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Products to Platforms: Making the Leap

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Business models
From the April 2016 Issue
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Executive Summary

Following the path of companies such as Apple and Amazon, more and more firms are trying to become not just product purveyors but also platform providers, facilitating direct connections between customers and other groups. Although launching a platform can generate new revenue, success is not automatic. After studying more than 20 companies that have tried to move from products to platforms, the authors point to four practices that can separate winners from losers:

1. Start with a defensible product and a critical mass of users.

A strong product and a loyal customer base will attract third parties to your platform.

2. Apply a hybrid business model.

Instead of operating with a “product mindset” or a “platform mindset” alone, combine the two in order to discover new opportunities for creating value.

3. Drive rapid conversion to the platform.

Existing customers are likely to flock to a platform if it provides enough new value, if the additional products and services offered are consistent with your brand, and if users have opportunities to improve both the products and the platform.

4. Deter competitive imitation.

Make it tough for rivals to copy your product-to-platform strategy: Consider creating proprietary standards, using exclusivity contracts, and erecting other barriers to competition.

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The Challenge

Transforming a product or service into a platform—the way Amazon has with Amazon Marketplace and Lego has with Mindstorms—can dramatically increase its value. But the path can be treacherous, and many attempts have failed.

The Best Practices

Four practices can help ensure success:

1. Start with a defensible product and a critical mass of users.

2. Apply a hybrid business model focused on creating and sharing new value.

3. Drive rapid conversion to the new platform.

4. Identify and act on opportunities to deter competitive imitation.

For years, Microsoft’s Outlook has been losing ground to Google’s Gmail and to the e-mail apps integrated into iPhones and other mobile devices. But now the company is trying to inject new life into Outlook, attempting to transform it from a simple e-mail product into a platform that connects users to a multitude of third-party services such as Uber, Yelp, and Evernote. Whether or not the leap from product to platform works is an immensely important question—not just for Microsoft but also for a growing number of businesses built around products or services.

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What you do: Time for action! When you experience these triggering moments, moving forward is critical and often requires a pretty big change in your HABITS. Yes, your habits. Think about it….what do you do now when this happens? Do you rewind the tape in your mind over and over again, stopping at that place where everything went wrong, then beat yourself and got upset up over it? Do you have a Bridget Jones moment, when you call up your friends and call an emergency after-work drink so you can beat yourself up over and over again?

What you do:

Stop that.

Seriously, just stop. Break that habit. Let it go.

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It’s just gonna happen

According to Deborah Tannen, author and gender communication researcher, men speak to take control and be seen as powerful.

Women speak to connect.

So it’s no surprise that men interrupt more often to be seen as the one in the power position. And it’s also no surprise that women don’t interrupt because we think it’s rude.

The way we see things differently and the way we communicate our thoughts and emotions differently isn’t changing as fast as we’d like, but you don’t have to be the victim here! You can take control and stay connected.

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