The most powerful products are those that eventually become platforms with network effects. A product platform strategy can be extremely powerful when your company is attempting to grow and scale. To create growth, PMs need to open the door to third parties and connect with their customers. So, how can product managers transform their products into platforms? Boston University Associate Professor Andrei Hagiu shares insights on three key methods for transforming products into platforms to increase your customer base and product value.  

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On what a platform is

A platform is a product that serves or enables other products or services. It is a business model that creates value by facilitating interactions between consumers and producers. By transforming products into platforms, PMs create more opportunities for consumers to see and buy their products. Companies like Facebook, Uber, and Amazon have revolutionized the way that we interact with and purchase products: Check out Andrei’s take on what a platform is: 

“A platform business is one that enables interactions between various customers. So, this could be interactions between the same type of customers, like a social network, communication, discord, or WhatsApp.”

“Or, it could be direct transactions between buyers and sellers. These would be your favorite marketplaces, Alibaba, eBay, Airbnb, and so on, and so forth. All of these are platforms in the sense that they enable interactions between customers.”

“There’s a huge funnel of platform businesses or entrepreneurs and investors trying to build or invest in the next Uber, the next Airbnb, and so on, and so forth.”

On advice for PMs transforming products into platforms

One of the most important elements of the new design is experimentation. In order to know if something will work for your company, you must test the waters. The first step when transforming products into platforms is to look at how exactly that would work in your company. Brainstorming ideas and solutions with your team is one of the best practices to ensure growth and innovation. This is some advice for PMs transforming products into platforms:

“Companies that are building products or platforms with network effects have become, and are increasingly becoming, the most valuable and powerful businesses.” 

“I would encourage every product manager to go through the exercise of saying, what is it? What would it mean for us to open the door to third parties? What would it mean for us to connect with customers?” 

“It’s worthwhile to go through the exercise of, let’s just assume we’re going to do this, what exactly would that mean? And at the very least, you’ll come up with interesting ideas for growth that you hadn’t thought about before. And in some cases, you’ll find that there are interesting ways in which you can turn products into platforms”

On how to transform products into platforms

There are three main ways for transforming products into platforms. One is opening the door to third parties. Your company partnering with another organization in order to increase the reach and audience of your product. The second is connecting with your existing customers and facilitating interactions between them. The third is about reaching out to customer’s customers. Doing so increases value for the customer and the organization. Here is the how of transforming products into platforms:

“There are three ways for transforming products into platforms. One of them is opening the door to third parties, the other one is connecting existing customers. And the last one is reaching out to customer’s customers.”

“Apple did not want anything to do the first year with third-party developers. After a year, they realized that there was a lot of demand from third parties. So, they opened up APIs and created an app store. Quite clearly today, we can see how this has become a very powerful platform.”

“The second one is connecting these existing customers. We’re just going to look at our customers. So, we’re selling them some product or service. And we ask the question, is there anything we can add to the product or service that allows our customers to interact with one another”

On the skill sets required for transforming products into platforms

As product managers and leaders, we have full control over our products. Every decision made and every interaction with consumers is controlled by us. Once you open the door to third parties, you are no longer in complete control. And an entirely different skill set is required for transforming products into platforms. A lot of products can benefit from transitioning into platforms, but it is not for everyone. These are some important things to consider when transforming products into platforms: 

“So, when we’re doing the product, obviously have full control. You have to basically can design everything. When you provide a platform, you’re rather in the business of enabling interactions between third parties, which you don’t necessarily control. So, it’s quite a different skill set.”

“Once you start opening the door to third-party apps, you have to realize that those third-party apps are not fully in your control. And if one of those apps does something bad for your customers, then, unfortunately, your customers are going to blame you.”

“Because you’re the one selling the initial product, then you have to worry about okay, is the value of the interactions that I’m enabling? Is it worth it?”

About the speaker
Andrei Hagiu Member
About the host
Rishikesh Yardi Instacart, Senior Product Manager
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