Every Organization Needs A Digital Platform Strategy: Impacts

This research note is restricted to the personal use of wmelean@bcv.org.ve.
Every Organization Needs a Digital Platform

Strategy
Published: 12 October 2016 ID: G00316151
Analyst(s): Betsy Burton, Kristin R. Moyer, Marcus Blosch, Hung LeHong, Chris Howard, Don Scheibenreif
Not every organization should assume a leadership role in a business

ecosystem; however, every organization needs a digital platform strategy.
CIOs must collaborate with their business counterparts to integrate digital
platform development into their technology and business strategic planning.
Impacts
■ Explore — Business ecosystem participation will affect how CIOs determine strategic and
operational investments.
■ Plan — Digital platform strategies require CIOs to integrate business and technology planning.
■ Deliver — Business and technology opportunities and risks will significantly influence how CIOs
support digital platforms.
■ Evolve — As business ecosystems expand, CIOs will have to manage increasingly complex
digital platform architectures.
Recommendations
CIOs seeking to develop future IT leadership must:
■ Collaborate with business counterparts on how and why to integrate business ecosystems to
improve the overall corporate strategy. Secure the financial and emotional commitment of
senior-level managers to design and deliver the right business model and technology
infrastructure.
■ Determine how your business strategy can be enhanced and evolved with a digital platform
strategy. Define a high-level statement that matches your organization's business objective with
the ecosystem strategy.
■ Create a "first team" to build momentum for the digital platform strategy. Start by identifying
potential monetization strategies.

■ Define the type of platform architecture needed. Use business ecosystem and capability
models. Examine the infrastructure, delivery, business model and interoperability, as a future-
state-focused platform can reduce the time to market over the long term.
Analysis
1
Gartner predicts that, by 2020, more than 30 billion devices will be connected to the internet. The
advent of digital business expands and evolves the opportunities, threats and constraints of
leveraging a business ecosystem. A digital business ecosystem is a marketplace of functions and
information. This network construct involves multiple value forms exchanged for the benefit of all
participants.
Business ecosystems can help organizations:
■ Develop and sell products

■ Complement existing services and capabilities
■ Optimize and enhance business operations
A survey of leading enterprise architecture (EA) practitioners shows that 58% of organizations
2
directly influence their ecosystems, while 33% collaborate across their ecosystems as needed.
Many successful new business models, including Alibaba, Uber and Amazon, leverage the
3
ecosystem as a key component of their business and technology strategies.
4
Traditional businesses are also transforming their business models. According to a 2016 Gartner
survey of CIOs, the typical CIO whose organization is participating in a digital ecosystem, expects
5
that the number of their partners to more than double over the next two years.
To engage and manage business ecosystems, organizations are creating and integrating with a
digital business platform to share critical assets. A digital platform is a business-driven framework
that allows a community of partners, providers and customers to share and enhance digital
processes and capabilities or to extend them for mutual benefit. This framework allows for different
combinations of business models, leadership, talent, delivery and IT infrastructure platforms that
power digital business ecosystems.
Not every organization should or will assume a leadership role in a business ecosystem; however,
every organization will need a digital platform strategy:
■ Some organizations will develop digital platforms to create a platform business model that
encompasses providers, consumers and employees and/or facilitates the creation or exchange
of goods, services and social interaction (see "Three Styles of Digital Business Platforms").
■ Others will integrate with other organizations' digital platforms to engage with their platform
business models.
Page 2 of 13 Gartner, Inc. | G00316151

To fully appreciate the opportunity of these ecosystems, CIOs must develop an effective digital
platform strategy that embraces both the IT and business sides of the organization (see Figure 1).
Figure 1. Impacts and Top Recommendations for CIOs Developing a Digital Business Platform
Source: Gartner (October 2016)
Digital business ecosystem — A marketplace of functions and information that

comprises a network construct whereby multiple value forms are exchanged for the
benefit of all participants.
Digital platform (digital business platform) — A business-driven framework that

allows a community of partners, providers and customers to share and enhance digital
processes and capabilities, or to extend them for business benefit. This framework
allows for combinations of business models, leadership, talent, delivery and IT
infrastructure platforms that power digital business ecosystems.
Platform business model — A business model design that consummates matches

among providers and consumers (also referred to as "users") or facilitates the creation
Gartner, Inc. | G00316151 Page 3 of 13

or exchange of goods, services and social currency, so that all participants can capture
value.
Impacts and Recommendations

Explore — Business ecosystem participation will affect how CIOs determine
strategic and operational investments
CIOs play an integral role in influencing business models that require the creation and participation
in a business ecosystem. This underlying set of capabilities enables entirely new products and
services and requires collective leadership vision. To succeed, CIOs must engage with business
peers to guide the specification of required products and services, and enabling the digital platform,
and related investments.
Practically, a business ecosystem enables various parties to expose their capabilities through APIs
for combination into higher-level outcomes. Ecosystems allow for openness and shared algorithms
and data. Some organizations will create and run powerful ecosystems; others will participate as
actors that connect with ecosystem players. Top-performing organizations leverage ecosystems to
co-create solutions and take advantage of distributed capabilities.
CIOs must recognize that prerequisites for ecosystem participation include divestment of
commodity capabilities, and increased openness to sharing data and logic. The value created by a
shared and resilient ecosystem comes from the interdependency, redundancy and interoperability
resulting from the adoption of shared connections (see Figure 2). This means that participating in an
ecosystem often requires changes to current business models, culture, business operations,
technology, governance, and security and risk strategies.
Figure 2. Business Ecosystems Enable Value Creation

Recommendations
CIOs:
■ Collaborate with business counterparts on how and why to integrate business ecosystems to
improve the overall corporate strategy. Secure the financial and emotional commitment of
senior-level managers to design and deliver the right business model and IT infrastructure.
■ Start by determining if the organization's strategy is to primarily create a platform business
model or to integrate it with other organizations' digital platforms. Recognize that most larger
organizations will support a combination of approaches.
■ Develop long-term scenarios that project how business ecosystems will evolve. Use market
dynamics that showcase ecosystem expansion and consolidation from a business and IT
perspective. Include projected partners and acquisitions in the planning.
Plan — Digital platform strategies require CIOs to integrate business and technology
planning
All organizations are changing and being affected by their business ecosystems. Digital business
expands and evolves the opportunities, threats and constraints of leveraging a business ecosystem
significantly for any organization, regardless of its size, industry or region. In the digital business era,
any organization can:
■ Engage people, businesses and Internet of Things (IoT) devices to support its business
■ Have a global customer and partner reach
■ Situationally create and change partnerships
Ecosystems that involve customers and partnerships may help develop and sell products, or
augment existing services. They can directly impact business operations, including the use of cloud,
IoT, mobility and analytics. To help CIOs explore their impact, we illustrate potential ecosystem
strategies (see Table 1).

Table 1. Digital Platform Strategies and Supporting Capabilities
Digital Description Capabilities

Platform
Strategy
Business A stable infrastructure platform supports a portfolio of Offers insight into relationships and
services business services that enables the organization to interactions.
innovate services quickly and easily. Develops and delivers services that
Examples: Expedia, Microsoft Office platform and integrate with open, modular
PayPal. architectures.
Open It is designed to leverage the ecosystem's available Allows the CIO and team to collaborate
innovation talent and existing resources and services to create new with external organizations and define
business models, products and services. an innovation process with clear
Examples: P&G, BBVA (see "BBVA Is Making Both governance and management.
Technical and Organizational Changes to Deliver on
Digital Business"), InnoCentive, Spigit and Brightidea.
Interest Online and real-time communities develop around any An information source that enables the
ecosystems topic, ranging from current affairs to games. ecosystem to promote member
Examples: Pinterest, Storify, Facebook and Instagram. interactions.
Produces the ability to do real-time
analytics (such as sentiment analysis)
around topics of interest.
Commercial Organizations, such as supply chains, engage in Allows for collaborative planning,
partner contractual relationships. decision making and responsive
ecosystems Examples: DHL (see "For Supply Chain Executives: DHL outcomes for each organization
Relies on Logistics Expertise to Enter Retail Space With involved.
Allyouneed.com Platform"), eBay, Alibaba and Microsoft Allows for real-time information
Xbox. exchange.
IoT Increasingly intelligent IoT devices are used to monitor Enables organizations to collect, store
ecosystems and control the physical world, and provide the basis for and analyze large quantities of
innovative new services. The information they generate information, much of it in real time.
will grow exponentially over the coming years. Allows teams to create service design
Examples: John Deere (see "The Internet of Things and innovation to put the information to
Revolution: Impact on Operational Technology good use.
Ecosystems"), GE Predix and Rolls-Royce Control and
Data Services.
Recommendations
CIOs:
■ Clearly define how the business strategy is enhanced and evolved with a digital platform
strategy. Start by defining a high-level statement that matches the organization's business
objective with the ecosystem strategy. Make sure this statement is actionable and includes
business and technology impacts.

■ Evolve business and IT strategic planning scenarios to include clear signposts that indicate that
one or more scenarios are more or less likely.
■ Analyze the impacts on any information that the digital platform strategy may generate.
Determine and document the business and technology implications, constraints,
interdependencies and risks of the digital platform strategy.
Deliver — Business and technology opportunities and risks will significantly

influence how CIOs support digital platforms
Digital business platforms lay the technology foundation for digital business success. Digital
business platforms should be easy to use and create value for employees, customers and partners
(see Figure 3). More importantly, platforms must attract customers who will use what the business
ecosystem provides.
Building a thriving digital platform can yield:
■ 6
Revenue growth — for example, Amazon Web Services (AWS)
■ 7
New business models
■ 8
Reductions in cost and time to market
■ New customer experiences that include price and transparency

Figure 3. Deliver the Digital Business Platform
The most challenging aspect of digital platforms is not building them, but managing them. CIOs
must:
■ Create new requirements for integration, security, compliance and reputation risk (that is, trust
and ethics) to be managed by the CIO and chief risk officer.
■ Collaborate with the COO and chief risk officer to create governance that ensures equitable
platform behavior by all key participants.
Recommendations
CIOs:
■ 9
Create a first team to build momentum for the digital platform strategy. Start by identifying
potential monetization strategies and impacts on risks.
■ Define clear business-driven outcomes, including achievable short-term metrics (a year) and
longer-term metrics (two to five years).
■ Build an in-house platform if the risk tolerance is high. Buy a company with a digital platform if
10
the time to market is urgent, as DB Schenker and Caterpillar did.

■ Create a digital core that involves API management capabilities and multienterprise information
governance that plug into the ecosystem. These capabilities include mechanisms to track and
charge for access. Other elements of the digital core include service orientation, lightweight
interoperation and mediation, layered security, and web-scale techniques that ensure
continuous delivery and scale (see "Renovate the IT Core: Laying the Foundation for Digital
Business").
Evolve — As business ecosystems expand, CIOs will have to manage increasingly

complex digital platform architectures
As business ecosystems grow with additional customers, partners and things, the technology and
business architecture supporting the platform becomes layered in complexity. To manage this
evolution, CIOs must collaborate with their business counterparts to define the likely scenarios for
the future state of the digital platform strategy. CIO must explore:
■ Future digital platform architectures to support internally or externally

■ Roles of the digital platform core provider, consumer and platform owner (see "Winning in the
Platform Game, Part 1: Understand the Game and Determine Your Role")
According to Jean Tirole, an economist with the Toulouse School of Economics, platform
businesses are multisided (see Note 1). This concept is designed to help organizations determine
the size of the digital market and economic trade-offs that allow them to position themselves
relative to a platform business model. Using this model, CIOs should note how complexity is
increased when each "side" is added.
The different platform types are:
■ One-sided — Traditional direct buyer-and-seller engagement. This is B2C and B2B, including
e-commerce types of engagement (for example, Barnes & Noble, and Marks and Spencer).
■ Two-sided — A broker providing platform services that bring buyers and sellers together (for
example, Craigslist, eBay, Airbnb, Uber and Lyft).
■ Three-sided — A broker provides platform services that bring buyers and sellers together, but a
third party also may provide services, such as advertising, reservations or payment options (for
example, Expedia, Facebook and eBay).
■ N-sided — Sellers, buyers, advertisers, partners and aggregators engage with one another to
provide a variety of transactions (for example, Amazon, Alibaba and Discovery Vitality).
Figure 4 illustrates the four platform types, and the interactions among the sides.

Figure 4. Multisided Digital Platform Styles
Each type of digital platform requires an increasing level of architectural complexity in terms of
technology and business — for example:
■ One travel-related business platform model provider was evolving from a three-sided platform
to an N-sided platform. It shared with us the massive complexities it faced globally, which
include governance, currency, regulatory payments for providers, payments from different
buyers, royalties from advertisers and add-on service providers.
■ A public-sector organization shared that it has a digital platform, but has yet to get it delivering
value, because the organization's partners are unwilling to participate because of governance
and trust issues.
To evolve the business ecosystem and digital platform strategy, CIOs must architect the digital
business in an iterative way. CIOs must focus not only on technology growth, but also on how they
evolve their business architecture to support evolving governance, trust, strategy, reputation,
security and economic requirements.
Recommendations
CIOs:

■ Determine the type of platform architecture needed. Use business ecosystem and capability
models to examine the infrastructure, delivery, business model and interoperability in light of the
digital platform strategy.
■ Make sure to designate some of the architecture teams (including enterprise application,
application architecture, information architecture and security architecture) to leading digital
platform strategy innovation.
■ Track your and your team's investment of time in the digital platform strategy. Ensure the team
is committed to building the overall strategy, not focused just on business and technology
solutions.
Gartner Recommended Reading

Some documents may not be available as part of your current Gartner subscription.
"Building a Digital Business Technology Platform"
"Three Styles of Digital Business Platforms"
"Building the Digital Platform: The 2016 CIO Agenda"
"Architect Your Business to Sense, Respond and Create Business Moments"
"Toolkit: Business Ecosystem Modeling"
"The Gartner Business Value Model: A Framework for Measuring Business Performance"
"Support Digital Business and the Nexus of Forces With Application Architecture Innovations"
"Architect Digital Business to Maximize the Value of Dynamic Economic Agents"
Evidence
1"Forecast Analysis: Internet of Things — Endpoints, Worldwide, 2015 Update" and "Forecast
Overview: Devices, Worldwide, 2016 Update."
2 "Follow the Leaders: Digital Business Is a Big Opportunity to Evolve Your EA Practice."
3"Mass Adoption of the Internet of Things Will Create New Opportunities and Challenges for
Enterprises."
4 "Fifty Examples of Digital Business: A CIO and CEO Resource."
5Gartner's 2016 survey of worldwide CIOs who participate in a digital ecosystem (n = 841) asked,
"How many important digital partners did your company, business unit, or government or public

entity have two years ago? How many important digital partners does it have today? How many
important digital partners do you expect it to have two years from now?"
6 J. Bort. "At This Rate, Amazon Will Definitely Be the First $10 Billion Cloud Company." Business
Insider. 28 July 2016.
7 "The Cambrian Explosion of APIs." Finextra. 1 June 2016.
8 "Articulating the Business Value of APIs."
9 P. Lencioni. "The Five Dysfunctions of a Team: A Leadership Fable." Jossey-Bass. 2002.
10E. Phillips. "DB Schenker Signs on With uShip Online Freight Platform." The Wall Street Journal.
29 June 2016.
J. Pramuk. "Caterpillar Buys Into Construction Rental Start-Up Yard Club." CNBC. 27 May 2015.
Note 1 Multisided Platforms

Jean Tirole, who won the Nobel Prize for economics in 2014, is a pioneer for defining a multisided
platform (MSP). The platform provider sets the rules for participation and pricing. A "side" is a group
of participants with similar interests. The simplest MSP is a two-sided version with platform
consumers of the product or service, and content providers to the platform. Uber is an example of a
two-sided platform provider. The consumers are the people who need a ride, and content providers
are the people with the cars. What makes an MSP different from a traditional retail environment is
that content providers have a direct relationship with consumers.
More on This Topic

This is part of two in-depth collections of research. See the collections:
■ Architect Digital Platforms to Deliver Business Value and Outcomes

■ Digital Business Success Depends on Civilization Infrastructure: A Gartner Trend Insight Report

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