In the past few decades, Platform Strategies have come into vogue and why not? When executed successfully, a Platform Strategy can create disproportionate success compared to a Product oriented strategy with strong competitive barriers and virtuous cycles of value from ecosystem complementors. However, the term "Platform Strategy" is often used to describe two very different types of strategies, with very different potential outcomes.
Two Types of Platform Strategies
There are typically two different types of strategies that companies employ which they describe as "Platform Strategies" that are similar but differ in ways that are material to their outcomes. We use the terms big "P" Platform and little "p" platform to differentiate between them.
Big "P" Platform Strategies can also be described as "Platforms of Increasing Value of Adoption" or PIVA. This is a Platform strategy that creates a virtuous cycle of value because it creates a multi-sided market and a positive economic feedback loop where adoption of the Platform by one market motivates investment by another to create complementary products that are dependent on interfaces and capabilities of the Platform, but add significant and differentiating value to the platform by their existence and therefore stimulate greater demand for the Platform, which motivates further investment in value-added products or services by additional complementors. The Operating System for general purpose computing systems like PCs and Smartphones are classic examples of a big "P" Platform or PIVA strategy. The availability of diverse and compelling apps makes an operating system more attractive to consumers and greater adoption of the OS by more consumers motivates more app developers to support that operating system.
Little "p" platform strategies are similar in that they typically refer to providing a reusable part of a modular system but differ in that they create economic efficiency for the ecosystem by consolidating investment for a portion of a system-level solution to a single provider, which can be re-used or vertically integrated by many others in the ecosystem into a solution level product. In the technology sector, examples of little "p" platform strategies are things like "reference platforms" or "software development kits" which facilitate the adoption of hardware or software ingredients they incorporate. Another example is the "franchise" model, which similarly packages the elements of a business into a reusable reference or starting point.
The Important Difference is in the Economics
While both approaches provide a re-usable, modular component of a complete system of use, they differ significantly in the economic behaviors and benefits they create.
The primary benefit of a little "p" platform strategy is an economic efficiency for the ecosystem downstream of the ingredient providers that create them, but since the solutions built on the platform don't directly make the platform more valuable to other adopters. It simply eliminates redundant investment in relatively common or commodity activities. This makes the adoption of the ingredients easier and may create a competitive advantage for the ingredient supplier, but one that can be easily replicated.
A big "P" or PIVA strategy creates a positive economic feedback loop and substantial economic leverage for the Platform provider. The investment that complementary product or services providers make, creates greater value for the Platform provider and their end-user customers. If that investment is also exclusive, then it also creates a substantial competitive barrier that alternative platforms have to overcome.
Setting the Right Expectation for Results
Both big "P" and little "p" strategies are useful, and they can even be complementary to each other. For example, a little "p" platform strategy can be a sub-component of a big "P" strategy facilitating ecosystem adoption. The important point is to make sure that you have clarity about which type of platform strategy you are pursuing, how it's economic benefits work and that you are defining your success metrics, KPIs, and expectations or results accordingly.
Do you have a platform strategy (big "P" or little "P") that you need help with? If so, contact us and let's explore how we can help.
