There’s a revolution sweeping across the business landscape. Boundaries are rapidly shifting and even collapsing, disrupting long-stable industries and creating entirely new ones. Whether or not they’re being squeezed yet, companies in every industry can feel the threat.
Sound familiar? That’s what happened in the Industrial Revolution, where inventions like steam power rapidly expanded the frontier of what was possible and eventually spawned entirely new business models like Henry Ford’s famous assembly line. But it’s also what’s happening today.
That’s because we’re in the middle of the Connected Revolution, the economic and social transformation ignited in the opening decades of the twenty-first century by mobile and connected technologies.
With the explosion of things like mobile and social media, business today has forever changed. What may have seemed a fad a decade ago is now at the core of many businesses. And the change is only beginning, as a new business model will continue to challenge traditional businesses in the years ahead: the platform. Platforms today are at the forefront of our economy, and they will only grow more prominent in the future.
Platform businesses like Amazon, Apple and Google are already dominating their industries, and platform start-ups like Uber and Airbnb are disrupting many others. Additionally, recent big acquisitions like Nest and Waze by Google and MapMyFitness by Under Armor were pure platform plays. So too were Google’s and Apple’s recent moves into the connected car with iOS for the Car and the Open Automotive Alliance. And Snapchat’s valuation at $4 billion by Google and offer of $3 billion in cash from Facebook were driven by its potential to grow into a powerful platform.
As these valuations and acquisitions indicate, platform businesses are growing into a major part of our economy. But why is this happening now?
Platforms themselves are not new. In its most basic form, a platform is a multisided business that uses technology to connect two or more mutually dependent groups in a way that benefits both sides. Platform business models from the Industrial Revolution era include shopping malls and credit card companies and have been around for a long time.
But today’s platforms are different. They are built for the Connected Revolution. These Connected Platforms are far more powerful, flexible, and open than were their predecessors, whose value was primarily in aggregation.
The key difference between then and now is in today’s technology. Technology in the Industrial Revolution was largely complementary to individual knowledge. Inventions from this era may have automated many tasks, but they worked best when people were guiding their use. Today, technology is rapidly replacing human knowledge. Many tasks that as recently as a decade ago were thought the sole domain of human beings are now being done automatically by machines.
This shift is the result of decades of advances in information technology. In the Industrial Revolution, industrial technology was far more advanced than IT, making human knowledge a necessary component of production. But now IT is rapidly catching up.
Apple’s iPhone – the most iconic of today’s platforms – kick-started this revolution by placing a computer right in everyone’s pocket. The iPhone and the generation of connected devices it inspired created a radical shift in individual behavior, spawning what’s now called the connected consumer. Today, connected technology has become so ingrained in our daily lives that, according to several recent studies, the average user checks their smartphone more than 100 times per day. There’s even a new term for the fear of being without your device – nomophobia.
This shift in behavior means that now almost everyone has technology with them wherever they go that uses sensors to continuously collect and transmit data. And all of this happens automatically throughout the day as you use and carry your device. The cost of gathering and transmitting information is now low enough that platforms are able to seamlessly accomplish tasks that would have previously taken a number of people to complete. The result is vastly lower barriers to entry and nearly unprecedented gains in efficiency. What would have previously taken a group of organizations to accomplish can now be done all through one platform.
Uber, valued at just under $4 billion, is the quintessential example. Uber’s platform connects you with a driver with the tap of a button. What previously required time and human capital to coordinate and deliver can now be done instantly at a much larger scale, and in a way that can react to your needs in real time. This is the power of the platform.
To some, this trend of platforms and technology displacing people may seem worrisome, but there’s more to the story. Platforms are not just replacing old jobs but also creating entirely new ones. For example, Apple claims that the iOS app economy has helped create almost 300,000 jobs. The openness of today’s platforms give them incredible potential for job creation.
Still, like the Industrial Revolution before it, the Connected Revolution will bring both social and economic upheaval. With a few notable exceptions like Nike and GE, today’s platform businesses are mostly tech companies and start-ups. But all businesses should be thinking about how to grow their own platform. If they don’t, someone else will, thanks to the much lower barriers to entry created by the widespread availability of today’s information technology. And since established platforms are very difficult to compete against (just look at how Microsoft is faring with its Windows Phone), moving too late can be fatal.
Like during the Industrial Revolution, this is anything but business as usual. Platforms are poised to transform our economy, just as new ways of doing business did in the 19th and 20th centuries. And though history doesn’t repeat itself, it does rhyme. The businesses that don’t harness the power of platforms will be today’s Luddites, left behind by the march of technological progress. That’s why it’s time for all businesses to start thinking about platform innovation – before it’s too late.
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