The economics, structure, and behavior of platform ecosystems and organizations
A platform strategy is the mobilization of a networked business platform to expand into and operate in a given market. A business platform, in turn, is a nexus of rules and infrastructure that facilitate interactions among network users. A platform may also be viewed as a published standard, together with a governance model, that facilitates third party participation.

| Geoffrey Parker and Marshall Van Alstyne, Platform Strategy

Platforming is the process of transforming an industrial-era vertical business into a participant in a networked platform ecosystem, or creating a platform ecosystem from the ground up. Platforming is the tactical realization of a platform strategy.

| Stowe Boyd

Platforming is a series investigating the thinking around platform business in leading strategy, design, and management consulting firms.

In this installment, I look into a report from March 2019 from Vivaldi, a global strategy consulting firm that is positioned as operating 'beyond consulting' through 'strategy by doing', a fusion of design thinking, management consulting, and strategy.

The Report: Platformization Potential

The report is entitled Platformization Potential, and is dedicated to the theme of platforming (a much prettier word than platformization, I think) and asks — and lays out a structure to consider — three questions:

  1. Can traditional pipeline firms become platform companies?
  2. Can they build a platform business?
  3. Can they capture exponential growth and boost their stock performance?

The report's research team undertook an extensive review of the leading thinking on platforms, and investigated the successes and failures in the domain. Then, Vivaldi defined two 'lenses' to analyze companies involved in platforming. The first is 'the brand relationship between a company and its stakeholders' and the second is 'how the company performs across five factors':

The Brand Relationship has these and other qualities:

The extent to which the brand establishes a relationship with consumers and the nature of the relationship with other participants in the ecosystem is the first lens through which to understand the platformization potential.

The type of brand relationship that a company has with consumers strongly determines the potential for building a platform business.

How broadly or narrowly a brand is positioned, to what extent the brand establishes a relationship with consumers, and the nature of the relationship with other participants in value creation determines the platformization potential. This is the cost of entry.

The Five Factors:

  1. The 'Customer Centricity PLUS' Mindset — Putting the customer first to the point of obsession is a precondition for platforming success. The PLUS represents looking beyond customers, and engaging with partners and suppliers in new ways, as 'essential providers of value, as participants in overall value creation, even connecting partners or suppliers directly with customers'. Ecosystem Mindset might be better.
  2. Value Through Data and Analytics — 'Companies that have high platformization potential are those that think far beyond simply products and services. They operate businesses where value is created through data and analytics, enabling them to create new value through strategies such as personalization or customization.' How Digital are they?
  3. Social Currency — 'how a company fits or is part of the social lives of consumers or others, and the extent it engages with others in social networks, both offline and online'. This is the network side of the network + platform = ecosystem equation: how Networked are they?
  4. Industry Position and Ecosystem Potential — A 'company’s position in the industry and their potential to orchestrate an ecosystem. To do so requires companies to have a certain position in an industry, and it requires them to have a systems perspective. One cannot do it alone.' Ecosystem Potential captures this perfectly.
  5. Agile Experimentation With New Technologies — 'Companies that are willing to continuously experiment and invest in value-creation through technology have higher platformization potential'. Or, how Technologically Curious are they?

In sum, those companies most likely to succeed in platforming are technologically curious, highly networked, digitally-grounded, and show high ecosystem potential and an ecosystem mindset.

Still I felt that maybe an additional obsession is missing, perhaps a sixth factor: a Learning Mindset. All platform ecosystems have to have the second engine — the learning engine — to complement the value engine, so that experience can be turned to new advantage. Perhaps dropping the qualifier technological from technologically curious would go part of the way there?

In sum, those companies most likely to succeed in platforming are technologically curious, highly networked, digitally-grounded, and show high ecosystem potential and an ecosystem mindset.

Vivaldi crunched the numbers on the Fortune 500 and found that FANGA (Facebook, Amazon, Netflix, Google and Apple) outpaced the pack by a great deal:

Platform businesses outperform the S&P 500 by 148%.

The report concludes by presenting a curated list — through the application of the two lenses — yielding The Top 50 Platformization Potential Companies, ranging across 11 industries. Some are perhaps unsurprising — like Netflix as the most likely candidate in Tech, Media, and Entertainment — while others had me scratching my head: Sherwin-Williams?

But their analysis of Sherwin-Williams is compelling:

Numerous platform opportunities exist for Sherwin-Williams. They have the ear of many potential platform participants - customers, contractors, designers - and they can bolster connectivity by making the technologies they offer interoperable across these participants.

With their focus on customer centricity, paint color app, and Spanish language content, Sherwin-Williams has demonstrated their interest in innovating for growth. With a foundation for better data, they should engage with both consumers and out-of-category vendors to put a century’s worth of customer learnings to work for more than just paint.

By inserting themselves in relevant conversations through collaborations and partnerships, Sherwin-Williams can learn more about participants, generating insights that would be valuable to anyone within the ecosystem. For example, Sherwin-Williams can integrate their offerings and expertise across furnishing retailer websites and social platforms. Sherwin-Williams’ social relevance will grow as users begin to engage with the brand on their partners’ various social pages.

However, digital products are not the greatest opportunity in plain sight. Numerous platforms aggregate subcontractors and suppliers, with main contractors and producers such as architects, structural engineers, HVAC engineers, and the network of interior designers. Sherwin- Williams has exciting opportunities to participate in many of the emerging platform models in the construction industry.


The report concludes,

It is our hope at Vivaldi that through this study, we will have contributed to a greater understanding of platform businesses and their role in enabling or transforming traditional pipeline or value-chain businesses.

I find the two lens model that Vivaldi developed for this analysis to be quite helpful, and I will be contrasting it with models from other strategy consulting companies in this series. I also plan to interview one or more of the contributors to learn more about Vivaldi's platforming work and research.

Their analysis of 50 leading platforming candidates lays out fifty narratives of what-may-come-to-be for Netflix, Sherwin-Williams, and 48 others. We will have to keep our eye on them to see who does — and does not — take the advice that Vivaldi has offered them.

I suggest that anyone interested in platform ecosystems read the report in full.