Behind the FANG's (and others) global reach and trillion dollar valuation headlines is one of the most cited organization types: Platform Organizations (or POs). While intriguing to many business leaders today, PO presents a design challenge to many OD professionals.
Closed and Open Systems
Today, most companies with traditional activities, operate in closed systems. People know who has what inside and outside the organization. They rely on limited supplies of labor and capital. Popular with government, defense, sports teams, churches, political parties, family businesses and many others. Value (or utility) is created and pushed from the producer to the consumer through the linear transformation of inputs to outputs (the “pipe” metaphor).
Open systems have become more popular as the Internet continues to democratize work. It works easily in ever-changing environments (such as VUCA) and is highly customizable, but more complex to use. It's made possible by digital technology that keeps transaction costs low, scales easily, adapts, and changes much more quickly than closed systems. They are generally flat and used by small (start-ups and micro enterprises) and very large organizations, with Alphabet/Google being the latest.
Core Design Features
At the core of every PO design is a unique 'platform' to stimulate interaction and sustain producer-consumer relationships in the value creation process. This allows organizations to use the cloud to unlock potential inventory, manpower, and talent. PO organizes people and things according to need, not supply. Customers have access to a wide variety of resources, choices, services, and products that can be customized across app stores and devices. Essentially a case of 'two markets', this collaborative interaction uses the infrastructure’s rules, contracts, incentives, tools, transactions to form the 'product or service' of the process. Without feedback loops, organizations clearly lose their ability to continuously adapt and survive within their ecosystem.
PO takes advantage of the "network effect". This emerges when the value experienced by users in a particular product or service increases as more users consume the product or provide "additions" to the network. For example, the more Uber drivers available, the more potential value each Uber user has (e.g. reduced wait time). And as more passengers join the platform, the potential increased revenue value for drivers grows. These positive feedback loops can extend across the ecosystem.
The PO results are as compelling as they are fascinating. They are used in both materials and service-intensive products manufactured by traditional and new tech companies. Airbnb is now the world's largest hotelier without owning a hotel. Uber and all other Ubers (from e-commerce to grocery delivery to healthcare). Or Tik-Tok and YouTube are the biggest video makers that gave their users the opportunity to create and offer their own short videos.
Categories
PO is becoming increasingly important to value creation. Regardless of structure, POs need to focus on interaction dynamics to influence transaction costs and improve competitiveness and growth potential. John Hagel¹ identified the following four PO categories.
1. Aggregation platforms bring together the relevant resources and help users to connect with them. They tend to be very transactional or task oriented. Examples include marketplaces and brokerage platforms such as eBay and Etsy. Operate like a hub-and-spoke with platform owners and organizers to facilitate all transactions.
2. Social platforms connect people. Facebook and Twitter are prime examples, but instead of supporting transactions and completing tasks, they support engagement between people with common interests. It also facilitates relationship networks without involving the platform organizers and owners.
3. Mobilization platforms encourage people to work together to achieve something beyond the capabilities of individual participants. They tend to pursue long-term relationships instead of focusing on isolated short-term deals and tasks. This is common in shipping and distribution networks like Lozada, Shopee, etc.
4 Learning platforms drive learning by bringing participants together to share insights over time. Participants tend to develop deeper relationships based on trust as they have the opportunity to realize more potential through collaboration. Examples include e-learning, the university of the future, non-profit organizations, mentoring, and membership organizations. Some Learning Platforms in the Philippines.
Shifting to PO
Helping traditional organizations shift to PO is an emerging OD practice.
So many companies running under the closed systems still exists. In the newspaper publishing for example, the publisher's "omnipotent" editorial staff still decides what consumers want to read. This is very different from their PO driven counterparts. Publishers like Amazon and Medium grant their readers to publish in their platforms (and make money). In fact, this free newsletter wouldn't exist without the Substact platform.
With PO, organizations can unlock hitherto “invisible” capacity and “repurposed” value. Examples include car parking spaces, accommodation and unused inventories. Moreover, many non-profit including the government that operates in closed systems should have shifted to PO that could guarantee the digital returns in the short run and sustainability in the long run. A possible way out from the increasingly tightening aid dependencies.
The Winds of Change
Many non-profit including the government needed to shift to PO types. Prolonged use of closed systems will only add more and more layers of bureaucracy (costs and poor performance) as they scale. They need more service access for their constituencies and innovations to make them happen. With PO, these organizations can guarantee future digital rewards and sustainability in lieu of the gradually tightening aid dependencies.
PO in the ODLab2022
For the business organization leaders, ask yourself: How long (and at what cost) can you endure to avoid shifting to PO?
I will join (and so with YOU) in the forthcoming ODPN’s ODLab2022 on December 1 and 2 in Bohol to catch the winds of change in the OD practice. I will share and mentor OD Professionals intending to start a PO practice. You can start with Simone Cicero’s Stories of PO Designs including a Boundaryless downloadable PO Design Templates to kickstart your PO practice. And will exchange notes on data driven and PO. See you all there.
Introduction to PO
NOTES
You’re only days away….from the ODLab2022 in Bohol
ODPN Conversations
ODPN’s next OD Conversation on The HeART of STORY will be shared by Raju Mandhyan, an expert story teller on Nov. 16, 2022 10 AM 12:00 NN.
FANG:: Facebook, Amazon, Netflix and Google
1. Source:: Deloitte Platform Business Model explained…in under 100 words