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Management Report

Management reports, briefs and video-clips issued by Samsung Economic Research Institute

The Importance of Building a Platform

The Importance of Building a Platform

CHOI Byong-Sam

Dec. 2, 2010

Transcript

Welcome to our video program. I’m Byong-Sam Choi, Research Fellow from the Technology and Industry department.

Many of you may have heard the word “platform” a lot lately. This is difficult to define it in a nutshell. What is a platform? Let’s find out.

SC Johnson started in 1886 as parquet flooring company and used the wax and the polish it invented to protect and improve flooring. As they became popular with customers, the company took its wax and polish products to market. However, the problem with the products was that it was not easy for ordinary customers to apply them easily on the floor. This would be the background for the invention of the aerosol spray can. Aerosol is a type of dispensing system which creates a mist of liquid particles. This is used with a can or bottle that contains a liquid under pressure. When the container's valve is opened, the liquid is forced out of a small hole and emerges as a mist.

With this technology, SC Johnson invented the first home furniture polish “Pledge” and gained insights from the product.

The management of the company discovered the limitless potential of the technology. Aerosol is not just a technology to spray polish onto a floor, it is a technology with which any liquid can be evenly sprayed on surfaces.

This insight led to hit products such as the air freshener “Glade,” the insect repellent “Off!,” and the bug killer “Raid.” The company has continued to be a leading global household brand with over 100 years of history.

What does SC Johnson’s case have to do with platforms?

For SC Johnson, aerosol was the platform.

The word “platform” is used in a wide variety of fields. There are platforms for cars, railways, and rocket launchers. An app-store is a kind of a platform, too.

Despite the variety of uses, they share a common characteristic. Multiple things begin from a platform. A platform is a starting point for products, programs, transactions and work. In this sense, a platform can be defined as “a structure that can be utilized for multiple uses.”

Many companies are now turning to platforms. Some of them announce they will be a “platform company,” and others like Amazon and Starbucks open up their assets. online and offline stores.to other companies to expand the use of their platform.

How can we better use platforms?

To start, you need to find a platform that is right for your company.

It can be a technology or a product.

In SC Johnson’s case, the company leveraged a single technology, aerosol, for a variety of fields.

Next, product platforms.

As products gain more specs and functions, platforms are being used in various products, including cars, TV, and IT products. For instance, Nokia, the world’s No.1 mobile phone maker, which produces 400 million phones a year, has more than 80 models in its lineup. Developing and manufacturing such a large variety of phones individually would be impossible, so the company is saving money by using a platform.

Operating systems of an online store or a computer and app store are also a platform. They enable companies and customers to engage in transactions. This type of platform has unique features. The more companies there are, the more customers there will be. And more customers in turn draw more companies. As for smartphones, users tend to choose a smartphone that offers more applications, and app developers go to the smartphone that has more users.

So it can be an attractive business since you can lure more companies or customers once a platform is established. This is how Microsoft has led the industry for 30 years after it won a victory in PC operating systems with MS-DOS and Windows in the early 80s. Windows still reaps massive profits, with operating profit margins reaching 70%. Meanwhile, Apple and Google are now competing fiercely to dominate the next platform that will gain ground on Windows.

Last but not least, your customers also can be a platform.

Let’s take Woongjin Coway for example. 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. The company is now thinking about going into the cosmetic business.

So far, we have looked at what a platform is, why it matters and what types of platforms are out there.

Korean companies lag behind when it comes to platform use. Some companies can cut costs by adopting a platform for a product, but there has been a notable lack of effort to find multiple sources of income or to lead an industry by making a platform that links various companies and customers.

Where are you 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 you face when customers become more demanding, even as development and production costs increase amid rising competition.

A platform can be anything.a technology, product, transaction infrastructure, brand or customers. I hope you will find a platform that realizes your business’s potential.

Thank you for watching. I’m Byong-Sam Choi.

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