A Strategist’s Guide to Platform Thinking
Part 1: Product Platforms
This is the first of a five-part series on platform thinking. The series lays out a simple framework designed to help you understand the various types of platforms and how they are used. Each part covers a different aspect of the platform spectrum and can be read independently in any order. In part I, I will focus on product platforms.
What is a Product Platform?
Product platform is not a new concept. Since the 1990s, the term “product platform” has been used extensively in the engineering and product development literature. Although multiple definitions exist, they all share a common theme of systematically reusing components, modules, and design elements to create product families.
Here are two popular definitions:
Meyer & Lehnerd (1997): “a set of subsystems and interfaces forming a common structure from which a stream of products can be developed.”¹
Roberson & Ulrich (1998): “the assets (components, processes, knowledge, people and relationships) shared by a set of products.”²
It is important to note that product platforms are distinctly different from what so-called multi-sided platforms which will be discussed in part 3 of the series. Product platforms do not facilitate transactions between producers and consumers. Instead, product platforms are used within the firm to develop derivative products from shared building blocks to satisfy a variety of market niches (Figure 1).
Why Use Product Platforms?
Globalization, increased competitive pressure, and the demand for product variety have changed the way in which products are designed and produced. Across many industries, rather than making individual products one at a time, companies have developed product platforms to take advantage of economies of scale and scope while satisfying the needs and requirements of a wide range of market segments.⁴
At the heart of a product platform is the modular approach to building a complex product.⁵ Many products can be made modular, meaning that they can be decomposed into smaller units which are designed independently yet function as an integrated whole. Components are designed to connect and interact through a standardized interface. By mixing and matching compatible components, a variety of product configurations can be created.⁶
Sharing components and a modular architecture across a family of products allows companies to reduce development and production costs, increase product varieties, and shorten time to market. A study of the automotive industry by Moreno Muffatto shows that sharing underbodies between models can reduce capital investment by 50% and cut down product lead times by as much as 30%.⁷ Volkswagen has also greatly benefited from a product platform-based approach. It was estimated that in the late 1990s, Volkswagen saved 1.5 billion per year in development and capital costs using product platforms.⁴
Examples of Product Platforms
Product platforms have been widely used by many companies as a cost-effective means to develop product variants and gain access to multiple market segments. Successful examples include Sony’s Walkman platform, Black & Decker’s power tool platform, Hewlett Packard’s Deskjet printer platform, and Intel’s Microprocessor platform.⁸
Recently, Volkswagen introduced the new MBE (modular electric drive matrix) platform. This product platform is designed to support a wide range of next-generation electric vehicles that offer at least 200 miles of range, from sleek sedans to spacious utility vehicles and vans. The key components of the MBE platform include an electric motor integrated into the rear axle, a large, flat high-voltage battery in the vehicle floor, and auxiliary powertrains integrated into the front end of the vehicle. Using a flexible modular architecture, Volkswagen intends to make e-mobility affordable starting in 2020 (Figure 2). MEB will be used to build the I.D. family of electric vehicles. The same product platform will also be shared across the group’s four major brands: Volkswagen, Audi, SEAT, and Skoda. The Group plans to produce one million electric vehicles a year by 2025 and launch 70 all-electric models by 2028 using the MEB platform.⁹
Companies that make digital products such as software can also benefit from a product platform-based approach. For example, Visio Corporation (now part of Microsoft) made a successful line of graphics-charting software in the early days — Visio SE, Visio 4.0, and Visio Technical 4.1 — to address the different needs of the home, business, and technical markets. The key components of the Visio product platform are the core graphics engine which consists of user interface, drawing tools, page layout, chart templates, shape stencils, and object linking and embedding technology, the SmartShape management subsystems for incorporating and manipulating graphic objects, and an applications programming interface that provides a standard scripting language.¹⁰
If you have other good examples of product platforms, I would love to hear from you. Please post them in the comments below.
References:
1. Meyer, M.H., & Lehnerd, A. P. (1997). The Power of Product Platform: Building Value and Cost Leadership. Free Press.
2. Robertson, D., & Ulrich, K. (1998). Planning for Product Platforms. Sloan Management Review, 39(4), 19–31.
3. McGrath, M. (2000). Product Strategy for High Technology Companies. McGraw-Hill Education.
4. Simpson, T.W., Siddique, Z., Jiao, R.J. (Eds.) (2007). Product Platform and Product Family Design: Methods and Applications. Springer.
5. Baldwin, C.Y., & Clark, K.B. (1997). Managing in the Age of Modularity. Harvard Business Review, 75(5):84–93
6. Shilling, M.A. (2000). Toward a General Modular Systems Theory and Its Applications to Interfirm Product Modularity. Academy of Management Review, 25(2), 312–334.
7. Muffatto, M. (1999). Platform Strategies in International New Product Development. International Journal of Operations & Production Management, 19(5/6), 449–460.
8. Harland, P.E., Uddin, Z., & Laudien, S. (2018). Product Platforms as a Lever for Competitive Advantage on a Company-Wide Level: A Resource Management Perspective. Review of Managerial Science, 1–22.
9. Volkswagen. (2019, Nov 7). Volkswagen Newsroom: Emobility [Press Releases]. Retrieved from: https://www.volkswagen-newsroom.com/en/e-mobility-3921.
10. Meyer, M.H., & Seliger, M. (1998). Product Platform in Software Development. MIT Sloan Management Review, Fall.
