Here is John Hagel III‘s introduction to his new report, “Business ecosystems come of age,” featured by the Deloitte University Press. Hagel explains how and why properly designed business platforms can help create and capture new economic value and scale the potential for learning across entire ecosystems.
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Ecosystems are dynamic and co-evolving communities of diverse actors who create new value through increasingly productive and sophisticated models of both collaboration and competition. Read more about our view of business ecosystems in the Introduction.
Properly designed business platforms can help create and capture new economic value and scale the potential for learning across entire ecosystems.
When Marc Merrill and his partner designed the online game League of Legends and founded a company, Riot Games, in 2009 to bring it to market, they didn’t only have in mind to create a new product for the gaming world. Their strategy was to build a platform. Already, that platform has become a very valuable one. Start with the game itself: 67 million people play it each month, generating some $1 billion dollars in annual revenue for the company. These gamers, who may be sitting alone in their dorm rooms but who, online, join up as teams to do battle, all play for free; Riot Games makes its money when, having drawn everyone into its designed environment, it finds other ways to capitalize on their presence. More recently, the company extended its platform to the offline world, creating live events in which League of Legend teams compete in tournaments in front of live spectators. It doing so, it launched what is now the fastest-growing part of the sports industry: e-sports.
Riot Games’ still evolving strategy is just one example of a trend we see all around us today, and not only among companies that were “born digital.” Everyone, it seems, is thinking in terms of platforms. That is, they are recognizing that, no matter the market, there is money to be made in providing layers of capabilities and standards that other players in that market can tap into and use to interact more efficiently. Popular platforms—a classic example being the iTunes application program—allow the participants on them to create and capture value for themselves, while also (thanks to network effects) yielding strong returns for the platform builder.3 Every participant must abide by the rules of the platform but is otherwise not answerable to any other player in it, including the platform originator.
The trend we’ll describe below, however, is likely more nuanced than the simple observation that many more firms are devising platform strategies. Managers’ familiarity and experience with platforms have reached the stage that they are increasingly designing them, or taking advantage of their existence, for particular kinds of gains. As we’ll discuss in more detail, many firms are employing noticeably different tactics depending on whether they see a platform as a way to improve performance (by focusing on what they do best), grow their footprint (by leveraging capabilities that in the past they would have had to own), innovate (drawing on that vast majority of smart people who aren’t strictly in their employ), or capture more value. Looking ahead, we anticipate that smart managers will refocus their platform strategies again—on the deliberate pursuit of the learning advantages that platform participation uniquely affords.
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Here is a direct link to the complete article.
John Hagel III has more than 30 years experience as a management consultant, author, speaker and entrepreneur, and has helped companies improve their performance by reshaping business strategies and more effectively integrating them with operating, organizational and technology capabilities. John currently serves as co-chairman of the Silicon Valley-based Deloitte Center for the Edge, which conducts original research into emerging business opportunities that should be on the CEO’s agenda but are not as yet.
To learn more about John and his work, please click here and here.