Bringing a knife to a gunfight?
“We must move beyond our comfort zone to become a platform company.”
Apple and Google built platforms, networks of users and developers, and an open operating system – an entire ecosystem. They won. Blackberry (Research In Motion) and Nokia focused on product features and functions with a proprietary closed operating system. They lost.
The battle of products or services changed to a war of ecosystems over a decade ago. The open operating system and a network of third-party app developers are fundamental to controlling the market. Android and Apple built platforms for developers-entrepreneurs and consumers. Blackberry never understood that its core customers were independent software developers building apps for the new devices.
Blackberry thought it knew what its customers wanted from a phone, but the Apple Store and Play Store didn’t even try to guess. They let the customers decide. iPhone and Android harnessed massive communities of software producers to create more and higher-quality apps. Blackberry and Nokia brought a knife to a gunfight—a smartphone to a platform fight.
Platforms create communities and markets that allow users to interact and transact. Value exchange is multidirectional. Platforms harness scalable networks of users (franchisees, independent eateries) and resources accessible on demand (Pricing tool app, Competitor information app, other analytics).
Platforms do not, to use a common phrase, own the means of production—instead, they create the means of connection. In a connected world, what a company owns matters less than the resources it can connect. The scale comes from cultivating an external network built on your business.
Most software-as-a-service (SaaS) companies function linearly similar to production companies with factories, distributors, and resellers. The only difference is the low cost of digital distribution. The value flows in one direction through the firm’s supply chain linearly.
Some companies build human capital or intangible assets to sell specialized services. This group includes tax attorneys, management consultants, and analytics companies (RMS falls in this camp.).
When a linear business gains a new customer, it adds only one new relationship – one buyer of a product or service (e.g., Mcdonald’s). When a platform adds a new user, that entity does not add just a single relationship but a potential relationship with all of the platform’s users. The platform grows exponentially.
Many companies call themselves a platform business just for making their product or service available on demand. They use the “platform” word to refer to a piece of technology rather than a business model.
Platform ? Technology
Computing platform – system on which application programs can run (Pricing tool on RMS cloud)
Product Platforms: Common design, formula, or versatile product upon which a product line is built (a car chassis for many different models).
Industry Platform: Products, services, or technologies that serve as foundations upon which complimentary products, services, or technologies can be built (Intel)
Platform as a service: Cloud computing services provide a computing platform and solution stack as an online service (AWS).
In each instance above, “platform” refers to an underlying product or technology allowing modular components to be built on top of it.
Finally, the most common misuse of the term “platform” is when it describes an integrated suite of software products. It is widespread among SaaS companies claiming they have a complete “platform” for X. In such cases, the word “platform” is used as a marketing term. Most SaaS companies are still too often trying to approach each price range on a service-to-service basis. These SaaS companies are still linear businesses. They are not networks, and as such, they don’t have the cost structure and underlying economics that make platform business models so successful today.
When I use the word “platform,” I am talking about a holistic description of how a company creates, delivers, and captures value, not just a piece of technology.
