As noted in my previous blog, the first of our 10 Recommendations Toward a Digital Future for International Post Corp. is to open platforms to third parties, and aid their business models. Openness is a key point in ensuring that platform models are successful and therefore, this recommendation merits more in-depth discussion and definition.
One of the first issues is what does "openness" mean? A full definition can be found in Opening Platforms: How, When and Why, but the basic insight is to offer greater rights of access to different communities with different roles. More precisely, this means giving rights of access or rights of modification to end users, developers (supply-side users), platform providers, and platform sponsors as in Figure 1 below.
The platform provider is the point of contact for users, even though this role does not necessarily have property rights. The platform sponsor controls critical ecosystem property rights. For example, if the platform sponsor is Microsoft Windows, then the platform provider can be Dell or Hewlett Packard.Components Rules Ecosystem
Figure 1
Opening different parts of the platform increases growth of that part of the ecosystem but also reduces control and ability to charge for that part of the ecosystem. Great ecosystem design is then a choice to open those parts that promote growth yet leave you with control over critical resources where you have an advantage.
As we describe in the IPC report: “Open means that the platform creators are willing to give up some of their own profits in order to seed interest, increase overall value and build an ecosystem through others.
A platform creator should consider what level of openness is acceptable. If you are too open – such as Linux-- no one is driving the bus, which does not optimize the value of the platform, and therefore, builds a smaller network. Too much control, however, means not enough innovation, not enough meaningful and relevant content, and therefore, not a big enough ecosystem to create a meaningful match – Apple, in the 1990s.
Openness, then, requires a balance of access, providing value to the ecosystem partners and value to the platform.
While closed platforms do create value, they tend to be limited in both scope and market penetration. When Facebook opened itself to developers, for example, it experienced massive growth relative to MySpace which had entered the market earlier. Openness in the right place works because developers then push out the demand curve themselves by innovating and creating more value. ..Openness at the demand and supply side are critical to building out the ecosystem, creating volume and thus value.”
Recommendation: Open Platforms to Third Parties and Aid their Business Models
Figure 2: Graphic illustrates that within country, a single IPC member can represent the point of customer contact. Intellectual property can be shared among IPC members.
The number of IPC members, across 24 different countries, implies there should be shared property rights in the platform. The green portions of Figure 2 show what should be open. This will encourage consistent adoption of technology standards and limit dominance of one member over another. It also encourages developers to contribute applications to the platform.
Figure 3: Graphic illustrates that across countries (markets), there can be multiple points for customer contact.
A number of IPC Member Posts have had the wisdom to realize that platform business models exist. A handful have even opened or sought partnerships to push this forward. Yet a platform should not be a single function application. Instead, it needs a suite of functions that can be combined in novel ways to create a space of opportunities.
IPC Member Posts should apply openness strategies retrospectively to physical plant and infrastructure, delivery services, and logistics. Allow third parties to help Posts innovate. The point is to open spare capacity in ways that other interested parties can figure out new ways to use them. This is a point often missed in digital platform discussions yet it remains one of the key opportunities for IPC Members Posts.
Recommendation: Seeding and Partnerships to Help Launch
Another recommendation (#6), Use Platform Envelopment, Seeding, and Partnerships to solve the chicken-and-egg launch problem, is also worthy of further discussion. Without these critical approaches, the launch of digital platforms can be stymied.
Specifically, “The classic difficulty for building a platform is the chicken-and-egg launch problem. Users of a platform want content and applications before they will use it; developers for a platform want users before they will provide content and applications. Each side wants the other to commit before it will spend resources to adopt the platform. This is a "critical mass" problem. There are several strategies to promote successful launch.
The point of seeding is to fill the platform with content or applications, preferably material that is already in high demand, in order to attract users. IPC Member Posts could take this approach by providing access to all kinds of e-government documents and services, for example.
Another common launch strategy is to identify key user groups, or so-called “marquee” developers, and offer them attractive reasons to participate. The Posts could do this by targeting bulk mailers and offering them attractive reasons to reach large populations associated with digital post platforms.
Finally, another strategy is to envelope users onto a platform, taking advantage of the current user base to move into adjacent markets. If IPC members can establish a digital relationship, say for eGovernment services, involving a large citizen population, it can then absorb adjacent platforms into the user base by adding applications.
As illustrated just by these two recommendations, it becomes clear that there are many ways for IPC members to leverage their existing models to prosper in digital markets. Please refer to the full report for elaboration of each point.
The Outlook
In summary, there is considerable hope for IPC Member Posts to reach the next step and become digital businesses. In answer to the questions posed on the scope of tasks, we have several results. If the core question is whether there exists a digital platform strategy for postal services, the answer should unequivocally be “yes.” If the question is whether current IPC members will be the ones to seize the initiative and own these services, the answer is “maybe.” It depends on IPC Member Posts willingness to pursue digital strategies analogous to, but quite different from, their physical strategies. If the question is how to proceed, we offer ten recommendations to get there.
IPC members possess a number of remarkable assets– large user populations, dedicated workers, more contact points than most businesses, and even government protected services. These can form the basis of a digital platform. By organizing around a VISA-like structure, IPC members can gain critical mass and market power. By defining low-level functions and opening the system, IPC members can create a platform. By seeding the platform, partnering with marquee users, and enveloping adjacent markets, IPC members can launch and expand. These partnerships can also mitigate risk. By pricing in two-sided fashion at architectural control points, members can gain new revenue streams. By applying these insights retrospectively to physical assets, they can recover lost ground and grow long-term sustainable business models.
Note: The publication of the White Paper is the culmination of more than a year’s collaboration between IPC member postal operators, IPC’s market research team and MIT Sloan School of Management’s Center for Digital Business. The theme and title IPC’s 2011 Annual Conference was ‘Digital business: opportunities to create value’ at which White Paper co-author Professor Marshall Van Alstyne presented to postal CEOs the value of developing integrated platforms.