The shift from building products to platforms
Photo by Alper Çuğun
People use the terms product and platform interchangeably and the latter has turned into the new trendy catchphrase by entrepreneurs. Investors such as Peter Thiel have voiced their skepticism about the platform concept and call it a buzzword.
When we talk about software, products and platforms refer to two different concepts. Recently there has been a shift from developing products to platforms for valid business reasons and before explaining why let’s define what products and platforms are:
What is a product?
A product is built to solve a specific problem or facilitate a specific process. It comes with a growing list of features. It is finished, refined, and finalized for sale. When people are about to buy a product, they compare quality, ease of use, and feature lists. Products are a lot easier to sell, because people have an easier time relating to them and understand what they are about. Mobile and desktop apps are generally products.
In every new release of a product, new features are added to motivate the customers to pay for upgrades. These features accumulate overtime and lead to a bloated product that is hard to maintain and hard to use. A product’s level of refinement and specialization makes it difficult to evolve and keep up with peoples’s ever-changing needs. It shorten the lifespan of a product as people find newer and better products to use over time.
What is a platform?
A platform provides the foundation and infrastructure for products to be built upon. It is often done in a modular fashion. It provides all the common aspects that a range of products need. A platform tends to be more general purpose and, unlike a product, it is never geared towards solving a specific problem. A business may choose to deliver or discontinue any number of products that are built on the same platform while gradually scale up and nurture the underlying infrastructure. Platforms are mainly developed on the web. A few examples are Amazon Web Services, GitHub, and Apple app store combined with their mobile services.
The generic nature of a platform extends its lifespan. While products may be added or removed on a platform, the underlying infrastructure doesn’t need to go through dramatic changes at the same rate. However platforms are more difficult to sell, because it takes a while for people to understand their nature. A platform can have many dimensions to it and can solve many different problems all at once. That also means that a user may need more time to engage with a platform before being able to appreciate what it has to offer.
Why the shift from products to platforms are happening?
As technology is progressing the lifespan of a product is getting shorter and shorter. That means there is less time to monetize a product or generate any profits at all. Considering that very few products succeed, product development is getting riskier and less profitable. A platform however, has the ability to adapt and evolve to keep up with the market changes as well as the customers needs and wants. This is done by adding different type of products on the existing platform in a modular fashion. These products also take less time to build and iterate because most of the core operations are handled by the underlying platform anyway.
Many of today’s platforms started as products first offering software as a service (SAAS). Amazon started as an online bookstore (product) and later started offering their scaled up infrastructure as Amazon Web Services. Today their online store is one of the many products built on top of their platform. Some argue that if Amazon was founded today, they would have started as a PAAS company and not an online store.
Many recent startups and companies are primarily offering platform as a services (PAAS). Github offers products such as Git repositories, issues tracker, and pages. They also provided a rich API which allows 3rd party developers and services integrate with Github and extend the platform.
Now next time that an entrepreneur or investor is talking about a platform or product, you can tell if they are just using them as buzzwords or they actually know what they are talking about.