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Developing platforms
(Note: this article is an excerpt from Agile Strategy: Designing Successful Companies in an Open World. You can download the full PDF book here).
To build their portfolio of businesses effectively and efficiently, companies
must develop shared product, process and resource platforms from which
each business in the company’s portfolio draws and to which each contributes
(Exhibit 1).
Exhibit 1: Leveraging and contributing to resource platforms
This requires companies to:
- develop robust and scalable product and process platforms
- build flexible resource platforms
- continually deepen and enhance their resource, product and process platforms
- design platforms that enable them to win in their domains of focus.
Develop robust and scalable product and process platforms
As discussed above, once a business reaches the growth stage of the lifecycle, it typically needs to reengineer its products and processes to make them more robust and scalable. During the creation stage, the business experimented with a range of prototype products and processes, using as few resources as possible. These prototypes were necessarily “quick and dirty” versions, based on partially engineered elements, manual workarounds, etc. Once the business begins to secure traction and moves into the growth stage, it quickly reaches the limits of these creation stage prototypes.
To make them more robust and scalable, products and processes must be redesigned based on a detailed set of requirements gathered during the experimental creation stage. These requirements can usually be separated into two groups: requirements that are common to many customers and stakeholders, and requirements that are unique to certain customers and stakeholders. Further, the common requirements can be grouped into sub-sets that are needed in different combinations by different customers and stakeholders.
To address these requirements efficiently and meet individual customer
and stakeholder needs, the business should design its products and processes
as a disaggregated set of modules, such that each module is standardized
for quality and cost, and the modules can be combined in many different
ways for different customers and stakeholders. These modules and their
standardized components and interfaces form the product and process platforms.
These platforms should also allow for customization to individual customers
and stakeholders.
Microsoft Office is a familiar product example. The modules are the different
Microsoft Office programs, such as Word or Excel, that can be purchased
in different combinations depending on customer needs. In addition, users
can build custom applications based on Microsoft Office’s standard modules.
We can take the sales process as a process example. The business should
design a sales process comprising a set of modules that can be combined
in different ways for different customers and stakeholders. For example,
there may be different sales process modules for large versus small customers,
or for direct versus indirect sales. In addition, the sales process should
allow for custom elements to be developed for certain customers or stakeholders.
Note that by developing these product and process platforms, the company
is laying the foundation for new adjacent business models that can leverage
these flexible, scalable platforms. In this way, the company is able
to build efficiencies and best practices in its core product and process
platforms, while enabling each business in its portfolio to develop a
business model tailored perfectly to the requirements of its target customer
group.
It is essential that these platforms support, and not constrain, the
company’s different businesses. Classic barriers to creating an evolving
portfolio of businesses include legacy, inflexible product architectures
or centralized, inflexible corporate processes. Today, companies need
to provide robust product and process platforms that truly enable its
individual business models. The individual businesses should be able
to leverage and customize these platforms to develop individual business
models optimized for their target customers.
Build flexible resource platforms
Similarly, companies should develop central resource platforms that can be leveraged by each of their businesses. To develop its resource platform, a company must analyze the financial, physical and human resource needs of each of its current and potential future businesses.
Financial resources include cash, receivables and access to debt or equity funding. These are perhaps the easiest resource needs to identify – its normally pretty clear when a business needs cash. To develop the right financial resources, the company needs to understand the current and future cash needs of each of its businesses, and whether the stage of business growth requires debt or equity funding.
Physical resources include fixed assets such as property and equipment, as well as consumables such as product inputs and inventory. Here the company must be careful to understand how the physical resource needs of its businesses vary. It is obviously preferable to be in businesses that share similar physical resource needs, such as a manufacturing plant, or access to a certain kind of raw material.
Human (or intangible) resources include capabilities (knowledge and skills) and connections (relationships and reputation). These are perhaps the most subtle and important types of resources for companies. Much has been written about the importance of building core capabilities that can be applied to many different businesses. Similarly, connections, particularly strategic relationships with customers, partners and other stakeholders, as well as a distinctive reputation or brand, can be critical resources for many or all of the company’s portfolio.
One of the keys to success in open markets is to build a flexible resource platform that allows resources to be increased or decreased as necessary, and to be quickly reallocated to different businesses. For example, some core capabilities should be developed inhouse, but many can be outsourced, available on demand as needed. Fixed resources can be leased rather than owned, and consumables and materials sourced from a range of suppliers. Similarly, the company should do everything possible to have ready access to different funding sources, and should try to minimize cash tied up long term in fixed and working capital investment.
Companies should guard against associating core resources with any one business. When a company allows a business to claim exclusive access to resources, it eliminates the possibility of making optimal investment decisions with those resources across the portfolio. Whether it is brand, skilled employees, knowledge, strategic relationships, unique locations, equipment, key inputs or access to funding, each of these should be part of the company’s resource platform, and available to be invested wherever it will earn the greatest return.
Continually deepen and enhance resource, product and process platforms
As the company continually evolves its portfolio as well as each of its
businesses, it should seek to continually deepen and enhance its resource,
product and process platforms. One important source is external. There
is wide range of potential stakeholders able to provide the resources
the company needs, so long as the company can offer best value in return
for those resources. Similarly, there are many external product and process
platforms that can be leveraged in whole or in part where it makes sense
to do so.
In addition, each of the company’s businesses should contribute to its platforms continuously. Individual businesses may innovate product or process components that can be incorporated into the platforms. In addition, each business is continually generating new knowledge, skills, relationships, reputation, physical assets, cash and other resources. These resources must contribute to the company’s resource platform, so they are available to any of its businesses.
This collective effort of building product, process and resource platforms from external sources and from each business is critical to success in open markets – and one that is neglected by many companies. This is a serious error, and a primary reason that many are struggling in today’s environment. Companies must ensure they continually enrich their product, process and resource platforms by tapping into external communities and through the daily experience and learning in each of their businesses, so that this collective wealth is available to be deployed wherever it will be of greatest benefit.
Design platforms to win in the domain of focus
As discussed above, companies should build their portfolios of businesses within a domain of focus, such that each of its businesses can both leverage and contribute to its product, process and resource platforms.
Note that this domain of focus both determines, and is determined by, the company’s platforms. Its short to medium term domain will be defined by the limits of its product and process platforms. Its longer term domain will be shaped by its financial, physical and human resources, which will determine the technologies it can explore, the markets in which it can participate, and the customers and stakeholders with whom it can do business.
Of these, it is the company’s human resources – its knowledge, skills, relationships and reputation – that are its only truly unique resources. All other resources will eventually be available to other companies, but each company’s human resources – and its collective aggregation of these resources over time – gives each company its unique position and future.
Companies should continually evaluate their product, process and particularly
resource platforms in the context of their current and future domains
of focus. They need to clearly understand the current state of their
platforms, and the extent to which their platforms enable the existing
portfolio. They also need to identify gaps in their platforms relative
to future potential businesses, and implement the initiatives needed
to fill those gaps.
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In summary, companies need a clear vision of their domains of focus,
of the businesses they should evolve within that domain, and of the product,
process and resource platforms they should develop to enable that vision
to be realized effectively and efficiently. These platforms must be robust,
scalable and flexible, available to all of the company’s businesses,
and continually enriched from external sources as well as through daily
contributions from each business in the portfolio.
References
Cooper, Robert G. Winning at New Products. Cambridge: Perseus Publishing, 2001
Gower, Annabelle (Editor). Platforms, Markets and Innovation. Northhampton MA: Edward Elgar, 2009
Hagel, John III and Arthur G. Armstrong. Net Gain: Expanding Markets Through Virtual Communities. Boston: Harvard Business School Press, 1997
Hagel, John III, John Seely Brown and Lang Davison. The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion. New York, Basic Books, 2010
Hagel, John III and Marc Singer. Net Worth: Shaping Markets When Customers Make the Rules. Boston: Harvard Business School Press, 1999
Haines, Steven. The Product Manager’s Desk Reference. New York: McGraw-Hill, 2009
Hamel, Gary, and C.K. Prahalad. Competing for the Future. Boston: Harvard Business School Press, 1994
About the author
Michael Lurie is the CEO and founder of the Agile Strategy Institute, a research, education and consulting organization, and the creator of its original core body of knowledge. He is also the founder of the Agile Strategy Alliance, a non-profit professional association for executives, board members and advisors interested in learning and practicing agile strategy.