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CHOI Byong-Sam

Importance of Building a “Platform”

CHOI Byong-Sam

Dec. 24, 2010

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Hardly a day passes without hearing the word "platform." Apple, Google and Microsoft jabber about the fierce competition to dominate IT platforms. Automakers describe their production platforms, 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 intone about platforms in their corporate strategies.

Naturally, even before platform entered business parlance, we also could hear about someone who stood on a train platform, dived off a platform, displayed something on a platform and recited a political party's platform, or set of policy proposals in an election campaign.

Although the range of uses of the word is wide, all platforms are bound by a common thread. A platform is a starting point for products, transactions and work. In this sense, a platform can be defined as "a structure that can be utilized for multiple uses." So it is no wonder companies have seized upon the Swiss Army knife-like word. Of course, that's the easy part. 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 decided upon in terms of a 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 app store are 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 a technology. SC Johnson's, a global leader in household brands, leveraged a single technology, aerosol, for a variety of uses.

SC Johnson started in 1886 as parquet flooring company and used the wax and the polish it invented to protect and improve flooring. The US 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. With this technology, SC Johnson invented the first home furniture polish "Pledge."

SC Johnson also recognized the potential of the technology from an air pressurized container. It could be use to not only spray floor polish but a myriad of other liquids. This insight led to a parade of household products, including the air freshener Glade, the window cleaner Windex and the bug killer Raid.

Customers also can be a platform. Take for example home appliance maker Woongjin Coway in Korea . The company launched a water purifier rental service in 1998 for the first time in the industry. Unlike other home appliances, you need to tell customers how to use a purifier and provide regular checkups. So the company established a house call service network. Around 10,000 specialists called Codies (Coway+Ladies) visit 5 million households once every two months. The service network is the company's platform. Expanding the use of the platform, Woongjin Coway has launched businesses in air purifiers, water softeners, electronic bidets, and food waste disposers.

Where are companies now in terms of platform competitiveness? In the future, a company's ability to develop and leverage a platform will be essential to determine its competence. A platform will offer a solution to the dilemma that companies face when customers become more demanding amid when competition intensifies.

Keeping in mind that a can be anything-a technology, product, transaction or customers, companies should do some unconventional thinking in determining what kind of platform is suitable. They should not lock themselves into their industry norm, such as a manufacturer thinking a product platform is its only option, or a service provider believing a transaction platform is its only option.

Sustained management of platforms is as important as selecting which platform to use for the growth of a company. Wide use of a single platform can be cost effective and enable efficient transactions. However, the uniqueness of a product can be degraded if it contains too many features of other products spun off from the same platform. Another potential side effect is if companies that have major deficiencies such as unreliable products or bad customer service gain access to a platform, such as an online store, raising the risk of customer dissatisfaction.

Building and firmly establishing a platform can take a considerable time and can incur losses for some time, meaning a long-term perspective, rather than adhering to short-term profits, is needed.

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