PLM’s platform play

Jun 23, 2016 | Hot Topics

Platforms are hot right now, but they’re hardly a new idea. I learned a few weeks ago from Dr. Marshall Van Alstyne (whose research is accessible here) that newspapers, which connect advertisers to consumers, are platforms. HMOs connect physicians and patients. Shopping malls connect stores to buyers. As he wrote in the Harvard Business Review,

“What’s changed … is that information technology has profoundly reduced the need to own physical infrastructure and assets. IT makes building and scaling up platforms vastly simpler and cheaper, allows nearly frictionless participation that strengthens network effects, and enhances the ability to capture, analyze, and exchange huge amounts of data that increase the platform’s value to all.”

He argues that most types of businesses will be reinvented by entrepreneurs who embrace the platform concept, and that they’ll radically change those industries. Think hoteling and Airbnb, or taxis and Uber; but also how Apple elevated the cell phone from being a phone (nice) to the place where we store all of the important stuff about our lives via apps (essential).

I’ve been musing a lot on the benefits of a platform from a technology perspective: the idea that a technically sound and extensible underpinning offers benefits to end-buyers, developers and the platform maker — what Dr. Van Alstyne calls the network effect. Each participant builds on the other to create a bigger result than the sum of its parts. Technically, platforms have 3 goals: standardization, simplification and scaling. By employing a platform, everyone agrees that they’re going to follow its standards (APIs in the case of IT, font size in the case of ads, store footprint in a mall. and so on). This simplifies everything about creating for the platform and using it and, in the case of IT, allowing it to scale faster. 

But what about the business implications of platforms? Dr. Van Alstyne argues that platforms will always win out over what he calls pipeline businesses whose value is the scarcity of the inputs and the intellectual property that is the recipe for combining those into a product. Platforms, he argues, are about community and contribution and managing that ecosystem to create value for buyers and sellers.

Dr. Val Alstyne says that one of the key factors in determining which platforms will succeed is its up-front design. Will it attract the right partners? Will it enable the right interactions? In our PLMish world, that might mean managing connecting complex CAD assemblies to a PDM for BOM management, or using a 3D model to create gorgeous renderings or NC instructions or a 3D PDF.

Once the underlying technology is sound (and extensible to make sure that it can keep growing), it all comes down to managing the ecosystem. What partners or perhaps even competitors can take part in the platform? How easy is it for suitable partners to join? Are they able to help shape the platform? What’s the financial model for the platform maker and participants? 

Creating the technology for a PLM platform may, sorry R&D, be the easiest part. An incentive system that rewards participants fairly is key to making the platform stronger and enabling it to grow. Happy partners will represent the platform in a positive light and attract buyers with solid offerings. Partners who feel compelled or restricted or taken advantage of, will not.

As you look at your PLM platform investment, ask yourself these questions:

1. Does the platform do what I need it to, from a technical perspective? Are the functions that I need today, available? Is it likely that what I’ll need next year will also be possible?

2. Assuming the tech is solid, does the platform add new partners on a regular basis? Are they partners I would do business with if they weren’t on the platform?

3. You can’t know the details of their agreements, but do the partners seem incentivized to keep building on the platform? Are they adding more to this platform or to another or are they trying to go it alone? What’s their future direction? (A sneaky way of asking if they feel like the platform maker is taking advantage.)

4. When a problem arises, do the partner and the platform maker work together to find a solution? Ask a partner how much support they get from the platform team. You’re looking for a close cooperation, with reasonable response times and levels of support.

Please check out Dr. Van Alstyn’s work; it’s an interesting look at how new businesses challenge traditional ways of doing things. His examples include services you’ve likely used, and which have radically changed their industries, and might serve as a valuabel resource if your business could make the leap from pipeline to platform. If you’d like to read more of my musings on PLM platforms, take a look at research I did here. If a platform vendor creates a solid, open and extensible platform, it should check all of the boxes identified by the people I interviewed — especially when it comes to business practices.