The Shift From Products to Platforms

Finding a way to compete in today's marketplace isn't easy. Not only do you have to battle against the retail giants of the world, but finding a way to be noticed in the online space is another challenge in and of itself. The shift from products to platforms is one way entrepreneurs are gaining traction. In fact, some companies are skipping products altogether and are moving toward a platform-centric approach because it offers more opportunity to scale. In this article, the authors discuss the implications of some well known firms moving toward this option:

What will business technology look like tomorrow?

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The second is a shift from products to platforms. Many people encounter evidence of this every day. The largest cab service owns no vehicles (Uber), the biggest hotelier has no property (Airbnb), the most comprehensive retailer holds no inventory (Alibaba) and the most valuable “media” company creates some content but not much (Facebook). There are more than 2.2m apps in Apple’s store, almost none of which the company developed itself.

Platforms are a way for companies to create marketplaces that allow both sides of the transaction to flourish—while the firm, as gatekeeper, enjoys a tidy revenue stream. This is hard to pull off. The platform must ensure that standards are high, and also attract different sets of participants (like drivers or app developers on one side and customers on the other). But platforms are very valuable when they work, since they scale beautifully in a digital setting. The meatiest part of the book is the treatment of platform economics, replete with demand-curve charts.

Read the full post here:  What will business technology look like tomorrow?

In this video, Boston University Professor Marshall van Alstyne discusses the differences between providing products as opposed to a platform. His statement that with a platform, "the value is created outside of the firm" is a key element. In other words, the users of the platform create value for other users, not just to benefit the company. If you can integrate the social factor into your business plan, you will open up many possibilities:

The 3 C's --- content, commerce and community --- have been playing a role in the foundation of businesses for many years but with the digital age, the need for innovation is pushing the envelope. Finding a way to balance both sides of the spectrum, with knowing what consumers want and being able to deliver it when they want it, can be a bit tricky. One of the basics of business is supply vs demand, and a platform-based model that encompasses the community is easier to scale because it is more adaptable and agile. Creating a platform out of a business that has traditionally offered products requires getting your followers on board with your new venture and building excitement. The process doesn't happen all at once but in stages, according to research done by Harvard Business Review:

Transitioning Your Company from Product to Platform

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Creating a new platform out of your product involves attracting a large number of users, but our research suggests that user growth isn’t linear. It occurs in stages:

1. Structuring an external product “love group”
2. Transforming the love group into early platform adopters
3. Leveraging early adopters to accelerate platform adoption

See more here:  Transitioning Your Company from Product to Platform

It can be a difficult transition to make, partly because of human nature. The old school way of doing things was to create a finished product. Another reason is that some companies are massive, with a ton of inventory and infrastructure, making it tough to change their plan of attack. With the significance of the mobile platform, you have to keep your mind open to change and be able to turn on a dime. Listening to your customers and letting them be part of the revolution can allow you to gain a competitive advantage.    

The post The Shift From Products to Platforms is republished from S&S Pro Blog