How to turn a product into a platform?

..and why you should care as a product manager?

Software is still eating the world. Most of the traditional tech products are now moving towards the platform model.

However, do you know what truly constitutes a platform?

• Is it an ecosystem that connects producers to consumers?
• Is it the facilitation of the exchange of goods, services or whatever currency is valuable to the participants?

I prefer the following definition:

“A platform is when the economic value of everybody that uses it, exceeds the value of the company that creates it. Then it’s a platform”

There are zillions of examples that fit this definition starting from a centralized platform such as Amazon, Uber to a decentralized blockchain platform.

The platform products open up the ecosystem by democratizing the value creation by producers. As a result, the offerings to consumers scale at a rapid speed. For example — As Uber gets more and more drivers to its platform, the number of riders increases. With more cars on the road, the customer experience for the riders improves because the waiting times go down. Along with the waiting times, Uber has an ability to offer lower-cost resulting in a flywheel of growth.

Flywheel effect of platforms

As a product manager, I have always wondered if every product can be turned into a platform or not? When I say product, I mean traditional products that are not yet platforms. Products follow a traditional pipeline model that narrows the scope. For example — products are developed to address the needs of a target customer segment and are very linear in terms of development. Classic iPods in early 2000 were a great example of products built for a target audience with a set of features. These features iteratively evolve based on the feedback of end-users along with the commercial opportunity. Traditional product struggles to scale after they reach a threshold or peak adoption.

Products are based on a linear pipeline model

As products build brands and have an audience, they should make a transition to a platform.

But, why?

Well, for the following three reasons:

• Platforms continue to grow and scale even after peak demand as they connect your customers to customers and your products to products
• There is a buzzword called network effects which comes into play when your product becomes a platform. Network effects refer to the impact that the number of users of a platform has on the value created by each user

So, how would you convert our previous example (iPod) to a platform? Well, think of iPhones and how it was a great transition from a traditional product to a platform. As the iPhone opened up the ecosystem to app developers, it grew exponentially. To date, it is continuing to grow as producers and consumers are happily providing each other with the virtuous cycle of feedback.

As a product manager, how do I find my platform market fit?

The first step of transitioning from a product to the platform is to treat both producers and consumers as your customers. In the traditional product world, internal engineers (producers) are responsible for iterating the product or the value which is offered by the product. However, as you make the shift towards a platform, you need to open up the barriers and let the outside developers or producers come in and evolve your ecosystem.

Virtuous cycle — A Platform provides facilitation between producers and consumers

A non-tech example I love is the following:

Imagine you run a farm. You employ various farmers who cultivate the crops on your farm. You have limited tools to operate with the output focussing on a few vegetables. You know your target audience really well and you optimize your pricing to target the addressable market. In this scenario, your asset (farm) and value (crop) are tightly coupled together.

Imagine if you decouple your asset to the value. What would that mean? That would open up your farm to external producers who would find the best way to maximize the utilization of the farm. You will get more advanced tools to operate as you are letting anyone come and farm on your land. Is this a charitable proposition? No, actually the opposite. You are enabling a platform economy by bringing all the barriers down and democratizing the way value is created. Think of Facebook — it is a farm that provides the infrastructure to producers (who contribute to their feed) and then filters the feed to target consumers (who consume the feed based on their interest and values) By offering this facilitation of value creation, it makes money via advertisement. There could be multiple ways to monetize facebook farms however they chose to make most money via advertisement. Basically, facebook is the farm of the attention economy. The more attention and engagement producers and consumers have, the more money Facebook makes.

So, as a product manager, if you want to magically turn your product into a platform, you need to:

• First, build the brand by capturing the market. Therefore, you need to build the traditional product that people are aware of.
• Second, open the door of your product to third parties in a way that external parties still align with your values and principles.
• Third, treat both your producers and consumers are customers.
• Find a way to connect your customers.
• Find a way to connect products to connect customers.

And, voila! Your product is a platform. But as we know from Spiderman that with great power comes great responsibility. As you open the flood gates to external producers, you need a framework to make sure you don’t lose your product identity. You also need to make sure that your external producers align with your values and principles. Facebook and Twitter are classic examples of this abuse. As more producers contribute, it becomes really hard to moderate what content should or should not be on the platform (but that is a whole new separate topic so we won’t go there)

Some other questions I ask as a platform product manager:

• Shall I build all the products to be externalizable or open source?
• How can I empower the outside partners to create products and services in my ecosystem?
• Are there any ways I can network with current competitors to produce valuable services for the customers?
• How do I build a community of producers and consumers without jeopardizing my business?

If you can answer the above questions, you can turn your product into a platform. But, please make sure that your platform has an ethical purpose as platforms are not to drive stickiness. Platforms can be addictive. This reminds me of one of my favorite songs:

You can check-out any time you like, but you can never leave.

Happy platforming.