Thinking of a Tech Startup: Is it a Platform or a Product?
How addressing the simple Chicken or Egg Problem can make your Startup most valuable in long run.
Recently I was approached by an old colleague and a long time friend, who was in pursuit of escaping his 9 to 5 job as a developer. He was working on his startup idea, indeed a tech venture, but one of his major roadblock was to decide whether to run and operate his business as a Product or a Platform. For anyone who’s coming from a technical background it’s easier to skew towards launching a product, which in a way is great to make sure that the technology you are building is innovative and competitive in the market. But that inclination does not help when you need to decide how you will run and operate the technology that you’ve just built.
You need to be very efficient and perfect in identifying the bucket where your business model belongs.
Failure to recognize the go-to-market approach at a very early stage can welcome unwanted technical debt and alterations to your product, with a possibility of a flop show. 90% of startups fail and the major reason behind this is not knowing exactly what is to be offered to the end user.
Product Thinking
In simplest terms, a Digital Product is a solution that solves specific problems for its users. It can be as basic as a Windows calculator or as complex as Microsoft excel. Products are usually scoped and are limited in terms of features and functionality that they offer. When talking about a product, focus usually is to achieve an outcome, which is often enough to support a variety of users.
For a product, functionality customization and depth of problem addressed usually go hand in hand, in other words with more customization you will be able to solve the same problem more effectively or can cover additional use cases of the main problem. Let’s take an example of Apple music, a product that everyone is aware of. It started as a tool from where you can tap into your favorite music with a single click, the problem it solves is providing music on the fly without actually needing to buy physical record albums. When objectively thinking of additional features that apple music offers, for instance, adding favorites or randomly shuffling playlist, they are still within scope of the main problem that it solves with a bit more of an user experience.
Customization are an integral part of the product life cycle and that is what keeps the business thriving. But there is a point in time when adding more functionalities no longer contribute to solving the fundamental problem, that is when industry starts looking for a Platform model.
Platform Thinking
In the book, “The Business of Platform” by Michael A. Cusumano et al., author explains platforms as a common point that connects individuals and organizations for a common purpose, sharing a common resource. Platform serves as a network where each side of the network, consumer and provider can interact providing value to each other.
Digital Platform not only solves specific problems, but provides technological capabilities for anyone to leverage, and create solutions for the intended parties. Facebook is a classic example of a platform business model. In its initial years, Facebook marketed itself as a social media site intended to bring people together where it did nothing but facilitate this interaction via its underlying technology. With gaining popularity it expanded its ecosystem to add more product blocks to its offering and its partners used these technologies provided by Facebook to serve the other side of the market. It offered services like advertising, developer APIs and games amongst others using which the third party businesses could offer their services for Facebook’s users, creating a profitable and collaborative community for everyone.
Over the years the Tech Industry has seen immense success in this kind of Platform Thinking approach, where expansion is kept on top of the mind always. The top Big 5, Amazon, Apple, Facebook, Google and Microsoft all are platform businesses. Platform model is more disruptive and is both sustainable and scalable in the long run but platform technology itself can take years to build.
The Takeaway
Tech space is more competitive today than it was a decade ago, also the problem space of tech users is dynamic and constantly changing. Technologies which were luxury back then are a necessity now. In the current high demanding world, a product mindset is a bit more out of trend. A company can solve the most complex world problems but how long can it continue to solve them? Rather a platform approach which lines up a series of products to provide capabilities to other businesses to solve problems, sounds more dominant and successful.
