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Nearly every company is increasing its investment in technology and attempting to create new competitive advantage by assembling technology into platforms that transform how they serve their customers, service their employees, and coordinate their supply chains. Platforms automate existing activities and functions, fundamentally changing how leaders run an organization. Platforms cut across traditional organizational boundaries, incorporating many departmental functions, thus forcing a restructuring of process, organization, and technology. That creates a real challenge for organizations.
Platforms automate existing activities and functions. Companies use their platforms broadly to both compete and run the organization. Digital platforms emerged when companies recognized they could dramatically improve customer or user experience by increasing the level of automation to achieve desired end-to-end process results.
Platforms not only improved the user experience but also created significant new efficiencies and productivity improvements at a fraction of the total cost. Companies then began changing their operating models to align with the new user experiences and increased productivity. Companies focused on how quickly they could build or assemble new platforms to be more competitive.
Challenge: Platforms cannot be managed like products
At the heart of these new technological marvels is a different kind of talent. The IT workers are giving way to heavy-duty engineers. This, in turn, challenges the traditional position and role of engineers. In the old model, companies often distributed their engineers in the business and typically did not concentrate them in a central IT organization. In the past, this made sense because engineering was key to developing products and was very core to what a company does. However, increasingly, we now find large numbers of engineers concentrated in organizations that build and support platforms.
Platforms differ from traditional products and IT investment due to their enormous impact on how companies are organized and operate. An additional challenge is that platforms continually evolve in unleashing constant waves of innovation, thus causing disruption to a company.
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Platforms need constant focus and investment. To ensure its platforms get the necessary sustained attention and investment, a company must reorganize the way it recruits and manages engineering talent internally or talent from third-party service providers.
If left to traditional IT and technology management techniques, companies often waste the huge investment they make in their platforms. Traditional IT management and governance do not provide the necessary organizational commitment, investment, and continual focus. Instead, traditional management gives only periodic or sporadic attention and investment, and it fails to deal with the huge change management and organizational disruption.
A platform collapses functions and requires a platform owner that has the support of the most senior leadership as well as combined deep knowledge of where the technologies are going, how they work, where the roadmap leads, and where the platform ranks in relationship to competitors’ platforms. Platform owners must be able to marshal the resources and build integrated plans that affect multiple departments.
Challenge: Engineering talent shortage
From an engineering perspective, platforms – as I mentioned above – require a copious amount of engineering talent. This puts strains on the way organizations recruit and maintain engineering talent. This is especially inconvenient now, as there is now an acute shortage of engineering talent in the world.
As it is increasingly hard to hire and maintain talent with engineering skills for platforms, we see more and more companies turning to offshore services for access to engineering talent. Although US companies began reducing their dependency on offshore talent a few years ago, these services now flourish again in efforts to address the severe talent deficit.
This causes companies to think differently about third-party service providers for engineering skills. Historically, companies looked to service providers to augment internal capabilities and supplement internal talent to do projects when their own engineering ran out of capacity.
As platforms take on such prominence in terms of investment and competitive differentiation, companies now need to think differently about the kind of service providers they have and the kind of relationships they have with those providers. Relationships that were based on one-time projects are giving way to much deeper dependency and more strategic relationships. In these kinds of relationships, customers ask their providers to co-invest and become more integral to the customer’s business.
Yes, companies will still rely on engineering service providers for projects. But some will choose providers that cater to deep, strategic relationships where they are integral to the ongoing building and evolving of platforms. These service providers will share responsibility for the customer’s strategic objectives, deploy their own capital investments and enter into a much closer, less arms-length relationship.
The issue of core vs. non-core seems to be dissipating. Instead, companies now need to focus on how quickly and reliably they can build and maintain platforms so they can achieve the competitive differentiation they need.
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