GUEST POST from Geoffrey A. Moore

A decade and a half ago, my colleague at TCG Advisors, Philip Lay, led a body of work with SAP around the topic of business network transformation. It was spurred by the unfolding transition from client-server architecture to a cloud-first, mobile-first world, and it explored the implications for managing both high-volume transactions as well as high-complexity relationships. Our hypothesis was that high-volume networks would be dominated by a small number of very powerful concentrators whereas the high-complexity networks would be orchestrated by a small number of very influential orchestrators.

The concentrator model has played out pretty much as expected, although the astounding success of Amazon in dominating retail is in itself a story for the ages. The key has been how IT platforms anchored in cloud and mobile, now supplemented with AI, have enabled transactional enterprises in multiple sectors of the economy to scale to levels previously unimaginable. And these same platforms, when opened to third parties, have proved equally valuable to the long tail of small entrepreneurial businesses, garnering them access to a mass-market distribution channel for their offerings, something well beyond their reach in the prior era.

The impact on the orchestrator model, by contrast, is harder to see, in part because so much of it plays out behind closed doors “in the room where it happens.” Enterprises like JP Morgan Chase, Accenture, Salesforce, Cisco, and SAP clearly extend their influence well beyond their borders. Their ability to orchestrate their value chains, however, has historically been grounded primarily in a network of personal relationships maintained through trustworthiness, experience, and intelligence, not technology. So, where does an IT platform fit into that kind of ecosystem?

Here it helps to bring in a distinction between core and context. Core is what differentiates your business; context is everything else you do. Unless you are yourself a major platform provider, the platform per se is always context, never core. So, all the talk about what is your platform strategy is frankly a bit overblown. Nonetheless, in both the business models under discussion, platforms can impinge upon the core, and that is where your attention does need to be focused.

In the case of the high-volume transaction model, where commoditization is an everyday fact of life, many vendors have sought to differentiate the customer experience, both during the buying process and over the useful life of the offer. This calls for deep engagement with the digital resources available, including accessing and managing multiple sources of data, applying sophisticated analytics, and programming real-time interactions. That said, such data-driven personalization is a tactic that has been pursued for well over a decade now, and the opportunities to differentiate have diminished considerably. The best of those remaining are in industries dominated by an oligopoly of Old Guard enterprises that are so encumbered with legacy systems that they cannot field a credible digital game. If you are playing elsewhere, you will likely fare better if you get back to innovating on the offering itself.

In the case of managing context in a high-complexity relationship model, it is friction that is the everyday fact of life worth worrying about. Most of it lies in the domain of transaction processing, the “paperwork” that tags along with every complex sale. Anything vendors can do to simplify transactional processes will pay off not only in higher customer satisfaction but also in faster order processing, better retention, and improved cross-sell and up-sell. It is not core, it does not differentiate, but it does make everyone breathe easier, including your own workforce. Here, given the remarkable recent advances in data management, machine learning, and generative AI, there is enormous opportunity to change the game, and very little downside risk for so doing. The challenge is to prioritize this effort, especially in established enterprises where the inertia of budget entitlement keeps resources trapped in the coffers of the prior era’s winning teams.

The key takeaway from all this is that for most of us platforms are not strategic so much as they are operational. That is, the risk is less that you might choose an unsuitable platform and more that you may insufficiently invest in exploiting whatever one you do choose. So, the sooner you get this issue off the board’s agenda and into your OKRs, the better.

That’s what I think. What do you think?

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