Building a Digital Platform: Business Innovation and Engagement

As we know, today’s businesses are going through constant pressure to innovate and stay competitive. Building a digital platform is no longer a luxury but a necessity for organizations aiming to thrive in the modern marketplace.

At the core of this transformation lies the digital platform, a critical component that enables businesses to harness the power of technology to drive efficiency, innovation, and customer engagement.

Digital transformation involves integrating digital technology into all business areas, changing how you operate, and deliver customer value.

This transformation is about adopting new technologies and rethinking business models and processes to create new opportunities for growth and value creation.

A digital platform is essential, as it provides the foundation for businesses to build, deploy, and manage digital applications and services effectively.

What is a Digital Platform?

A digital platform is a comprehensive, integrated set of business, data, and infrastructure components that work together to facilitate the rapid development, deployment, and scaling of digital applications and services.

It is the backbone of digital transformation, providing the tools and resources to build and manage digital offerings efficiently.

We can define as a repository of business, data, and infrastructure components used to configure and deploy digital offerings rapidly.

Organizations can create reusable digital components, such as APIs, microservices, and data repositories, and easy access and use them across different applications and services.

This modular approach allows businesses to innovate quickly and respond to customer needs more effectively.

The digital platform acts as a bridge between the business’s operational backbone and its digital offerings.

While the operational backbone ensures the reliability and security of core business processes, the digital platform focuses on experimentation, rapid innovation, and continuous enhancement of digital services.

Key Components

A digital platform typically comprises three key components: business, data, and infrastructure components.

1. Business Components

These include tools and services that support business operations and decision-making, such as dashboards, customer alerts, and analytics tools.

Business components enhance user functionality and provide valuable insights that drive business growth.

2. Data Components

Data components involve collecting, storing, and managing data from various sources.

They provide easy access to data through APIs, enabling businesses to leverage data for analytics, machine learning, and other applications.

Effective data management is crucial for making informed business decisions and delivering personalized customer experiences.

3. Infrastructure Components

Infrastructure components encompass the core services required to support digital applications, including user authentication, access control, connectivity, and device communication.

These components ensure the digital platform’s reliability, scalability, and security, allowing businesses to avoid vendor lock-in and maintain flexibility in their technology choices.

The Operational Backbone vs. Digital Platform

Two foundational concepts often come into play in digital transformation: the operational backbone and the digital platform.

Understanding the differences between these two and how they complement each other is crucial for any business aiming to thrive in the digital age.

Operational Backbone

The operational backbone is a tightly integrated, bulletproof production environment designed to ensure the reliability and security of business processes.

It encompasses the core systems and processes that manage a company’s critical operations and transactions.

Characteristics

Ensures stability, reliability, and efficiency of core business processes.

Focuses on standardization and integration of essential business functions such as finance, HR, supply chain, and customer service.
Typically involves enterprise systems like ERP (Enterprise Resource Planning) and CRM (Customer Relationship Management).
Primarily inward-facing, aiming to streamline and optimize internal operations.

Digital Platform

A digital platform is a repository of business, data, and infrastructure components that rapidly configure and deploy digital offerings.

It supports the creation and scaling of new digital services and customer experiences.

Characteristics

Facilitates rapid innovation, experimentation, and continuous enhancement of digital products and services.
Comprises reusable digital components, such as APIs, microservices, and data repositories.
Designed to be modular and flexible, allowing for easy integration and adaptation.
Primarily outward-facing, focusing on creating value through digital customer interactions and offerings.

How They Complement Each Other

While the operational backbone and digital platform serve different purposes, they are highly complementary and provide a robust foundation for digital transformation.

Operational Backbone

Provides the stable environment necessary for running the business’s day-to-day operations efficiently.
Ensures that core business processes are reliable, secure, and scalable.

Digital Platform

Builds on the stability the operational backbone provides to enable rapid development and deployment of new digital services.
Helps businesses make use of their current data and processes to generate innovative ideas and create new value propositions.

Together, these two components create a powerful synergy. The operational backbone ensures that the business can run smoothly and efficiently.

The digital platform enables agility and innovation, allowing the company to adapt quickly to changing market conditions and customer needs.

Building a Digital Platform Incrementally

Building a digital platform is a complex and resource-intensive task. Many organizations opt for an incremental approach to manage this effectively, which offers several advantages.

1. Manageable Investment: By incrementally building the digital platform, companies can spread the costs over time, making the investment more manageable and reducing financial risk.

2. Flexibility and Adaptability: An incremental approach allows businesses to remain flexible and adapt to new technologies and market changes as they build their platform.

3. Continuous Learning: Organizations can learn from each development phase, making adjustments based on real-world feedback and performance data.

4. Risk Mitigation: By breaking the project into smaller, more manageable parts, companies can identify and address issues early, reducing the risk of large-scale failures.

5. Scalability: Incremental development enables scalability, allowing businesses to expand their digital platform as their needs grow.

Example: Schneider Electric’s Component-Based Strategy

Schneider Electric provides an excellent example of an incremental approach to building a digital platform.

The company adopted a component-based strategy and focused on developing reusable digital components that they could integrate into various digital offerings.

Initial Steps: Schneider Electric started by integrating sensors and connectivity into its products, providing remote monitoring services.

These initial digital enhancements were relatively simple but laid the groundwork for more complex solutions.

Iterative Development: The company experimented with different digital solutions across its business units, learning from each iteration and gradually building more sophisticated capabilities.

Building Blocks: Schneider created key digital components, such as data management systems and IoT platforms, for reuse across different digital services.

Scaling Up: Over time, Schneider Electric scaled up its digital platform, integrating more advanced analytics and AI capabilities and expanding its digital offerings to include comprehensive energy management solutions.

This incremental, component-based approach allowed Schneider Electric to build a robust digital platform while managing risks and adapting to technological advancements and market needs.

Key Design Principles for a Digital Platform

Modularity and Reusability

Modularity and reusability are essential principles in designing a digital platform.

Modular design involves dividing a system into smaller, self-contained units (modules) that developers can independently create and use in different systems. This approach enhances the platform’s flexibility and scalability.

Developers can use these modules across different parts of the organization or in various projects without modification, ensuring reusability.

This principle reduces redundancy, saves time, and improves efficiency. By creating reusable components, organizations can speed up the development process, maintain consistency, and reduce costs associated with custom development.

A modular and reusable digital platform enables businesses to adapt to changing market conditions quickly, incorporate new technologies, and support a wide range of digital offerings.

Road mapping and Standard API Design

Effective digital platforms also require a clear roadmap and standard API (Application Programming Interface) design.

A roadmap outlines the strategic development and evolution of the platform, providing details on timelines, milestones, and dependencies.

It aligns all stakeholders and allows them to track progress towards the platform’s goals.

Standard API design ensures that different systems and components can communicate and work together seamlessly.

APIs act as bridges between various software applications, enabling them to interact and share data.

Standardizing API design involves defining consistent methods, protocols, and data formats that all API developers must follow.

This standardization simplifies integration, enhances security, and ensures the platform can support various applications and services.

Together, a well-defined roadmap and standardized API design provides the foundation for building a robust and scalable digital platform that can support future growth and innovation.

Case Studies

1: Toyota Connected North America’s Mobility Services

Toyota Connected North America (TCNA) developed a comprehensive digital platform to support mobility services.

Other Toyota distributors want to launch local mobility offerings designed for reuse on the platform. Key components of TCNA’s platform include:

Data Repository: Sensors on cars and phones collect extensive data, which is processed and stored for various functionalities.
Infrastructure Components: Built on a cloud platform, these components connect vehicles to the cloud, authenticate users, and link to payment providers.
Common Business Components: These include a mobile app for reservations, the Smart Key Box (a digital key system), vehicle tracking, and payment services.

The platform’s modular and reusable design allowed TCNA to roll out new services quickly.

For example, after launching Hui, a car-sharing service in Honolulu, Toyota implemented a bus tracking service in Japan within six days using the same platform components.

This approach underscores the value of a well-designed digital platform in facilitating rapid deployment and innovation.

2: PI Chile’s Customer Portal and API Integration

PI Chile, a subsidiary of the Principal Financial Group, embarked on a digital transformation to enhance customer experience and operational efficiency.

The company leveraged its operational backbone and an emerging digital platform to create the PrincipalConnect.cl customer portal. Key aspects include:

Operational Backbone: PI Chile’s core systems provide reliable customer and product management data and functionality. The company wrapped these systems in APIs to support digital offerings, allowing seamless integration without directly accessing legacy systems.
Digital Platform Development: A local startup collaborated to develop the PrincipalConnect.cl portal, delivering the first version within two months. The platform’s APIs enabled digital offerings to access essential data and functionality efficiently.
Digital Experience Lab (DXLab): PI Chile established the DXLab to foster innovation and new working methods. The lab’s autonomous teams focused on developing digital offerings and reusable components, such as a wellness score component for retirement readiness.

This incremental approach to building the digital platform allowed PI Chile to adapt quickly, innovate, and deliver value to customers without overhauling existing systems.

PI Chile successfully advanced its digital transformation by focusing on modularity, reusability, and a collaborative development environment.

Common Challenges in Building a Digital Platform

1. Integration with Existing Systems

Many businesses struggle to integrate new digital platforms with their legacy systems. The operational backbone, which supports core business processes, often lacks the flexibility required for digital innovations.
The discrepancy in design requirements between the operational backbone and the digital platform can lead to significant integration issues.

2. Organizational Resistance

Building a digital platform often requires a shift in organizational culture and processes. This change can meet resistance from employees accustomed to traditional ways of working.
The need for new decision-making accountabilities and work designs can create friction within the organization.

3. Complexity in Managing Digital Components

Developing a digital platform incrementally can lead to a complex landscape of digital components. Without proper management, this can cause a disorganized and inefficient platform.
The temptation to build monolithic digital offerings to address immediate opportunities can create long-term issues, making future innovations slower and more challenging.

Solutions and Best Practices

Adopting Modularity and Reusability

Designing digital platforms with modularity and reusability helps manage complexity and facilitate integration with existing systems.
Standard API design and road mapping play a critical role in supporting modularity and ensuring the reusability of components across different digital offerings.

Incremental Development Approach

Building the digital platform incrementally allows businesses to adapt and grow their digital capabilities. This approach helps in managing risks and allows for continuous improvement.
Schneider Electric’s strategy of developing key components, such as subscription billing and identity services, exemplifies the benefits of an incremental approach.

Clear Vision and Leadership

A clear vision and strong leadership are essential for successful digital transformation. Commitment to developing the digital platform and the ability to drive organizational change are must-haves for leaders.
Ensuring teams responsible for the operational backbone and digital platform collaborate effectively can bridge the gap between traditional and digital business processes.

Trends and Future Outlook

Increased Adoption of AI and Machine Learning

Digital platforms are increasingly leveraging AI and machine learning to enhance their capabilities.

These technologies enable more sophisticated data analysis, personalized customer experiences, and automated decision-making processes.

Companies integrating AI and machine learning into their digital platforms will probably lead to innovation and efficiency.

Expansion of IoT Integration

The Internet of Things (IoT) continues to grow, with more devices becoming interconnected. Using digital platforms to connect and manage IoT devices can give businesses a strong edge over their competitors in different industries.

Processing and analyzing data from IoT devices in real time is becoming crucial to modern digital platforms.

Focus on Cybersecurity

As digital platforms handle increasing amounts of sensitive data, cybersecurity becomes paramount.

Future digital platforms must incorporate robust security measures to protect against cyber threats and ensure data integrity.

Companies must invest in advanced cybersecurity solutions and practices to safeguard their digital assets and maintain customer trust.

How Businesses Can Stay Ahead in Digital Transformation

Continuous Learning and Adaptation

Businesses must foster a culture of continuous learning and adaptability to stay ahead in the rapidly changing digital landscape.

This involves staying informed about the latest technological advancements and being willing to experiment with new approaches.

Encouraging innovation and agility within teams helps respond swiftly to market changes and emerging opportunities.

Strategic Partnerships and Collaborations

Strategic partnerships with technology providers, startups, and other organizations can speed up digital transformation.

Collaborations enable businesses to leverage external expertise and resources, driving innovation and efficiency.

Partnering with companies that offer complementary technologies can enhance the functionality and reach of digital platforms.

Investment in Talent and Skills

Investing in talent development is crucial for building and maintaining a successful digital platform.

Companies must focus on attracting and keeping skilled professionals with expertise in digital technologies.

Providing ongoing training and development opportunities ensures employees remain up-to-date with the latest digital trends and capabilities.

Key Takeaways

Digital Platforms are Essential for Rapid Innovation and Customer Engagement
Digital platforms provide the infrastructure for creating and deploying digital offerings quickly and efficiently.
They enable businesses to experiment with new ideas, iterate rapidly, and market new products and services faster.
Incremental Development and Component-Based Architecture are Effective Strategies
Building a digital platform incrementally allows companies to adapt and grow their digital capabilities.
A component-based architecture ensures that developers can reuse and repurpose different platform parts, which enhances flexibility and reduces development time.
Successful Digital Transformation Requires Both an Operational Backbone and a Robust Digital Platform
The operational backbone ensures that core business processes run smoothly and efficiently.
A digital platform complements this by providing the agility needed to innovate and adapt to changing market conditions.