CIO upfront: Platforms are eating the world. But how do you build one?

There must be a real business opportunity for partners who work on your platform, by solving real problems for your shared customers.

Own a first generation iPhone? Me neither. By itself the iPhone was a breakthrough gadget, an iPod with a web browser and phone. But it was the power of the platform, that really switched me, and a generation of consumers, on.

The launch of iOS AppStore put a world of computing power in your pocket. It became possible to video call anyone in the world with Skype, share photos with Facebook and Instagram, and watch a panda sneeze on YouTube. Today, there are more than two million iOS apps.

In 2009, when setting up an ecommerce store for a client, I integrated Mailchimp and Shopify via their API, and became hooked on the power of connected SaaS platforms.

Today, at Xero, we hear success stories every day about how our platform enables small businesses and their advisors to connect to hundreds of applications, banks, and other businesses around the world.

Some of the most successful platforms, including Apple, Microsoft and Amazon began their life as products. So why are platforms eating the world of software? Because successful platforms create opportunities for everyone who participates, which drives more investment back into the platform.

They become almost self sustaining, which is why we call them ecosystems. Achieving critical mass between the supply and demand side of a marketplace is hard, but if you’re willing to put in the effort, it pays off. The network effect creates a defensible market position and accelerates innovation by leveraging third party development - which means better solutions and happy customers.

CIOs on this side of the world are becoming keenly aware of the benefits. Gartner’s annual CIO Agenda Survey found 49 per cent of Australian and New Zealand CIOs are participating in digital ecosystems as platforms, to exchange information and interact electronically with competitors, customers, regulators, stakeholders and other enterprises. And when they do, they are more successful.

Top-performing organisations were found to participate more in digital ecosystems, prioritise interoperability of their technology infrastructure and are more focused on mastering interdependence.

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How do you create a supply of products or services without customers? But how do you attract customers without a supply of products or services?Nick Houldsworth, Xero

Foundations for success

There are no silver bullets. Building a successful platform is a long-term investment. You also have to overcome the ‘chicken and egg’ effect.

How do you create a supply of products or services without customers? But how do you attract customers without a supply of products or services?

Leveraging an established customer base helps, but it’s not enough on its own, there must be a real business opportunity for partners who work on your platform, by solving real problems for your shared customers.

When it comes to building a successful developer platform one of the industry leaders is Salesforce. Through it’s AppExchange, there are more than 5000 solutions available and 87 percent of Salesforce customers use at least one of those apps.

On a recent episode of Xero’s Developer Podcast, I caught up with Ludovic Ulrich, senior director of marketing on the Salesforce AppExchange team, to talk about what makes a successful platform.

“Ecosystems are critical for success in any industry,” Ulrich said. “At Salesforce they are part of our DNA. And we’ve seen that companies can fail without them. Take the Pebble Smartwatch for example. Many analysts say its lack of a developer ecosystem and apps around it to create stickiness was one of the reasons the company didn’t make it. That has become table stakes now.”

So, how do you create a successful ecosystem? While Ulrich says having a great customer experience is crucial, so is offering a great experience for partners and developers who are connecting with your platform.

“Think about the companies and startups that complement your offering and how they can connect and scale with you, in a self-service way. Developers are busy and the bar is high. They are often looking for the shortest way to build something meaningful, so it’s important to make the benefits of building to your platform clear.

According to IDC, by 2022 the Salesforce partner ecosystem will gain $5.18 for every dollar Salesforce earns. And that’s only expected to grow. That’s a massive opportunity for developers with commercial aspirations looking to build apps and access our customer base. We also remove as much friction as we can for this group, that includes good API documentation and sample code,” Ulrich said.

Another successful ecosystem that has grown over time is Zapier. With 1000-plus integrations, Zapier connects their customers’ favourite software tools. Cody Jones, head of partnerships at Zapier, also stresses the importance of these relationships.

“Maintaining a great relationship with partners throughout the entire lifecycle is crucial. We keep a tight feedback loop with our partners, to provide feedback in a timely manner and help them progress through the process,” Jones said.

But it’s been a learning curve for Zapier, whose team started out building every integration themselves. As they gained momentum, they have been able to shift to a model where now almost every integration is built by their partners.

“When we reached 45 integrations shortly after launching, it felt like a big milestone, but even that number was hard to maintain with a small team. Smaller tools began to build with us and when we reached 120 integrations we realised there was enough value for our partners to build to our platform.

“At that point it made sense to invest in a self-service way for developing to our standard. We are still refining that process and making it smoother every day, improving documentation and putting in place automation checks, to find things before they become issues,” Jones said.

A business at any stage can execute a platform strategy, but growing a successful ecosystem takes more than just putting your logo on an off-the-shelf marketplace.

It’s a long-term investment in a range of functional areas: product, developer relations and marketing, business development and more.

But beyond this, the best in the industry put platform at the core of their culture and strategy. Not only do they invest in their community, they foster a shared sense of purpose - working together towards a common goal.

Nick Houldsworth is general manager ecosystem at Xero.

Copyright © 2018 IDG Communications, Inc.

6 digital transformation success stories