Institute of Product Leadership
Search
Close this search box.

Unlocking Platform Thinking Key Platform Product Management Perspectives

By Roopa Jayaraman – Senior Vice President at Odessa

Transitioning to a platform-centric model is a strategic move that can drive significant growth and innovation. Companies like Shopify and Salesforce have set benchmarks by effectively leveraging platform thinking. Let’s delve into the key elements of platform product management, architecture, and operations that are crucial for building and scaling successful platforms.

Key Takeaways:

  • Understanding and designing for various user personas, such as developers and end-users, is crucial for creating a platform that meets diverse needs and ensures a seamless, omnichannel user experience.
  • A platform’s feature backlog should include both functional and ecosystem features, leveraging data and analytics to prioritize impactful enhancements and maintain ecosystem health.
  • Focus on core strengths while providing open, extensible features through APIs and toolkits to enable the broader ecosystem to innovate and extend the platform’s capabilities.
  • Organize agile teams around specific platform features to enhance focus, go-to-market agility, and operational efficiency, ensuring quick iteration and improvement based on user feedback.
  • Instill a platform-first mindset across all organizational levels, integrating this philosophy into product management, engineering, and design to ensure cohesive and strategic platform development and operation.
In this article
    Add a header to begin generating the table of contents

    The Rise of Platform Companies: Disruption and Dominance

    Over the past decade, platform companies have significantly disrupted and dominated various industries. This transformation has been observed across startups becoming unicorns and traditional organizations reinventing themselves as successful platform product companies.

    Key Examples of Platform Disruption

    • Airbnb vs. Marriott

    Airbnb: Revolutionized the hospitality industry.

    Marriott: Represents traditional hotel chains that have been challenged by Airbnb’s model.

    • Uber vs. General Motors (GM)

    Uber: Disrupted the automobile industry with its ride-sharing model.

    GM: A century-old company that now faces competition from newer, platform-based businesses.

    • Amazon’s Evolution

    Initial Phase: Started as an online bookstore.

    Current Status: Expanded into a multi-billion dollar marketplace and cloud service provider, showcasing the potential of platform scalability.

    • Microsoft’s Transformation

    Pre-2014: Operated primarily as a devices and services company.

    Post-2014: Under Satya Nadella’s leadership, transitioned into a productivity and platform company, rejuvenating its market position.

     

    Market Impact and Data

    • Market Capitalization: Recent studies indicate that among the top 10 companies by market cap, seven to eight are platform companies.
    • Value Creation: Platform companies are leading in market capitalization and capability, showcasing their significant impact on the market.

     

    The Platform-First Mindset

    • Definition: Emphasizes adopting platform principles to drive business growth and innovation.
    • Economies of Scale: Platform models bring unprecedented economies of scale and growth potential.
    • Disruption of Traditional Models: The platform-first approach is disrupting traditional business models by fostering greater efficiency and scalability.

    Broader Implications and Adoption

    • Beyond Large Companies: Many smaller organizations have also adopted the platform mindset, creating value within their respective ecosystems.
    • Future-Proofing: Embracing platform principles is crucial for companies and professionals to remain competitive and future-proof in the evolving market landscape.
    executive mba in product management

    Understanding Platform Complexity in Tech

    Platforms have become ubiquitous in the tech world, making the term both ambitious and ambiguous. Today, almost every company aspires to be or brands itself as a platform, leading to a pervasive use of the term. Platform strategists have attempted to categorize platforms into logical groupings. Here, we’ll explore three key types of platforms, understanding their distinct roles and interconnections.

    1. Marketplace or Consumer Platforms

    Marketplaces or consumer platforms are those we interact with daily for various purposes, such as accessing information, enhancing productivity, or social communication. These platforms have a significant global footprint and are integral to our daily lives. Examples include:

    • Uber: Revolutionizing transportation.
    • Airbnb: Transforming hospitality.
    • Instagram and Facebook: Facilitating social connections.

    These platforms cater directly to consumers, providing essential services and conveniences that are deeply embedded in our routines.

    2. Developer Platforms

    Developer platforms provide tools and environments for developers to create applications and services. Some marketplace platforms offer development toolkits, but there are also standalone developer platforms. Examples include:

    • Android: Used for creating apps in Google’s marketplace.
    • Apple’s iOS: Providing a robust ecosystem for app development.
    • Amazon Web Services (AWS): Offering a wide range of cloud computing services.

    These platforms empower developers to build, innovate, and expand the ecosystem of available applications and services.

    3. Product Extension Platforms

    Product extension platforms originate from companies initially focused on specific products, which then expand their offerings to include a broader range of services. These platforms leverage their foundational products to extend their market reach and capabilities. Examples include:

    • Salesforce: Started as a CRM product and expanded into a comprehensive business platform.
    • Shopify: Evolved from an e-commerce product into a platform offering a variety of commerce services.

    Product extension platforms are unique in that they build on existing products, extending their functionalities to serve a wider array of business needs.

    How To Define a Platform

    Platforms have become a fundamental business model in today’s digital economy, driving value through unique mechanisms that differentiate them from traditional product-based models. Understanding what constitutes a platform is crucial for appreciating its role and potential in various industries.

    At its core, a platform is a business model designed to create value. Unlike traditional products, which create value through direct consumption, platforms generate value through interactions. These interactions are the conduit through which value flows and is amplified.

    The following characteristics define a platform:

    1. Interactions as the Heart of the Model

    • Platforms thrive on interactions, which can be one-to-many or many-to-many.
    • These interactions typically occur between interdependent consumers and producers within the platform ecosystem.

    2. Scalability

    • Platforms are inherently scalable ecosystems.
    • Users can continuously interact and engage with the platform, often on demand, enhancing its scalability.

    3. Network Effects

    One of the most discussed features of platforms is their ability to create network effects.

    Network Effects: The value of a platform increases as more people use it. This viral phenomenon is crucial for platforms as it drives exponential growth and engagement.

    Platforms can rapidly scale by creating communities and markets that benefit from these network effects.

    4. Blitzscaling

    • Platforms have the potential for blitzscaling, rapidly growing their user base and market presence.
    • This rapid scaling is often driven by network effects and the platform’s ability to facilitate on-demand interactions.

     

    Monetization and Multiplier Effect

    Monetization Model

    • Platforms typically have a multiplier effect on value creation and capture.
    • The value generated on a platform is distributed across its user base, particularly between consumers and producers.

    Multiplier Effect

    • The economic value of a platform is not confined to a single entity; instead, it spreads across the ecosystem.
    • This distribution enhances the overall value captured and monetized, benefiting all participants in the platform.

    Understanding Platform Players and Their Roles

    In any business model, interactions between key players are crucial. In the context of platforms, these interactions define the unique dynamics that differentiate platforms from traditional product-based models. Understanding the roles of these key players is essential to grasping how platforms create and deliver value. Platforms operate through interactions among three primary players:

    1. The Platform Itself

    Role: The platform serves as an enabler or infrastructure provider.

    Function: It offers the necessary tools, capabilities, and environment for other participants to interact and create value.

    2. Producers

    Role: Producers are the creators who develop tools, products, or services using the platform’s infrastructure.

    Function: They leverage the platform’s capabilities to build and innovate, providing offerings that attract consumers.

    3. Consumers

    Role: Consumers are the end-users who adopt and use the products or services created by the producers on the platform.

    Function: They engage with the platform to fulfill their needs, driving demand and value creation within the ecosystem.

    Contrasting Platforms with Products

    To better understand the platform model, it helps to contrast it with a traditional product-based approach:

    Product Model:

    • Linear Process: In a product model, a company builds a product with a specific end user in mind, addressing a particular business problem.
    • Value Chain: The product is developed, marketed, and shipped directly or indirectly to the customer, following a linear value chain.
    • End Goal: The focus is on delivering a finished product to the customer, who is the primary user.

     

    Platform Model:

    • Non-Linear Process: Platforms involve a more interactive and iterative process where the platform itself provides features and tools that producers use to create offerings.
    • Ecosystem Value Creation: Producers and consumers interact within the platform, creating a non-linear flow of value.
    • Multiplicative Impact: The platform enables multiple producers to create diverse offerings, enhancing the overall value for a broad base of consumers.

    Unlocking Value Through Ecosystems

    The platform model’s non-linear, interactive nature is a key differentiator that unlocks significant value. By fostering an ecosystem where producers and consumers can interact dynamically, platforms can scale efficiently and create robust, interconnected markets.

    • Ecosystem Dynamics: The platform facilitates ongoing interactions, leading to continuous innovation and value creation.
    • Network Effects: As more users (both producers and consumers) join the platform, the value of the platform increases, attracting even more participants and driving exponential growth.

    The Heart of Value Creation in Platform Business Models

    Value creation is the cornerstone of any business model. For a business to thrive, it must deliver sustainable and compelling value to its end users. This principle applies equally to product-based models and platform-based models. However, the way value is created and sustained in platform models is distinct and nuanced.

    In platform models, value creation is driven by interactions within the ecosystem. This process is non-linear and continuous, enabling a multiplier effect that enhances value over time.

    1. Non-Linear Value Creation

    • Unlike the linear value chain of traditional product models, platforms create value through a two-way, ongoing process.
    • Interactions: The core of value creation lies in the interactions between the platform’s players—producers, consumers, and the platform itself.

    2. Multiplier Effect and Network Effects

    • The multiplier effect amplifies the value generated within the platform ecosystem.
    • Network Effects: The platform becomes more valuable as more users join and interact, leading to exponential growth and enhanced user engagement.

    3. Sustainable Value

    • For a platform to succeed, it must create value that is not only compelling but also difficult to replicate.
    • The continuous cycle of interactions and feature usage fosters a virtuous cycle of growth and innovation, potentially leading to market dominance or a highly efficient ecosystem.

     

    Real-World Examples

    To illustrate how these principles play out, consider the cases of Uber and Airbnb, two of the most cited examples of successful platform models.

    1. Uber: The Ride-Sharing Revolution

    • The Napkin Sketch: Often touted as a game-changing concept by venture capitalists, Uber’s founder sketched out how value is created in the ride-share space.
    • Non-Linear Growth: Uber’s model showcases how driver and rider interactions create a network effect, enhancing the platform’s value as more users participate.
    • Multiplier Effect: The increase in users leads to better service availability and efficiency, driving further growth and market penetration.

    2. Airbnb: The Hospitality Disruptor

    • Host-Visitor Ecosystem: Airbnb’s platform connects hosts who own properties with visitors seeking accommodations.
    • Virtual Cycle of Value: The interactions between hosts and guests create a continuous cycle of value. Hosts provide unique and personalized experiences, attracting more visitors and enhancing the platform’s reputation.
    • Sustainable Growth: This model not only creates value for both hosts and guests but also fosters a strong community, contributing to Airbnb’s long-term success.

    Platform Business Model

    Transitioning to a platform strategy requires significant shifts in mindset and approach. Unlike traditional product models, platforms operate as ecosystems. This shift has profound implications for product managers, architects, and business leaders.

    Key Paradigm Shifts

    1. Ecosystem vs. System

    • Traditional System: Focused on delivering a specific product or service.
    • Platform Ecosystem: An interconnected network where multiple players interact and create value.

    2. Openness and Extensibility

    • Traditional Mindset: Emphasizes tightly controlled intellectual property (IP).
    • Platform Paradigm: Thrives on openness, enabling extensibility through APIs and self-service tools.

    3. Self-Service Model

    • Control vs. Self-Service: Core aspects remain controlled, but much functionality is externalized for ecosystem participants to innovate.
    • Empowering Users: Providing tools and extension points to enable third-party innovation.

    Organizational and Architectural Shifts

    • Rethinking Organizational Design

    • Collaborative Culture: Fostering collaboration and openness within the organization.
    • Cross-Functional Teams: Supporting the ecosystem’s diverse needs.

    • Architectural Decisions

    • Scalable Infrastructure: Supporting extensive interactions and integrations.
    • API-First Approach: Ensuring easy extension and integration.

    Go-to-Market Strategy

    1. Ecosystem-Oriented Approach

    • Engaging Stakeholders: Considering all ecosystem participants in the strategy.
    • Value Proposition: Clearly articulating benefits for producers, consumers, and developers.

    2. Driving Adoption

    • Incentivizing Participation: Creating incentives for early adopters.
    • Continuous Engagement: Maintaining engagement through updates and community-building.

    Platform-Product Continuum and Prongs of Platform Management

    At the heart of any successful platform is a strong product offering. These are not separate entities but parts of a continuum in the evolution of a company. Using Microsoft’s transformation from a devices and services company to a productivity and platform powerhouse as an example, we see this shift isn’t a dichotomy but a progression.

    There are 3 prongs of platform management- 

    1. Platform Product Management

    Effective platform product management is crucial for building successful platforms. It involves understanding various user personas, managing an ecosystem-centric feature backlog, and focusing on interaction-based metrics and monetization strategies.

    Understanding Platform Personas

    (i) Diverse User Base

    • Developers as Users: When building development platforms, developers are key users. The focus is on ease of use, low-code or no-code options, and the ability to quickly build and deploy applications.
    • End Users: For consumer platforms, the focus shifts to user experience, ensuring seamless omnichannel interactions.

    (ii) Design Considerations

    • Developer Personas: Prioritize simplicity and functionality, enabling developers to innovate and bring products to market efficiently.
    • Consumer Personas: Emphasize user-friendly interfaces and consistent experiences across multiple channels.

    Managing the Feature Backlog

    (i) Ecosystem Features

    • Balanced Backlog: A mix of functional features that create market impact and non-functional features like API capabilities.
    • Data-Driven Decisions: Utilize analytics from user interactions to inform feature prioritization and development.

    (ii) Cloud Integration

    Deployment: Leverage cloud infrastructure for provisioning toolsets and deploying in the marketplace, ensuring scalability and accessibility.

    Metrics and Monetization

    (i) Key Performance Indicators (KPIs)

    • User Interactions: Metrics are built around user engagement and interaction, the core currencies of a platform.
    • Specific Metrics:

    Consumer Platforms: Focus on user numbers, usage rates, loyalty, and network effects.

    Developer Platforms: Track the number of developers, published apps, and app usage by end customers.

    (ii) SaaS Business Metrics

    • Recurring Revenue: Monitor annual and monthly recurring revenue to gauge platform growth.
    • Feature Usage: Assess the monthly usage of various feature sets to understand adoption and value.

    2. Platform Architecture

    Let us look at the core competencies and openness of platform architecture:

    (i) Core Competencies and Openness

    • Focus on Core Competencies: Platform companies prioritize their core strengths and capitalize on them.
    • Unlocking Features: By providing tools and development capabilities, platforms enable the ecosystem to extend and build upon the core offerings. This openness is critical to fostering innovation and reach.

    (ii) Reusable Components and Toolkits

    • Abstracting Reusable Components: Platforms must provide toolkits that abstract reusable components, making it easier for developers to build and extend applications.
    • Microservices and APIs: Designing the platform with microservices and API capabilities ensures it is modular and extendable, promoting ease of integration and development.

    (iii) Headless Programming Paradigm

    • Low Code/No Code Development: Platforms should offer low-code or no-code options to enable quick and consistent app development without extensive hand-coding.

    (iv) Technology Choices

    • Intentional Decisions: Whether building or acquiring technology, decisions are guided by principles that ensure scalability, flexibility, and integration with the platform ecosystem.

    3. Platform Operations

    (i) Agile Full-Stack Teams

    • Organized Around Platform Features: Teams should be organized around specific platform features, such as data tools, developer tools, or specific services (e.g., payments for a FinTech platform). This promotes focus and agility in bringing features to market.

    (ii) Platform-First Mindset

    • Cultural Integration: The platform-first mindset must permeate across product management, engineering, and design teams. Decisions should consider their impact on the entire ecosystem, ensuring every feature enhances the platform’s value.

    (iii) Robust Development and Delivery

    • DevOps and Continuous Delivery: Implementing DevOps practices and continuous delivery ensures quick feedback loops and early validation, critical for rapidly evolving platforms with extensive user bases.

    Case Studies

    • Shopify

    • Journey from Startup to Multibillion-Dollar Platform: Starting as a small online store for snowboards, Shopify identified a gap in the market for easy-to-use online store tools. By externalizing their toolsets and enabling merchants to build and enhance their online presence, Shopify created a robust ecosystem.
    • Shopify’s success is driven by its focus on core competencies, openness, and empowering the ecosystem. This approach has made it a global leader in e-commerce platforms.

    • Salesforce

    • Evolution from CRM Product to Comprehensive Platform: Initially a CRM product, Salesforce has transformed into a multi-billion-dollar platform, integrating customers and companies through a digital omnichannel experience.
    • Platform and Ecosystem Integration: Salesforce externalized its development tools (e.g., Foursquare.com IDE), allowing partners to build apps and innovate within the platform. Their success is measured by the value created for the ecosystem and end-users.
    • Strategic Acquisitions: Salesforce’s technology investments and acquisitions further enhance its platform capabilities, driving integration and market disruption.

    Unlocking platform thinking involves a strategic blend of product management, architecture, and operations. By focusing on core competencies, embracing openness, organizing agile teams, and integrating a platform-first mindset, companies can achieve sustainable growth and innovation. As demonstrated by Shopify and Salesforce, effective platform thinking can lead to significant market impact and business success.

    Frequently Asked Questions

    A platform product manager defines and executes the platform’s vision and strategy, ensuring it meets diverse user needs. They manage the feature backlog, prioritize technology choices, and foster collaboration across teams. Their role includes driving operational excellence through agile practices and tracking KPIs to ensure scalability and user engagement, ultimately aligning platform growth with business goals.

    Platform operations ensure the seamless execution and scalability of a platform. This involves maintaining infrastructure, supporting agile full-stack teams, and optimizing processes for continuous delivery and feedback loops. The goal is to enable efficient deployment, monitor performance, and facilitate user engagement, ensuring the platform remains robust, responsive, and capable of supporting ecosystem growth.

    At its core, a platform is a business model designed to create value. Unlike traditional products, which create value through direct consumption, platforms generate value through interactions. These interactions are the conduit through which value flows and is amplified.

    About the Author

    Roopa Jayaraman – Senior Vice President at Odessa

    Institute of Product Leadership is Asia’s First Business School providing accredited degree programs and certification courses exclusively in Product Management, Strategy, and Leadership.
    Explore Our Programs
    Facebook
    Twitter
    LinkedIn
    Our Popular Product Management Programs
    executive mba in product leadership
    Our Trending Product Management Programs
    Trending Posts
    WordPress admin themes

    About Institute of Product Leadership

    About Us
    Contact Us
    Faculty & Coaches
    Alumni
    Success Stories
    Press & Media
    Corporate Training
    Career Management
    Hire Talent
    Privacy Policy
    Refund Policy
    Student Loans and Financing
    Sitemap
    Careers @ IPL

    Product Management Courses

    University Programs
    Executive MBA in Product Leadership
    Certificate Programs
    Certified Associate Product Manager
    International Certificate in Product Management
    Post Graduate Program in Product Management
    International Certificate in Strategy & Leadership
    Product Management Professional Workshop

    Product Community

    Product Leaders Forum
    IPL Alumni Network

    Free Resources

    Events
    Blogs
    Knowledge Center
    Toolkits & Templates