Instead of Optimizing Processes, Reimagine Them as Platforms

Michael Schrage

Process optimization can transform user experience. Rethinking process optimization — visualizing processes as platforms — can transform your business model.

One applications outsourcing team, for example, proposed a clever UX tweak to help optimize a global fulfillment process their company managed for its biggest client.

The idea was simple: Instead of making buyers go through the entire online ordering sequence only to find stock-outs or delivery delays, why not alert them to product availability upfront? A little dab of inventory data would enhance both customer expectations and process efficiencies. Surely this cheap, customer-centric, and data-driven innovation would impress the client.

But the more rigorously the use cases were modeled, the more complicated enhancing expectations and efficiencies became. Would buyers abandon purchases if they couldn’t get exactly what they wanted? Would they defect to competitors? Might product bundles or incentives meaningfully shift demand and production flows?

All the originally appealing simplicity vanished into uncertainty. The analytics all suggested that giving customers clear, timely, and accurate data was as likely to subvert as improve fulfillment KPIs.

This seemingly counterintuitive finding infuriated the group. How could such a well-defined process defy optimization? Why wouldn’t better information inherently lead to better results? The breakthrough came less than 20 minutes into a facilitated design session: the team realized it was struggling to solve the wrong problem.

The real obstacle and opportunity wasn’t better optimizing the fulfillment process but creating a better platform for fulfillment. In other words, global fulfillment needed to look, feel, and deliver more like Amazon than SAP. To make customers measurably happier, optimization mattered less than innovation.

This realization gob-smacked the group. They instantly grasped that platform architectures demanded different digital and business design sensibilities than process architectures. Their RFP-responsive outsourcing expertise had perversely obscured essential insights into what creative fulfillment should mean for both customers and client. Their optimization strengths had become innovation weakness.

“Platformizing” process would be key to success. That is, the applications outsourcing team revisited, rethought, and road-mapped how to best turn a valued internal process into a viable business platform. Challenging people to visualize processes as platforms completely changes how trade-offs between innovation, optimization, and user experience are debated and discussed.

Not all business processes can – or should – be re-conceptualized as platforms. But when typical and traditional analytic efforts to improve or optimize processes hit diminishing returns, that could signal a “platformization” opportunity.

Most established businesses, however, privilege products over processes in their platform strategies. As Feng Zhu and Nathan Furr observe in their article “Products to Platforms: Making the Leap“:

“In a product business model, firms create value by developing differentiated products for specific customer needs, and they capture value by charging money for those items. In a platform business model, firms create value primarily by connecting users and third parties, and they capture value by charging fees for access to the platform. Platform models bring a shift in emphasis—from meeting specific customer needs to encouraging mass-market adoption in order to maximize the number of interactions, or from product-related sources of competitive advantage (such as product differentiation) to network-related sources of competitive advantage (the network effects of connecting many users and third parties).”

”Platformization” dissolves once-meaningful distinctions between product vs. process competitive advantage. The ongoing digitalization, virtualization, and “network-ification” of business processes renders them uniquely suitable to be platformed.

Traditional operations research process optimization, for example, seldom embraces A/B testing or incorporates customer recommendation engines. By contrast, world-class digital platforms like Google, Amazon, Apple’s App Store, and Netflix practically fetishize iterative experimentation and “collective intelligence.”

When fulfillment processes become platforms, opportunities to segment customers, A/B test bundled offers and make targeted recommendations explode. Do stock-outs and delivery delays still matter? Of course. But customers can now consider incentives – discounts, promotions, special plans, etc. – as compensations and inducements to buy. Instead of prioritizing process optimization around inventory management, UXes dedicated to cultivating loyalty, trial and ancillary services evolve. Platforms, not processes, make innovations faster and easier to implement.

Consequently, that applications outsourcer can now go beyond customer satisfaction to influence the developer side of the process-turned-platform. Customer demand and recommendations data can create predictive analytic insights that suppliers can use to manage their just-in-time inventories. Supply chains can become more anticipatory and effective.

Fulfillment gets redefined from the process of receiving, packaging, and shipping orders for goods into a platform that mediates how customers and suppliers create and get value from each other. Untangling where optimization ends and innovation begins – and vice versa – becomes a fool’s errand.

For most organizations, identifying which processes deserve or need to become platforms – hiring, training, fundraising, marketing, innovation, software development – becomes strategically paramount. When should an R&D group embrace X-Prize-like initiatives or crowdsourcing innovation initiatives? What kind of device-agnostic digital training platform will yield the richest returns on human capital investment?

The economics of innovation change when R&D becomes less a process and more a platform. Similarly, organizations that manage marketing more as a platform than a process identify, segment, and service their customers dramatically differently than those that don’t. Look no further than Amazon, Uber, or Alibaba for validation.

Application Programming Interfaces (APIs) and Software Development Kits (SDKs) are the secret sauce for digital platform innovation and enhancement. For example, early in its online presence Netflix opened public APIs from which users created links to New York Times movie reviews and ways to discover niche content. An API can give your best users the chance to better customize and personalize your platform to their needs. APIs and SDKs give users the permission and the power to create value for themselves.

Process innovation, improvement, and efficiency aren’t going away or becoming less important. But the new strategic reality is that platform innovation increasingly defines and drives process capability rather than the other way around. Platforms, not process, increasingly impact and influence User Experience – for customers, clients, channels and suppliers alike. Platforms, not processes, are what empower processes to interoperate and productively interact.

For legacy industries and companies, the surest way to make a key process more robust, resilient and less vulnerable to disruption is to platformize it. The future of process innovation is platformization; the future of platforms belongs to the processes that make platform users more valuable.