Effective Platform Product Management

Tabassum Memon

• Publisher: Packt Publishing
• Year: 2021
• ISBN:
  9781801814904
• Edition: 1
• Topic: Computer Science
• Subtopic: Computer Science General
• Index: Computer Science

Turn your platform into the next big thing with expert advice to scale and implement a proven growth roadmap across multiple channelsKey Features• Gain expert insight about platform business models and how they're different to linear products• Explore the end-to-end platform life cycle, from developing a strategy to measuring the outcome• Follow real-life examples to discover the most effective growth strategies your platformBook DescriptionScaling a platform is a lot different than scaling a product. This is why product managers developing or transitioning to a platform model are often facing completely new challenges – both technical and strategic. But if you want to build the next Amazon, Netflix, Spotify, or a completely new type of platform, then you need to adopt a platform-first approach to change how you invent, develop, and market solutions. This is where Effective Product Platform Management comes in.This book addresses product management as a critical pillar of platform development. It'll help you understand the difference between traditional and modern product management for platforms and even decide whether the platform business model is the way to go for you.As you progress, you'll be able to build the right platform strategy, define the MVP, and focus on ongoing backlog prioritization for successful platforms. This book will also walk you through the practical steps and guidelines that can ease your organization's transition from linear products to platforms.By the end of this platform product management book, you'll have learned the essential aspects of product management for building successful and scalable platforms. You'll also have a clear understanding of the next steps you need to take to perfect and execute your new platform strategy – and take on the world.What you will learn• Understand the difference between the product and platform business model• Build an end-to-end platform strategy from scratch• Translate the platform strategy to a roadmap with a well-defined implementation plan• Define the MVP for faster releases and test viability in the early stages• Create an operating model and design an execution plan• Measure the success or failure of the platform and make iterations after feedbackWho this book is forIf you're a product manager, product owner, product director, or a business executive working on a platform strategy and its day-to-day execution, then this book is for you. It will also be useful for change managers and program managers tasked with transitioning from products to platforms. You won't need any prior knowledge of platform strategy or platform transitioning before you get started, since the book covers all the basics – but taking notes to reflect on your journey as you work through the practical examples in this book is recommended.

Section 1: Building the Right Strategy for the Platform Business Model

In this section, we'll make sure that you understand the difference between the traditional linear business model and the platform business model, along with looking at the fundamentals of a digital platform. You will learn how product management aspects and techniques are executed differently for traditional linear products versus digital platforms. You will also learn how to validate the viability of the platform business model by applying the appropriate research. Finally, you will learn how to build a robust platform strategy for a successful sustainable platform.

This section comprises the following chapters:

• Chapter 1, Fundamentals of Platform Business Models
• Chapter 2, Differences between Linear Products and Platforms
• Chapter 3, Research and Validation
• Chapter 4, Building a Platform Strategy

Chapter 1: Fundamentals of Platform Business Models

In the last decade or so, platform business models have revolutionized various industries, such as retail, entertainment, media, and travel. Companies such as Amazon, Spotify, and Airbnb have changed how businesses reach out to their consumers and how consumers use the products. One thing all these companies have in common is a platform business model that allows multiple producers to connect to their consumers. This multidimensional model is the biggest differentiator for these companies, giving them an edge over traditional linear business models catering to limited consumer segments or demographics. So, because of the rise of such platforms, more and more businesses are adapting to a platform-first approach.

But before we dive deeper into platform business models, it is essential to understand what the term platform means in general and how that concept applies to digital businesses. Hence, in this chapter, we will cover the following topics:

• What is a platform?
• Understanding platform business models
• Types of platforms
• Platform revenue models
• Benefits of a platform business model
• Building the right digital platform for a platform business model

What is a platform?

As per Encyclopedia.com's definition, the literal meaning of the word platform is a raised level surface on which people or things can stand (https://www.encyclopedia.com/science-and-technology/computers-and-electrical-engineering/computers-and-computing/platform). It makes sense as a broader concept that a platform is an avenue for people or things to carry out crucial tasks. The word platform has different meanings in different industries and fields—for example, in the railway industry, construction, public speaking, and so on.

But one common thing in all the definitions of a platform is that a platform enables some core activities to occur. This brings me to the most precise and simple definition I have read of a platform: a platform is something that allows something else to happen. A platform is something that is foundational, enables people to undertake core activities, and helps connect different entities together. In terms of a platform in a public speaking context, a speaker can connect to the audience through a platform. Similarly, a train can connect to passengers via a platform, and a construction worker undertakes their core activities through a platform.

This analogy can also be applied to digital businesses, whereby a platform enables the core activities of the business and connects different entities; for example, in e-commerce platforms, sellers and consumers connect with each other, and the platform enables them to accomplish the core activity of selling and consuming goods. Similarly, in an audio-streaming platform, artists and listeners come together to share and listen to music. Similarly, in a payment-processing platform, banks or credit card companies connect with vendors to enable seamless money transfer.

A critical feature of a platform is that it allows a web of multiple channels to connect and perform core activities, not just two parties that connect linearly. For example, once a platform is built in an auditorium, all the speakers using the auditorium can address the crowd from one platform; we do not have to build a different stage (platform) for every speaker.

Another example here is a railway platform that, once built, is used by all the trains and passengers traveling to and from that station. The same is true for the digital world; multiple sellers can sell on an e-commerce platform, and many artists can upload their music on an audio-streaming platform. We will explore this multidimensional approach and a platform's network effect in more detail while discussing the characteristics of a platform business model.

Understanding platform business models

As mentioned earlier in this chapter, we have seen a tremendous shift and disruption in various industries in the last few decades. Traditionally, huge brick-and-mortar stores were synonymous with retail business, but today, the world's second-largest retailer does not have a single physical store. Companies such as Amazon, Spotify, Netflix, and so on have changed the business landscape. These companies took the very traditional concept of a platform and translated it into the digital world.

For example, Amazon is no different from the older-style marketplace where sellers display their products and buyers come to browse and buy products they are interested in. Netflix is no different from a video library where you bring home any video media with a small subscription fee. The traditional platform concept aided by technology is the secret sauce for the success of today's businesses. Imagine a marketplace where a buyer from Australia can buy goods from sellers in the US or a user from China can rent a movie from a video library in Europe.

This broader reach is possible because of platforms. It could be argued here that producers creating their own digital presence in the form of websites can still get a global reach. This is true, but this model is neither scalable nor cost-effective.

Let's look at an example here of a new designer who wants to launch their new line of clothing; if they create their own online boutique rather than leveraging an existing platform, they won’t be able to optimize it or get it right as it is not their core capability. Secondly, they will divert from their competency of designing clothes.

On the other hand, a fashion retail platform already has all the foundations in place. They are an expert in customer acquisition, Search Engine Optimization (SEO), and other digital aspects that will take years for the new designer to build, and even then, they might not get it right. This model is a win-win for all parties, in the following ways:

• Designers: Designers can reach out to consumers worldwide without spending a lot of time and effort on doing this. They can focus on creativity and design to provide more options for consumers to choose from.
• Fashion retail platform: The platform can showcase and sell the work of different creative designers. They don't have to worry about designing, manufacturing, or producing. Their job is to connect the designers to consumers. Their success depends on how well they can scale and how many designers and consumers they can connect. The more consumers they can connect to the designers, the more revenue they generate for themselves and for the designers.
• Consumers: Consumers get access to designs from multiple designers across the globe. They can search, explore, compare, and choose between different options within a single uninterrupted User Experience (UX). Getting access to a variety of options in a single uninterrupted UX is not possible in the linear business world.

This example describes how a platform business model is beneficial to all the players involved. The majority of platforms have three primary parties: producers, consumers, and the platform owner, but there are few platforms—such as payment-processing platforms—where you will find additional entities such as a bank or credit card processor, which are referred to as intermediaries.

Characteristics of a platform business model

So far, we have seen the general definition of a platform and how it applies to platform businesses in the digital world. As we go further into understanding platform business models and digital platforms, let's look at some of the characteristics that define these models. There are, for sure, lots and lots of different features and characteristics of a platform, but in my opinion, the following three are the key characteristics or the essential elements of any platform business:

• Multidimensional
• Network effect
• Plug-and-play mechanism

Multidimensional

We briefly looked at the characteristics of a platform business earlier in this chapter: the platform does not just let two entities connect linearly but allows a web of multiple entities to create and deliver value.

In a traditional linear business model, there is only one producer who delivers value to a handful of consumers. At the same time, a platform model allows multiple producers to serve and provide value to multiple consumers—for example, an author of a book has their own website selling their own books versus Amazon selling books from multiple authors. The following diagram shows the one-dimensional flow in a linear product model as compared to the multidimensional flow in a platform model:

Figure 1.1 – Linear product and multidimensional platform

The preceding diagram depicts how consumers can choose to buy from any producer on the platform, whereas the consumer is restricted to only one producer in the linear product model. In the platform model, the flow of products is coming from multiple directions.

This nonlinear and multidimensional approach is what made companies such as Amazon, Netflix, and Spotify so different and set them apart from the competition. Amazon doesn't sell products from just one manufacturer, but it allows any seller to use its platform to sell. Similarly, Netflix streams content from hundreds of production houses from dozens of countries. Spotify is not restricted to just one artist but gives listeners access to multiple artists. Creating this multidimensional connection between producers and consumers is a crucial aspect of a platform business model.

Networ...