The Flywheel Effect @ product-and-platform enterprises

The Flywheel Effect @ product-and-platform enterprises

This Story is part of a series.

  • Nico Michler
    Nico Michler CEO, designaffairs

In this opinion piece – the first in a series of two interlinked articles – I’d like to talk about intelligent products and platforms. And a phenomenon I call the “flywheel effect”. As more and more companies transform into integrated product-and-platform enterprises, it’s my firm conviction that the flywheel effect is going to offer very significant opportunities for innovative growth in an increasingly digital world. 

My views are inspired by my experience and by my network of Accenture colleagues from all over the world in our Connected Products & Platform business. Whether we realize it or not, we interact with products and platforms that are intelligent every day of our livesIf you use a device like Alexa, drive a car with electronic sensors, connect to your doctor virtually because of the current pandemic, or use a VR headset for entertainment – all of these are intelligent products driven by intelligent platforms.

Look at Apple and Amazon, two companies that have built their success on intelligent products and platforms. They also happen to be among the top market-cap companies in the world – and that’s no coincidence. As once-traditional software and hardware companies, they quickly realized the value in developing more connected, more personalized products and services. They built platforms around their products and then enabled an ecosystem around that platform to ultimately deliver new services and outcomes. That had the effect of exciting users, building customer loyalty and basically ‘locking them in’ to their products.  

Photo by Sagar Soneji from Pexels

Im a big Apple fan – I use iMessage every day of my life – on my watch, my smartphone, my laptop and my desktop. I use it to connect with friends and family.

I am, in effect, locked into the Apple ecosystem. I’ve considered switching to Android or Microsoft on many occasions, because I love their hardware and devices too. But the idea of giving up my iMessage – and not being part of my family and friends’ ecosystem anymore – has always stopped me from moving overIn effect, Apple walked me into their ecosystem – and now it’s keeping me there 

Amazon Prime is another good example. If I want to order something online, I always go to Amazon first. If I see the Prime logo next to a product, I feel comfortable because I know the price is going to be competitive, the package is going to arrive at my home safely, and both the payment and my data is going to be secure. Again, they’ve locked me into their ecosystem.  

It’s not just giants like Apple and Amazon, as well as Microsoft and Google, that have embraced the product-and-platform concept. Nowadays, more and more enterprises are moving in the same direction. More and more companies are building intelligent products and platforms, and  enabling services to create ecosystems that people can rely on.  

This phenomenon isn’t just limited to hardware companies either.

Salesforce effectively built softwareasaservice as we know it. Microsoft Office 365 tooMicrosoft has ensured we are so dependent on its software as a service that they’ve made it almost impossible for us to walk away from it. Imagine working without Teams nowadays! And, of course, there are intelligent platforms behind these products and services. Adobe went from a software model to a cloudbased subscription model, and now theyre building an ecosystem model to sell more subscription services and offer new oppurtunities. 

All of these companies turned their software products and services into a platform business; they built a developer ecosystem around it, put vertical solutions on top of the platform and now sell services on top.  

Network server technician.
Network server technician.

This is where the industry is headed – and we too are heading down this platform road as well.

IDC predicts that, by 2023, 60% of the top 2,000 companies globally will have a digital developer ecosystem around their platform. Not only that, half of those will drive 20% of their digital revenues through that ecosystem platform. This is the opportunity right now for enterprises to create entirely new revenue streams that can drive enormous growth.  

There’s another interesting benefit when you build a developer ecosystem: R&D. And you basically get it for free too. Think about it for a moment. Apple has this huge R&D ecosystem with their developer kids and not only is it free, they’re making big money out of it too. The developers are innovating on Apple’s platform, they’re doing loads of R&D – and Apple’s getting a cut of everything they sell on the platform.  

In the old days, a product was a single item with a single purpose. Something that worked well, but which wasn’t updated over time. It wasn’t personalized and we never had a proper relationship with the manufacturer. It was the same with software. We bought a box of CDs or DVDs to install on our computer. And that was it; that’s all we got. We got a piece of software, it wasn’t personalized, it mightn’t have fitted our precise needs and it didn’t get updated over time. It certainly wasn’t intelligent either – it didn’t take account of our daily usage patterns to offer an improved solution. We just got the general software, used by everyone, in a standardized way.  

Well, times have changed. In today’s productandplatform company, the product is more connected than ever. Its more personalized than ever too.

I would argue that a smartphone is probably the most personalized product we have ever owned. From the background on the device to the photos, emails, apps and outcomes its driving – every smartphone is unique! I’ve cited numerous examples of connected products now and they all represent the next opportunity: the opportunity to create a platform around them. What I’ve observed is that companies create apps to control devices and then call it a ‘platform’. But this is wrong.

Taking pictures with smartphone of Skyscrapers in Shanghai, China

So what exactly is a platform? Put simply, it’s a business model where two groups of users come together to create an exchange. That’s the formal way of saying it. The informal way I like to explain it is that when two user bases come together, we get what I call the flywheel effect. 

eBay is a good example of this. You have sellers and you have buyers – so guess what? The more sellers you have, the more buyers you attract. The more buyers you have, the more sellers you attract… and the flywheel starts spinning. This is the platform effect in its simplest way and it feeds itself. It’s the very same with Apple. When it launched the iPhone, it also launched a developer platform to create apps. The more apps that were developed, the more devices Apple sold. More devices, more developers; more developers, more apps, more devices – the flywheel starts spinning. They have repeated this many times now. They did it for the iPad, the iwatch, the iTV and the Mac.  

On top of all this, platforms give companies the ability to lay out new services and outcomes to monetize user needs and desires even further.  I started with an iPhone, then bought an iPad, an iWatch and a Mac. I also bought them for my family too and signed us all up for Apple Music, Apple TV and iDrive. So Apple basically walked me and my family into their ecosystem – and are keeping us there.  

The transformation that is now taking place provides an unbelievable opportunity to unlock revenue growth inside an enterprise.

Now, more than ever, consumers are demanding better digital services, better experiences and better outcomes. In this era of COVID-19, it’s no exaggeration to say that companies which fail to deliver better digital outcomes are quickly going to find themselves getting outflanked – and left behind – by their competitors. 

It’s already happening. We see start-up companies pushing into these spaces, leaving traditional businesses behind. To take advantage of this opportunity, you need to transform your organization. You need to become a modern-day organization, a modern product-and-platform organization. Most traditional organizations are siloed. Each department has its own siloed capabilities and objectives, and everyone is working hard to achieve their siloed goals.  

Modern organizations are built differently. The main difference is that they work in much more collaborative ways, with cross-functional teams developing products with a huge emphasis on design and experience. And the only way to get that right – when you’re collaborating across a design team, engineering team, product team, DevOps, customer service – is when everyone comes together and places design and experience at the core of what’s being built in a digital supported IT structure.  

But it isn’t just about the organization; it’s also about the process. A modern process is more agile, more open minded and less siloed. It’s about getting frequent feedback from an established customers advisory board as an example, taking that feedback and going back to the drawing board to make the product better. That is why meaningful cross-functional teams are so important, so that we can get things done quickly and at scale before we launch a new product.  

People passing LED illuminated tunnel

In the second part of this opinion piece, I’m going to explain what we at Accenture and designaffairs are doing to embrace the product-and-platform approach, and walk you through some really good examples of the work we’re doing all around the world to help companies leverage and benefit from the flywheel effect.

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