How to make your organisation the next Netflix...

Have you ever wondered how the likes of Amazon, Spotify and Netflix came to be the industry-shattering giants they are today? Are you interested in finding out whether your organisation could, or indeed should, be following in their footsteps? Take 5 minutes to understand how Platform Organisations came into being, what it means for the future of business and how your organisation could get in the game.

This blog is the first in a series where I spend time with experts in fields relating to Organisation Design. This month’s conversation was with Deloitte Organisation Design Director Clive Smit, talking about how Platform Organisations work, and why both consumers and organisation leaders should take notice.
 

What are Platform Organisations?

Platforms Organisations cannot exist in isolation, they’d serve no purpose. Platform Organisations need to operate in an ecosystem, where sellers of goods and services require a place to interact communicate and trade with consumers. Many potential suppliers have a car and some free time, lots of people need transportation from A-to-B, Uber provides a platform to combine the two. Music labels have songs, the public want to enjoy music, Spotify allows people to access the music labels’ catalogues. The Platform Organisations often offer no goods or services themselves, instead profiting from providing the connection between buyers and sellers in a convenient, efficient manner.
 

Why have so many of these suddenly come about?

The journey to platform organisations becoming so prolific has been fascinating. Many of the pioneers in this space at the turn of the millennium (remember Napster anyone?) were hit hard by the financial turbulence of the late 2000s, and few survived. Since then two things have happened, firstly the economic climate has been somewhat more predictable, and secondly, technology has evolved to allow us to do more creative and useful things. As a result, there are many more of these types of organisations emerging today. While 15 years ago these ideas were seen as a fad, owing to their unusual business model and small market share (due to a less tech orientated society), the emerging giants of the time, such as Facebook and Amazon, gradually caused heads to turn. As the public became more internet and tech savvy, the organisations that were able to meet their newfound interests and priorities reaped huge rewards, and now others are all keen to follow suit.
 

How do these organisations become so successful?

There are many reasons. A notable one is the benefit of something called Network Effects. Consumers on the platform effectively become what we call ‘prosumers’, who give the organisation ideas and feedback in real time, allowing the organisation to respond by building additional features into their offering. If you watch Netflix and rewatch certain shows repeatedly, you are providing the company insight into your preferred consumer habits, which it will aggregate with other users to influence choices of which other films to offer you in future. The consumer then gets a product that better suits their interests, and the platform organisation avoids wasting time and money on products people are not interest in. Similarly the producers of the content have a space to test new ideas in, and only iterate and build if it proves popular, whilst gaining continued loyalty from consumers who feel they are being personally recognised by the platform itself.

If these two factors work well, its creates a viral chain reaction. The consumers continually receive products which better suit them, whilst producers cut waste by making better and more market focussed output. The platform organisation sits in the middle and generates profit through a variety of possible avenues, such as advertising, transaction charges, or joining fees.
 

Why isn’t this something everyone now does?

Whilst many Platform Organisations began as start-ups, that is certainly not exclusively the case. The ones that succeed consistently have a two things in common:

1. They do their research – is there a market for this and evidence that the platform would take hold
2. They get the tech right – the user experience needs to be something that the consumers buy-in to

Bricks and mortar organisations which get these two things right, can reap the rewards whilst maintaining their typical lines of business. Whilst Ocado might have arrived as a food delivery platform organisation in the UK, the likes of Waitrose and Tesco have managed to seize on the model and create their own successful online-to-home delivery services. To get this kind of evolution right, it is important to plan carefully and know your market.
 

Eight tips for organisations looking for a foot-in-the-door:

1. Look at the marketplace – analyse the disruptions that are occurring, and look for a gap, or a synergy with an existing provider which would prove beneficial (see point 8).
2. What’s your organisational vision? – do you want to remain a bricks-and-mortar delivery organisation with a platform arm, or do you want to reorientate entirely? Consider the organisational ethos and mission and how that would change as a result. It needs to all fit cohesively as a concept in order to work.
3. Consider the required capabilities – look at how far you are currently from the capability and operating model required to deliver a tech-driven platform. Even if the end state would be hugely profitable, organisations can collapse into themselves when trying to transition.
4. Incubate then industrialise – start small and fail fast. Scaling is important, but complex. You need the right tech and the right talented people to manage the scaling effectively. Utilise contingent workforce options and gig workers with the right skills to make this growth happen.
5. What’s the MVP? – find your Minimum Viable Product and use that as the basis of scaling. What would be the most simple thing that could prove valuable in the market? Built that, then examine the impact.
6. How will it be funded? – does the idea live off the profits of your bricks and mortar, or do you need to explore avenues such as venture capitalists to fund the first steps?
7. Find and use feedback – the chain reaction of the Network Effects is only possible if you digitally and literally listen to your customers and suppliers. Identify how you are going to do this, and how you will ensure it is working.
8. Decide how to interact with existing platforms – even if you don’t want to become a platform organisation, you can still stand to benefit from interacting with them. Just as Uber have expanded into the food delivery sector, platforms need to know about options available to them and collaborations which could prove lucrative for both parties.