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Amazon’s Bezos Pushed A Platform. Should You?

October 19th, 2011

What applications would it make sense to platform-ize in a retail chain? Definitely not your applications for handling payment cards—the less connections there, the better. Probably not loyalty-program applications, either, unless you’re planning to give outsiders access to all that hard-won CRM data. An API to expose inventory levels and prices to the world in a highly accessible way? That’s something your competitors would love, but it’s exactly what you don’t want to be doing.

In fact, almost everything that made sense for Amazon to turn into a platform—and thus expose to the outside world of customers and third-party retailers—makes zero sense for a retail chain to do.

On the other hand, consider one of the nastiest problems most chains face: dueling inventory systems, one for E-Commerce and at least one for in-store inventory. At most chains, those two inventory systems aren’t integrated. They’re barely on speaking terms, and they communicate through exactly the things that Amazon outlawed in 2002: special backdoors, direct links from one application into another and single-purpose reads of inventory data.

That’s when there is a connection other than an associate jumping between a local-inventory screen and the Web site to tell a customer whether the item she’s looking for is in the store, in another local store or is available online.

Now that’s a candidate for a platform. Or at least it’s a candidate for platform thinking.

What you want is for associates to be able to query all of the chain’s inventory. And for the E-Commerce inventory to be available to stores and in-store inventory to be available to ship to E-Commerce customers. And for excess inventory to be under good enough control that you’ll never have to sell any item at clearance that some customer anywhere in the world is willing to pay full price for.

You want an inventory platform. Not a single chain-wide application that replaces all your current inventory applications—that type of monolithic, single-point-of-failure application is an invitation to disaster—but a unified way for applications to query all your inventories, so new merged-channel inventory tricks don’t require one-off connections and risk destabilizing the whole system.

That’s why chains should be thinking hard about the platform question. Unfortunately, thinking is all that most chains will do. There’s a reason it took Nordstrom years to create an enterprise-wide view of inventory, and why JCPenney is still working on the same problem. It’s pretty much the same reason that it took a CEO’s mandate to force platform thinking company-wide at Amazon.

Platforms are hard to do, they’re expensive, and they’re difficult to justify, because there’s no single thing you can do with a platform that you can’t do cheaper and easier by stringing a connection between one application and another.

That means it’s not just IT that needs to be thinking about platforms. Without strong executive support for a platform approach, that’s never going to happen, no matter how much sense it makes for a retailer.

And if Google’s executives have that much trouble grasping the platform concept, as a retail CIO, you’ve got your work cut out for you.


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