February 8, 2006

Excerpts: Let Go to Grow -- Part VI

By: 800-CEO-READ @ 6:00 PM – Filed under: Management & Workplace Culture

The Business Platform
A business platform has three distinct elements:
  • Governance rules and rolesComponents are individual; a platform is designed for coordination and collaboration. Successful platforms require policies with teethgovernance rulesand allocation of authority and responsibility that ensures enterprise coordination plus localized application and innovation.

  • Blueprints and interface standardsThe degree of linkage, extension, and collaboration rests on technology standards, industry practices, and process interfaces.

  • Integration capabilitiesA platform coordinates many players in value webs and must be able to grow in reach, range, and robustness. Reach refers to the link with customers and partners; range, to the variety of roles a platform can play and services it can offer or support; robustness, to end-to-end quality and reliability.

The air traffic control system is a splendid illustration of these three platform elements. Governance rules and roles are the glue of ATC: its regulatory framework. The individual passenger is largely unaware that components, generating flight operations, check-in procedures, terminal operations, and facilities rely on these rules. ATC includes many blueprints to ensure coordination of components. The entire system must manage 5,000 planes in U.S. air space at any one time and synchronize all the many interactions this involves.
Let Go To Grow is an executive handbook for defining the business equivalent of the air traffic control system: your firms business platform. Agility is the key to profitable growth in commodity hell. It breaks the negative feedback loop of the tighten control strategy and creates options for growth.
We titled our book Let Go To Grow because letting go is the key management and cultural shift necessary to grow, to become a firm that combines speed, flexibility, adaptability, coordination, collaboration, and innovation. The role of the business platform is to enable growth, and the role of the corporate culture is to exploit the opportunities that the platform enables.
We base our analysis on an in-depth review of firms that have successfully made the shift to become agile firmsour work is not at all hypothetical. Although these leaders are very different in size, industry, strategy, and other ecosystem demographics, they show the same overall drive for growth. They accept commoditization and use their platforms as an ally. Wal-Mart and Dell sell commodity goods, and their supply chains are the coordination of components. GEs governance rules componentize its back-office and administrative processes across its many diverse units. This GE standardization creates, rather than blocks, innovations in organizational design and location.
Growth leaders let go of the traditional value chain and build relationships everywhere, relying on partners for capabilities that used to be protected as core and kept in-house. They turn outsourcing of functions into insourcing of capabilities, drawing on collaborations in design, engineering, and distribution that they bring in-house even though outside parties handle them.
They grow through others growth. UPS handles close to two-thirds of all online e-commerce transactions. Its ads speak of its synchronizing its customers entire logistics, from warehousing to shipping to inventory management to financing. UPS gives up control to its customers in order to build growth, and in doing so, it fuels its partners profitable growth by providing logistical expertise, scale, and systems without the partner firms needing to make heavy investments of capital, organization, and people.
Growth leaders make the truisms about commitment to the customer a reality. They give up control of information and decision-making to the customer and facilitate customer innovation via their own platforms. Amazons platform synchronizes a set of components that even competitors like Borders use. Some 35,000 e-commerce technology developers use the Amazon technology platform as they want. Amazon associates are any person, company, club, public-sector group, or school anywhere that would like to earn commissions through connecting its customers to Amazon. FedEx gives customers complete control of their interactions with the companyFedEx gives up control to gain collaboration and growth. Similarly, eBay is explicitly, not accidentally, driven by its customers; eBay grows and grows as a result.
Above all, business-platform leaders are leaders because top management understands the platform issues. That is of critical importance to moving from component hell into platform-driven growth. Platforms rest above all on governance rules. Spot the component/commoditization trends early, and take charge of change.
This content is excerpted from Chapter 2 of the book titled, "Let Go to Grow: Escaping the Commodity Trap", authored by Linda Sanford, with Dave Taylor, copyright 2006 by International Business Machines Corporation, ISBN 0131482084, published Dec. 2005 by Prentice Hall Professional. Reproduced by permission of Pearson Education, Inc. All rights reserved.