Why experimenting with platform innovation is vital

innovation-experiementationWhy wait?

Paul Hobcraft and I have been writing extensively about the impact that emerging platforms and ecosystems are having, and will have, on innovation.

As I wrote previously, we are in the same position with platforms that we were with “dot coms” and ecommerce in 1999.  Then there were thousands of alternatives and experiments to try to figure out what would work.  Now, much the same thing is going to happen at the platform level.

There’s a reason Amazon, Facebook, Google, GE and others are trying to test out their platforms, and why other industries like financial services want so desperately for their own platforms to prevail.

Platforms are enticing because they lead to the concept of a required standard.  Anyone who controls a platform in an industry or market can dictate how the rest of the ecosystem adds value or in some cases connects to customers. Thus, we can expect to see a lot of companies claiming to have the definitive platform in this or that industry.  What’s more, some functions, like the ability to pay for goods and services within a platform, are already platforms in themselves, although they are narrow but important enablers to larger platforms.  Some companies and their platforms will thrive, some companies will build enabling technologies or the “APIs” that ensure tight integration for ecosystem players, but most will take a “wait and see” approach.

While wait and see has traditionally been a viable business strategy, it’s now an increasingly risky one.  Your company doesn’t have the luxury to wait and see what emerges or unfolds in terms of platforms.  New technologies, digital transformation and new entrants from unexpected quarters are changing the dynamics of industries and customer expectations far too quickly for a “wait and see” response.  What was once a reasonable response, patience and observation, is now a recipe for falling further behind, because the lack of engagement means that you may lack the learning that market participants are receiving, and the inertia brought about by “wait and see” may make it even more difficult to move quickly if you can ascertain what’s going on.

Many companies will be tempted to follow the wait and see approach I’ve outlined above, thinking that once the technologies and capabilities are selected and implemented, they’ll adopt the chosen solutions and find ways to compete or scale.  Where innovation, ecosystems and platforms are concerned, that is a very risky proposition.

The only constant is change

Platforms are reworking the way companies and industry partners integrate to provide seamless experiences for customers. This last idea is exceptionally important:  many companies will tell you about their platforms or their participation in a valuable ecosystem.  Customers care about useful products, cohesive solutions and seamless experiences.  Platforms and ecosystems are just the means to those ends.  As they are formed, new, tighter relationships to customers are created, and companies that participate in the platform or as part of the ecosystem will solidify relationships.  Those that take a “wait and see” approach will find the opportunities to participate as part of a platform or as an ecosystem provider much more limited if they weren’t involved early on.

Further, the pace of change in capability and technology, as well as integration and inter-operability is accelerating.  Companies that experiment and learn will be able to improve their pace of innovation and change.  In the past the “wait and see” approach was reasonable, because companies understood the lifecycle of technologies and ideas revolved around a rapid rise followed by a long life and slow decline.  But the pace of change and shape of customer demands, along with shifts in digital transformation are changing lifecycles.  Increasingly the “steady state” reflected in that long life is much shorter and the decline is much more rapid.  Gone are the days when you could join a platform “already in progress” and expect to participate profitably without investing in the experimentation and discovery upfront.  Platforms and ecosystems may reach a “Steady State” temporarily but will constantly morph, extend and grow.

Thinking that you can wait until the platform or ecosystem resolves is a fallacy. 

By the time a platform or ecosystem slows or becomes “stable”, it will be decaying.  Waiting to join is like showing up dressed for a wedding but arriving for the funeral, or in some cases, the renewal of the vows or even the second marriage.  The change in markets will be that rapid, that sudden.  Platforms will either be exceptionally flexible and fungible, or they will be exceptionally short lived.  Either way, predictability will decrease.

As these platforms and ecosystems emerge and assert themselves, it is vital to start experimenting now and to keep experimenting.  Some platforms and ecosystems will succeed and grow organically, some will fail.  Innovators must hedge their bets across a range of platforms and ecosystems.  Waiting to see which ones win out may mean that there are no remaining slots in the ecosystem and that the platform has different protocols or standards than what the company developed.

Are you ready to innovate beyond the product?

Paul asks a similar question in his most recent post:  Are you ready to thrive in a world of innovation ecosystems?  Currently, many companies would be happy to generate a handful of discrete innovation activities leading to a few new products or services each year.  These innovation activities are still too inward looking, not really grasping the importance of engaging with emerging platforms and the ecosystems that will flourish around the platforms.  To be a successful innovator, you’ve got to fully engage your internal capabilities and insights, and mesh those with the emerging platforms and ecosystems that can provide a total, cohesive seamless experience.

As the fine print in many financial services firms reminds us, past performance does not guarantee future performance.  What was true in the past – the opportunity to wait for innovations or technologies to prove themselves and then adopt them – isn’t as true anymore.  There are several reasons for this:  constant change, shorter product and even industry life cycles, fickle customers.

The real take away is that you need to be discovering needs, experimenting with potential platforms and innovating constantly. 

You can’t afford to wait, because by the time a new technology or capability is proven, and customers have adopted it, the next iteration is already well on its way to commercial viability.  Meanwhile, waiting leaves you without any of the learning that companies fully engaged in experimenting with platforms and ecosystems are gaining, and in the end your company has its opportunities and profit potential dictated to it by the firms that have experience, and by the remaining opportunities in the platforms and ecosystems.  You will be robbed of strategic choice.

The new imperative

Call it what you want, if innovation has become a pariah within your organization, but you must be discovering needs and experimenting constantly with new technologies, platforms and ecosystems.  You must understand these capabilities and integrate them in a way that provides seamless customer experience.

If your corporate strategies don’t address this urgent need, tear them up and start again.  Operating models of the past are not valid in a market where the old rules no longer apply.

Lean, fast, nimble, innovative companies who understand the totality of customer need and experience and are willing to learn and experiment will win.  This is what innovators must know about the very near future of innovation in corporations.

Overcoming the Resisters

Several factors will resist the emerging reality we are describing, and you must address and overcome these resisters.

First among these will be organizational history and memory, which will suggest the future looks a lot like the past.  Never before have we seen such rapid, radical change and we can only expect it to increase in intensity and variability.

Second, the “wait and see” approach has led to success, and when something works companies tend to stick with it, even when the strategy no longer works or applies.  You need to be experimenting and discovering new capabilities, new relationships and new skills, matching your capability development and pace of change with the market at a minimum, just to keep up to speed.  Sitting and waiting is the recipe for a slow demise.

Third, you don’t have the requisite skills, culture or motivations and rewards to shift to a faster pace, a more nimble response.  You likely don’t reward experimentation and discovery.  You must engage your teams and encourage them to rethink their roles, to experiment, test, discover and work at the pace set by the market.

Finally, you probably don’t work well with a wide range of partners and ecosystem participants, but customers will demand that you do.  The faster you engage with external platform providers and the ecosystem partners, the faster you’ll provide solutions that customers in the near future will value.

Andy Grove is famous for saying “only the paranoid survive”.  In this context we could say that only the exceptionally agile, intelligent competitor who is constantly discovering new opportunities and exploring new options, reaching out to platform and ecosystem partners will survive.  That’s not paranoia, that’s the new business reality.

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