ‘pulled’ into a different future to the one we might have envisaged.
For example, before the advent of Amazon we were happy to go down to the book-shop, browse the shelves and take away what we hoped would be an entertaining read. Some of us may even have subscribed to book clubs where, once a month, we received a book they thought we might like. Back then, we knew no alternative; we didn’t realise that we would soon be able to browse thousands of books online; read reviews; receive recommendations based upon previous purchases and get our choice delivered to our home the following day. And we could do all this without moving from our computer! The idea of streaming music and videos to our computer or mobile device was fanciful and, if it ever happened, was something we would never be able to afford. And as for ‘updating our status’, why would anyone be interested!
Today’s business platforms are very different
Today’s emerging business platforms are very different from the platforms of yesterday, which were essentially closed systems aimed at automating transactional processing for multiple users. Examples of this type include retail banking platforms; payment networks such as Swift, BACS and CHAPS; credit card issuing and processing platforms provided by TSYS and MBNA, and airline reservation systems like Sabre. And of course the proliferation of enterprise applications based upon ERP systems like SAP and Oracle/PeopleSoft.
So if today’s business platforms are different, what makes them so? In our view, they differ in four important ways:
- They are extendable. New value-added services can be added easily. For example, when Amazon was launched in 1994, it was solely an e-tailer of books. Over the years, it has continually extended what it offers to now include CDs, DVDs, online music and many other products provided by third-party suppliers. Today it is possible to get virtually anything from Amazon.com.
- They are open – to new participants. For example, when Apple launched iTunes in 1998 it offered a simple music player; today people and companies across the globe develop apps for the iPhone and iPad, which are available on the iTunes Store. The same applies to Google Play.
- They support eco-systems. Their reach extends across the value chain from suppliers to customers, they enable immediate feedback and communicate directly with social media.
- They are agile. They are not constrained as their underpinning technology and architecture enables them to adapt and evolve.
Today’s business platforms all have one thing in common: they change our individual and organisational behaviour. They change our trajectories to a different future. They pull our present into their future! A future that became so familiar it didn’t feel like we’d changed at all! But was this by accident? Did these things just happen or were they planned?
Make no mistake: it was all planned. When Jeff Bezos launched Amazon, he had a clear vision from the outset – and he continues to develop this vision today – as did Mark Zuckerberg at Facebook and the system architects at Apple. They were all building a future in which they believed we would willingly participate. It’s a sure bet that system architects in the likes of Google are doing the same right now.
When the future becomes the present
At first we don’t understand why we need it, and then we can’t manage without it! It then sets expectations by which we judge all others. Without us knowing it, the likes of Amazon and Facebook changed our future in a way that drove change across the whole retail sector. If an organisation doesn’t have an omni-channel capability in place it will suffer – as was demonstrated last Christmas when the growth in sales of John Lewis was attributed to customers being able to browse, view demonstration videos, read reviews, select, pay and have the item delivered or arrange for collection from their nearest store – including those of its sister company Waitrose. Retail analysts attributed this lack of capability to the poor performance of Debenhams, for example.
When the future becomes the norm and you don’t have that capability, it can hurt and be expensive to catch up. This was the case with Morrisons, the UK’s fourth largest supermarket, which up until early 2014 did not have an online ordering and delivery service. This lack of capability, in the fastest growing segment, was adversely hitting market share and profitability. In order to catch up, they signed a £200m deal with Ocado, to get access to its online grocery ordering and delivery business platform.
The challenge is implementation
The principle of using business platforms to pull the present into the future is a compelling one and, as the examples above illustrate, it can be very effective. Furthermore, the approach is not restricted to consumer-centric platforms like Amazon and iTunes; the same principle can be applied to any organisation, industry or government. The challenge lies in successfully applying the approach.
When Tony Blair announced the NHS National Programme for IT (NPfIT) in 2002, his vision was for a very different patient experience and a more efficient National Health Service (NHS). The aim of the initiative was to move the NHS in England towards a single, centrally-mandated platform that connected 30,000 General Practitioners to 300 hospitals, providing secure and audited access to these records by authorised health professionals – see belowfor more details. Unfortunately, the initiative was not a success and in September 2013, the UK Government’s Public Accounts Committee said that although the National Programme for IT had been effectively disbanded in 2011, some large regional contracts and other costs remained outstanding and were still costing the public dearly. It described the former National Programme for IT as one of the “worst and most expensive contracting fiascos” ever. Estimates of the costs vary, but are likely to exceed £12 billion.
The NHS National Programme for IT (NPfIT)
While positioned as an IT initiative, the aim of the programme was to build a business platform that would create a very different future for patients and medical practitioners.
With an initial budget of £2.3 billion over three years, its intended functionality included:
In 2008, the BBC launched its Digital Media Initiative (DMI) with the aim of modernising the Corporation’s production and archiving methods by using connected digital production and media asset management systems. In effect, creating a business platform that supported the programme production eco-system. In May 2013 it was abandoned at a cost of some £98 million.
The UK Department of Work and Pensions is currently in the middle of building a new £2.4 billion business platform to support their Universal Credit initiative, the aim of which is not only to re-engineer the complex administration of £70 billion of social security payments to 8 million households, but also to merge six benefit systems across two government departments and scores of local authorities throughout the country. There are reports that the programme is in difficulty, which is not surprising considering its complexity.
In these three examples – admittedly from the public sector – the principle of ‘pulling the present into the future’ through the use of technology-enabled business platforms was and is being applied. The fact that the first two examples failed and the third is at risk does not mean the approach is not valid – rather that the capabilities were not in place to build such an ambitious future in this way. In the first two examples the IT component of the initiatives was blamed, and if the Universal Credit initiative goes the same way we are sure IT will also get blamed. But the building of these complex business platforms involves more than IT – as their ultimate aim is to change the behaviour of their users across a complex eco-system. It involves the design of a different operating model that engages its users in such a way that will ‘pull’ them from how they operate today to a very different future. In the case of Universal Credit, from accessing multiple benefits from multiple agencies to receiving one (universal) benefit.
The question is not whether this approach should be taken, but how do we develop the capabilities that ensure success? What can we learn from the likes of Amazon, eBay, Google, iTunes and Facebook?
The lead time can be long
The lead time to develop these business platforms, and for them to be adopted, can be considerable – and require significant investment. In the case of Amazon it took seven years from launch to it making a profit – see below.
Amazon’s path to profitability
The company was founded in 1994, and in July 1995 sold its first book on Amazon.com. In the first two months of business, it sold to all 50 US states and over 45 countries. Within two months, Amazon’s sales were up to $20,000/week.
Not planning to make a profit for four to five years caused fear among shareholders who felt that not reaching profitability fast enough made it difficult to justify investment, and questioned whether it could survive in the long term.
When the dot-com bubble burst at the start of the 21st Century, destroying many e-companies in the process, Amazon survived, and grew on past the bubble burst to become a huge player in online sales.
It finally turned its first profit in the fourth quarter of 2001: $5 million (ie, 1¢ per share), on revenues of more than $1 billion.
Another example is Ocado, founded in 2003 by three ex-Goldman Sachs bankers and listed in 2012. During the early years, it invested heavily in building a technology-enabled platform to support online grocery ordering and delivery. Until 2013, its only customer was Waitrose – an up-market UK supermarket. As described earlier, Morrisons became its second customer in 2013. Analysts believe that this could be a significant turning point for Ocado and expects it to make its platform available to other supermarkets outside the UK. Having invested heavily in building its platforms and capabilities, analysts now believe that it will report a profit in 2014 and will attract other customers, typically outside the UK.
Future business platforms
We believe that technology-enabled business platforms will increasingly become the basis on which business is done in the future – for consumers and organisations in the private and public sector. Furthermore, we believe that these business platforms will support entire eco-systems, which span traditional organisational boundaries to be truly sector-wide. Increasingly, the emergence of these business platforms in multiple sectors – such as consumer products, healthcare, medicine and governments – will pull us all into a future that we cannot entirely envisage today – in a manner similar to which Amazon, iTunes, Facebook and LinkedIn have done.
The following three examples provide illustrations of where this phenomenon is already beginning to happen – with the potential to transform entire sectors.
World’s first $1,000 genome enables factory-scale sequencing for population and disease studies
In January 2014, Illumina Inc announced that its new HiSeq X Ten Sequencing System had ‘broken the sound barrier of human genomics’ by enabling the $1,000 genome. It said: “This platform includes dramatic technology breakthroughs that enable researchers to undertake studies of unprecedented scale by providing the throughput to sequence tens of thousands of human genomes in a single lab. It can analyse complete genomic information from huge sample populations. The HiSeq X Ten platform is ideal for scientists and institutions to focus on the discovery of genome variations to enable a deeper understanding of human biology and genetic disease”.
When this is coupled with the emerging phenomenon of ‘Precision Medicine’, radical new business models appear possible through the collaboration of multiple players in the eco-system. Precision Medicine focuses on particular treatments for particular patients – not just for particular diseases. It allows pharmaceutical companies to develop drugs that lead to better outcomes while cutting development time and costs.
GE creates partnership to build an industrial-strength internet platform
In November 2012, GE Aviation and Accenture formed Taleris, a joint venture to provide intelligent operations planning and recovery solutions for commercial aircraft. This new venture uses advanced prognostics technologies based on artificial intelligence and behavioural science, combined with advanced planning optimisation and recovery technologies based on operations research.
While it does not call itself a business platform it has all the features we have discussed earlier. It supports an ecosystem that helps airlines avoid controllable disruptions and recover from non-controllable disruptions, driving down costs in the areas of maintenance, passenger rebooking, crew logistics and aircraft movement. It is a business platform that is pulling an industry to a different future. We are convinced that over time the platform will be extended and do the same for other industries with machine-based assets, eg railways, hospitals and utilities.
Powered by IBM’s Watson platforms
Many future platforms will undoubtedly feature IBM’s Watson super-computer, which is able to emulate how humans think, using natural language capabilities and advanced analytics. Gartner predicts that this is the beginning of a number of ‘powered by IBM Watson’ apps coming onto the market. The platform is already attracting developers, including Fluid, which is developing an app for retailers North Face to provide advice on online shopping and Welltok, which is developing an app to give people advice on health and lifestyle. The development platform is open, with IBM making its APIs available to potential developers. IBM is even working with venture capitalists to build an eco-system of companies that might play a role. To date over 800 organisations have expressed interest in creating apps based on the Watson platform.
The first commercial application of the Watson-based platform was in February 2013 to support lung cancer treatment decisions. IBM has said the range of possible applications spans legal research, telecoms, financial services and government.
Investment Bank Credit Agricole estimates that IBM’s Watson-based business could account for more than 12% of IBM’s total revenue by 2018.
Platforms such as these will continue to change behaviours of multiple players and pull us into a different future.
The Economist, in its January 2014 special report on tech start-ups, predicts that the impact of ‘platformisation’ will be monumental. Furthermore, it believes that those who see the current entrepreneurial explosion as merely another dotcom bubble should think again. The report finishes by saying that “Today’s digital primordial soup contains the makings of the economy and perhaps even the government of tomorrow”.
Five key questions
If you or your organisation are thinking about a technology-enabled business platform, consider these five questions:
- How has your own personal and professional life been changed in the last decade by technology-enabled business platforms?
- What technology-enabled business platforms exist or are emerging in and around your industry ecosystem?
- What role (or roles) is your organisation currently playing – or planning to play – in these emerging business platforms? Are you actively building a platform or developing platform components?
- What threats and opportunities do these business platforms present to you?
- If you fast-forward five years, how might your industry sector be transformed by current or emerging business platforms?
We welcome your thoughts.