How can your platform business model fuel competitiveness and growth?

Platform strategy implementations are growing, as the adoption and maturity of platform business models continue to accelerate across the tech industry’s various subsectors. While nearly 56% of the companies we surveyed said they only began transitioning to a platform model within the past two years, the majority – around two-thirds – expect to reach full-scale platform model implementation within the next three years. And the expected ROI in platforms is growing too. On average, by 2025, companies expect to see a 17% annual return on investment (ROI) from their platform investments, up from around 5% today.

Taken together, what do these findings suggest about companies’ current mindset? In an uncertain macro environment, executives at platform businesses can take greater control over strategic and operational levers to quickly adapt to changing operational and competitive conditions – including those outside the company’s control. This includes refocusing employees to the most critical tasks to increase efficiency and productivity; adjusting offerings to improve and strengthen customer relationships; and gaining visibility into process improvements that can reduce operational costs.

Growing platform momentum drives GenAI investment

Excitement around generative AI (GenAI) capabilities and applications is further accelerating the platform economy and driving new investments and strategies. Today, 39% of platform businesses are investing in GenAI to support and maintain their platform model and associated digital tools – a figure that’s expected to jump to 60% over the next two years, making GenAI their highest priority for emerging tech investment. GenAI is supporting both front- and back-office functions at platform businesses, such as streamlining regulatory compliance efforts, improving knowledge management and data flow and accelerating software coding with new copilots. What’s more, nearly 40% of platform businesses say their existing AI investments are already acting as a differentiator and source of competitive advantage.

Injecting GenAI into platform strategies

Companies aren’t just investing in AI platforms, they are remaking their platform strategies to capitalize on the GenAI opportunity. Last year, before GenAI exploded into the headlines, we found that companies weren’t prioritizing partnerships and alliances in their platform strategies. This year, however, we found that more than half (51%) of tech companies increased collaboration with third parties specifically to optimize their GenAI platform investments and offerings.

While activity is ramping up, the business outcomes from GenAI remain nascent. Achieving its full potential impact on platform business models will require more work – including detailed identification of use cases and fit-for-purpose implementation strategies. Now is the time for CEOs to educate themselves on the front- and back-office opportunities of a GenAI-enabled platform strategy, and its likely impact on business operations, customer offerings and tax profile.

"Platform companies are excited about the way GenAI can streamline how they make sense of the data generated through their interactions with customers and act on it to improve their products and services,” said Monique Christensen, EY US-West Client Executive Leader. “But they also recognize the need to level up their partnership and ecosystem strategies in order to access the full stack of tools and capabilities required to unlock the transformative potential of GenAI.

The “platform leaders” are differentiating themselves and driving higher ROI

While platform models can bring major benefits, these are not always realized to the same extent. We found that around 9% of the businesses we surveyed can be classified as “platform leaders.” What sets these leaders apart is that they earn at least 50% of their revenue from platform models; have reached full implementation or expect to do so within one year; have transitioned to a platform model at least one to two years ago; and earn ROI of over 5% from their platform business.

Platform leaders are especially prominent in the IT services (27%) and software (27%) subsectors. But we are increasingly seeing hardware companies, including leading semiconductor firms, create massive returns by establishing platform strategies and ecosystem partnerships to enable GenAI across the tech stack.

Platform leaders do several other things differently. For example, platform leaders are significantly more likely to seek ways for GenAI platform solutions to support their existing products and services. They are also more likely than most to prioritize new partnerships and creating ecosystem value – 55% say the size of their network or ecosystem is their most important key performance indicator (KPI). They are also more likely to have established effective mechanisms for platform governance and seeding compliance with platform policies.

Platform leaders have CEOs driving strategy

There are near infinite ways to approach designing, deploying or accelerating a platform business model. What’s clear is that you, as CEO, have a pivotal role to play in its success. Building and governing a platform is a strategic – not just technological – challenge. While our survey findings show that the primary responsibility for driving the platform strategy at platform leaders still rests with the chief technology officer (CTO) and chief information officer (CIO), we’re seeing more involvement this year from other C-suite members.

Leaders driving whole-of-business platform transformation

Interestingly, executives who are just starting their platform journey are benchmarking against the leaders and are overwhelmingly putting their platform decision-making in the hands of the executive board (45%), compared with only 18% at the leader organizations. When it comes to executing platform strategies, enterprises are finding ways to involve an appropriate mix of executive functions in both the technology and business domains.

Four steps to become a platform leader

So, as a tech CEO, what learnings and conclusions should you draw from our latest platform economy study? We’d like to propose the following four steps that – together – we believe can help you realize the full potential value from your platform strategy.

1. Optimize your data strategy
   Data is the foundation of platform companies and you, as the CEO, should prioritize how your company optimizes and secures data to maximize growth. Companies with the highest revenue (over US$10 billion) are increasingly confident that they have the appropriate data assets and infrastructure built into their platform models to vault them into a leadership position in the race to monetize GenAI. The increasing cost of data storage and transfer is helping large players maintain an advantage. These high-revenue companies are also almost 20% more likely to believe their platform data capabilities can drive AI opportunities, and nearly 60% believe their superior data management and analytics capacity bring them a competitive advantage. CEOs – especially those at smaller platform companies – will need to urgently assess whether their platforms are generating AI-ready data and secure the talent and resources necessary to avoid falling behind larger data-rich players.
   
   
2. Establish a multi-tiered AI platform strategy
   This positions your company to access the best of both closed AI models and more open-source solutions. We expect the AI (and GenAI) solution space to evolve rapidly and become more specialized in ways that benefit companies that don’t rely on a single solution. As CEO, you and your teams should anticipate that AI-enabled platform strategies will require the kind of hybrid, joined-up approach that companies are already using for their hybrid- and multi-cloud strategies. A hybrid approach to your AI strategy can also help to enable the types of platform partnerships that are unlocking AI capabilities across the tech sector.
   
   
3.   Leverage AI for rapid platform experimentation and iteration
   The days of slow and costly A/B testing and beta rollouts are coming to an end. AI-enabled digital twins and other tools help businesses test new approaches rapidly and implement changes with greater confidence. Given these new capabilities, your company should not delay. Now is the time to optimize your digital platforms and win customer support and loyalty – your competitors are also using emerging technology to accelerate, complete and iterate their platform operating model transformation.
   
   
4. Prioritize investments in new forms of digital infrastructure that all platform businesses will ultimately need
   The emerging technologies that are generating major opportunities for tech companies can also be expensive and energy intensive. As public and regulatory scrutiny grows and industry competition intensifies for data center capacity (including the physical real estate on which data centers can be built), companies that have established consistent and reliable access to compute power and low-latency information flow will be well positioned to lead the way. As CEO, you should prepare for this future scenario today.