Platform Philosophy
Throughout my experience talking about and teaching platform strategy, I’ve been challenged to discover and codify the picture of how I see platforms working, especially in the context of consumer software built with a strong B2B backbone. While I don’t always conform to some traditional views— I try not to focus too hard on network effects— people familiar with and working within platforms will probably be accustomed.
A platform is a suite of products and services that serves to create emergent ecosystem advantages through tradeoffs.
What is a platform?
Let’s start with the definition of a platform, as many of us do. A platform is a suite of products and services that serves to create emergent ecosystem advantages through tradeoffs. These advantages may come in the form of users, revenue, enterprise value, optionality, and, especially, partnerships and M&A visibility. The primary tradeoff, though, is what I call channel conflict. We’ll come back to that. You share both the advantages and the tradeoffs with everyone participating in the platform: users using your products, SAAS products leveraging your data, your own products.
Platforms Are Like SimCity
Platforms are operated with several levers, corresponding mostly to product, management, and terms of service. They also require substantial investment and confidence from your organization: no amount of pulling levers will survive an organization that is afraid of letting their organism grow. However, platforms travel through a lifecycle, requiring periods of control and release, much like The Fed policing the markets. You don’t have to know your primary revenue model ahead of time, but you need to understand how your platform affects and is effected by it.
In SimCity you take on the role of Mayor of a burgeoning city, dedicating space to residential, industrial, and commercial development, all while building vital infrastructure. You balance the right policies and zoning to create an efficient, growing, profitable happy little world. Then Godzilla comes. In the latest version of the game, they introduced a key element: your city is exists next to other cities. They’re like little galaxies spiraling against each other, creating pressures, sharing resources, and exerting gravity.
You might be a small adtech startup named Dodge City with water you’ve licensed to Salesforce City. Salesforce City has millions of residents you would love to know they’re getting Dodge City water. Maybe you want them to move to Dodge City, or maybe you just want them to work or shop. What’s important is that you respect their city and ensure that you both benefit from the exchange— and keep in mind that there’s several other cities sharing resources.
The Levers
Kin Lane (the API Evangelist) has already done a lot of great work identifying the building blocks of APIs. We’ve talked at great length about the role they play in encouraging a respectful, growing ecosystem. He collectively calls these The Politics of APIs, but I’ll discuss them a bit here.
Product — The resources or interactions you make available. How core are they to your primary products? How do you make them available? What are they suited for? How do you package it?
Management — How do you deliver and manage the API? How do you restrict, encourage, and enforce responsible usage? Do you manage the packaging, enforcement, and distribution?
Terms of Service — What sort of behavior and products are you trying to encourage or discourage? What sort of branding do you require? What recourse do you have for violation? Is your platform open, or for vetted partners?
Setting Platform Goals
As I said before, platforms invite and thrive off of tradeoffs. Knowing and embracing this is vital to setting the right goals for your platform and products. The moment you decide that revenue is a platform goal, you’re on a collision course with channel conflict. How you operate the levers depends heavily on your goals and which stage you’re in. Don Hoang (VP of Business Development at Lithium) and I defined a series of phases: growth, strategic, hybrid, and revenue. You’ll often be in a mixture of all of these, but when negotiating resources, it’s best to select one.
Platform revenue depends heavily on product decisions and your company’s business model. You can get by having absolutely vital data that everyone wants for awhile, but if you’ve organized it poorly, made it difficult to work with— if you haven’t created the right infrastructure to transport (and brand it!) between cities— it’s going to be like pulling teeth. At times, revenue can act as a control lever, rather than a goal. Be careful to identify whether you want incidental revenue, or are building a business.
If your platform’s primary goal is user growth, your partnerships team will require products that are built for bringing users to your app with clear value propositions. You’re going to need to build some grease— widget builders, syntactical sugar; make it easy. Most importantly, build partnerships and products that make pieces of your product vital to users experience within other apps in a way that underscores the strengths of your first party products.
The Platform Lifecycle
A fully mature platform ought to provide value everywhere a customer can reasonably be. This means on your website, in your mobile apps, on a retailer’s site, a brand’s app, in the brand’s prospecting and leadgen, in their CRM system, in their content pipeline, and in their advertising targeting. The degree to which the customer knows you’re integrated in the lifecycle depends on how strong your brand and platform is.
This cycle is what drives the beloved network effects. However, which network you’re driving transforms throughout. Let’s walk through it.
- Your first party apps and website registers users. Call it MyGreatCo. You’re giving them a great product and user experience that they’re deriving real value from. You might have ways that brands, agencies, and partners can also get in front of those customers. The point is, brands are getting excited and want to leverage all of your exhaust!
- You offer data, actions, users, behavior, aggregates, insights, what-have-you via an API Product. But the brands aren’t going to just integrate this themselves, they want it inside the SAAS CRM and Analytics products they’re already using. They’re asking those products, “hey, when can I get MyGreatCo data here?”
- Now those SAAS products are clamoring to capture the demand from their stable of brands, and to differentiate their offerings. Now it’s time to strike a deal to bring MyGreatCo data into their ecosystems in a mutually beneficial way. It may be revenue, it may sharing the funnel.
- Those platforms are making differentiated offerings. They’re doing things you didn’t imagine, but hopefully you pulled the right levers on your policy and terms of service and the partnership can not only withstand it, it can guide it and benefit from it. You might see these as competitive, but also opportunities for mergers and acquisitions later down the road. You’re making a non-monetary investment.
- Brands are using the products. They’re loving the SAAS, but most importantly, they’re loving the benefits that MyGreatCo gave them, and now they’re using that to deliver better customer experiences. Better content. Better offers. Better advertising. Every thing is awesome. It’s even driving demand from brands that hadn’t heard of MyGreatCo yet.
- People love the benefits they’re getting from the outer limits of your platform. They’re driving their friends and network to join. It’s making your product better, your user base stronger, and driving even more value back to those brands and SAAS products. Level up.
Channel Conflict
The last thing to discuss is the concept of channel conflict. This will be a central issue within your product, sales, and marketing organization. The truth about platforms is: even with the best pulling of levers, you’ll be creating an environment that may compete with your existing or future products in some way. Your sales staff will be competing with the sales staff of that SAAS product for the same brand dollars. Your product will want to be the only game in town. Your marketing will want to say they’re the only game in town.
Your team will need to accept these risks completely. In the graph you can see that as revenue (or, in a lesser sense, user) growth goes up, channel conflict is also going to go up. As your platform grows, in order to hit an inflection point of growth, you’re going to have to accept more risk. A responsibly built platform can whether these risks as advantages. The API Products can be subsets or transformations of your core assets. And your core products will simply have to be better. It’s a challenge your organization should accept. The levers you pull along the way will encourage this growth and let you benefit from it across the board.
In conclusion, a healthy platform balances tradeoffs and risk to create a vibrant ecosystem that contributes to a better product, better user experiences, and growth. I’m happy to discuss criticism of this approach with anyone!
