Building a platform business is like building a movement
Many tech companies are now platform companies. They either offer applications and services to the end-users or tools for developers to make applications on their platform. It is said the software business has reached a more mature phase — i.e., it is not only for VC investors anymore when it doesn’t include a significant technology risk. But the platform business creates its own questions — how to actually run the business, and not only how to get to the market, but also how to scale it. And in the end, you have to motivate people, so you must create a movement with passion.
It is a known fact that a platform alone is not enough to succeed. The success of a platform depends significantly on the initial applications or services on the platform and how happy the users are with those services. We know a new game console needs excellent games when it is launched. A streaming service needs enough strong, original content. Apple had to guarantee top-level apps after it launched the iPhone and App Store. We also know the historical cases, such as how VHS ultimately beat Beta with a better (or at least wider) movie selection.
The end-game is the easy bit
Some platforms have taken a developer-first approach. They don’t really offer end-user applications or services, but rather the tools and ecosystem for developers to make and sell them. This adds an extra layer of complexity. First, the platform must get developers to use tools and actually make apps and offer them to a market. Second, those applications must be good enough that users like them. Third, in the long run, both the platform and developers must be able to build enough business on the platform.
It is easy to see the end-game of the platform business. You must have a platform that has a lot of developers that make a lot of sticky applications that people pay for and use, and generates enough money to give a fair share to all parties. The goal is the easy part — the challenge is how to achieve it. You also need tactics for the go-to-market and scale-up phases.
One typical early-phase mistake is to think the whole platform economy will work itself — i.e. you just publish your platform and developers come to make their successful apps. But it can be just as risky as ignoring the ecosystem and developers and just making your own services for enterprises. It prevents you from engaging other parties in your ecosystem and gets you stuck with slow enterprise sales. Then, you only grow by hiring more developers to tailor services, as well as more sales reps to sell to new customers. One way or another, this is actually a common path for many platforms, despite their public appearance.
Not sales reps but conductors
Operating this kind of platform business is not about managing the business and selling products — it’s more about orchestrating your ecosystem. When a conductor orchestrates a symphony, there are different parts that need their own instruments and role. The conductor can get different parties to play together and also emphasize different components as different parts of the whole. The conductor must get all parties to play together.
In the platform economy, product management is more complex and thus becomes even more important than it has been in traditional models where you sell directly to users. You can easily get lost in features if you make them whenever someone asks for them.
In the traditional software business, it is often said that you must not make what customers wish to have, but what they are prepared to pay for. The platform business version of this is that you should develop products that help to get the right outcomes within the ecosystem. So, it is not only about getting one thing to work and making a few developers and users happy, but also how they really drive your platform to its next phase. In the early days of a platform, a company typically works with some chosen partners to get the first top-quality services to the market even if the platform doesn’t yet support all that, while at the same time making sure the platform can serve longer-term targets, not just the first use cases.
Get people to love and hate you
The platform business needs a clear strategy and smart tactical moves. If either is missing, the business will most probably fail. If the strategy is missing, the business is only really a set of tactical maneuvers to make some functional apps for users, but it never becomes a real platform business. If the tactical part is missing, then the platform can be really good, but it never draws the first developers, users or use cases.
Platforms now cover many kinds of business sectors — from gaming and streaming to software development, NFTs and apps on personal data. We can talk about many technical, business model, pricing and productization aspects, but we must not forget one of the key components — the platform must always engage people, be they developers, content creators, influencers or paying users.
The old truth of business works with platforms too: you must get some people to love you, and it doesn’t happen until some people also hate you. Marketing and culture play a very important role in creating a successful platform. You must take your own position, get people excited, and really represent what you want to build.
Creating a platform business means building technology, community and movement at the same time. People must feel they are part of something important on your platform. If you just want people to buy whatever you make, you end up building a traditional business, not a platform business. But if you are able to motivate many people to build with you and be a part of your ‘movement’, you can build a really scalable business.
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