[Letter] Many faces of “platform”Hardly a day passes without hearing the word “platform.” Apple, Google and Microsoft jabber on about the fierce competition to dominate IT platforms. Automakers describe their production platforms as a set of components universally shared by several vehicles. And then there are major Korean companies, including SK Telecom, Hyundai Card and Woongjin Coway, who discuss about platforms in their corporate strategies.
How can companies turn the conceptual word into a real platform? To start, they need to find an appropriate platform for their operations. Product platforms have long been used by manufacturing companies to avoid the massive cost of separately developing products and to maintain price competitiveness. Product platforms also boost product development. Key features of a product are based upon the type of platform. Nokia, the world’s No. 1 mobile phone maker, which produces 400 million phones a year, has more than 80 models in its lineup based on around 10 platforms.
Transaction platforms refer to systems in which companies and customers transact with each other. Operating systems of an online store or a computer and application store are such examples. In a transaction platform, the more companies there are, the more customers there will be. And more customers in turn draw more companies. Take smartphones for example. Users tend to choose a smartphone that offers more applications, and app developers go to the smartphone that has more users. Apple and Google compete on this basis aggressively, trying to dominate the platform in the application market.
Another platform can be technology. SC Johnson’s, a global leader in household brands, leveraged a single technology: aerosol, for a variety of uses. The U.S. company took its wax and polish products to the retail market but the wax was difficult for ordinary buyers to apply on their floors. That led to the invention of aerosol spray, a delivery system that dispenses liquid in a fine mist.
Customers also can be a platform. Take home appliance maker Woongjin Coway in Korea for example. The company launched a water purifier rental service in 1998 for the first time in the industry. Unlike other home appliances, they tell customers how to use a purifier and provides regular checkups. The company established a house call service network. Around 10,000 specialists called Codies (Coway and Ladies) visit 5 million households once every two months. The service network is the company’s platform.
In terms of platform competitiveness, a company’s ability to develop and leverage a platform will be essential to determine its competence as a platform. It will also offer a solution to the dilemma that companies face when customers become more demanding as competition intensifies.
Keeping in mind that a platform can be anything - a technology, product, transaction or customers - companies should do some unconventional thinking in determining what kind of platform is suitable.
Choi Byong-sam is a researcher at Samsung Economic Research Institute.