Construction workers build platforms. Those platforms can serve bricklayers, carpenters, painters and anyone working in the project. In internet business, great companies engineer products with duality: products which are also platforms. Facebook is a product and also a platform.
In this piece, I explain why you must desire to create a platform and not just a product. Just like construction platforms, platforms enable you to rewire your business logic with ease. Products are hard-wired and fixed. Platforms create digital customers while products make consumers; customers are better. Out of customers, you have fans!
The best modern technology businesses are platform-anchored, not product-driven. Facebook is a platform. Apple has a platform. Google runs as a platform. These are among the most valuable companies on earth. As marginal cost goes lower in the internet age, platforms will rise because of the positive continuum of network effects. From aggregation construct to one oasis strategy, businesses with consumer focused frameworks are wired to succeed if they are platform-oriented.
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In this piece, I explain the key components of the duality element.
Product applications are wired with predefined logic which means they do only what you want them to do and nothing more. Myspace built a social connection app and nothing more. But in platforms, you do not have “hard-wired” logic states making it easier to reconfigure the ecosystems for different uses. Here, Facebook engineered a platform which makes it possible that it can do whatever comes in future. Once that happens, you see amazing scalability driven by network effects: a virtuoso circle where as more people use a digital product, the product gets more data which is used to improve the customer experience, and that improved quality attracts more users.
Any digital product that does not have the duality element will struggle especially in consumer market: you need the product and the platform as one to make progress these days. You need to build platforms because they have the elasticity to evolve with your business logic. Products are static and fade quickly as markets change. Platforms can grow without bounds, anchoring new opportunities on top. The business logic of integration, process and decision making are best handled on platforms over products in the internet space. With platforms, you have CUSTOMERS; products deliver consumers.
Connecting to Double Play Strategy
- Digital products that succeed are often both products and platforms, with platforms serving as essential moats for modern digital products.
- Samsung makes profits, not just from the Galaxy mobile unit, but from the chip business. Samsung’s chip business remains a significant contributor to its operating profit.
- Apple plays a crucial role in Samsung’s success through chip orders, highlighting the interdependence between the two tech giants despite their competitive dynamics in the market.
- The concept of “Double Play” in business strategy is exemplified by Samsung’s ability to leverage its mobile device unit as an internal customer for its chip business, reducing risks and fostering innovation.
- Both Samsung and Apple benefit from a symbiotic relationship where Samsung’s chip-making expertise complements Apple’s need for high-quality chips at scale, showcasing how innovation and collaboration can lead to mutual success in the tech industry.
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Yet, in the realm of digital products, while platforms undoubtedly offer advantages in terms of scale and network effects, it is an oversimplification to assert that all successful digital products must adopt a platform strategy. Many successful products thrive without relying on platform elements, showcasing the diversity of approaches in the digital landscape. Moreover, the notion that platforms serve as essential moats for modern digital products overlooks the complexities and challenges associated with maintaining platform dominance. Regulatory scrutiny, antitrust concerns, and the need for continuous innovation to sustain relevance are critical factors that can erode any perceived moat provided by a platform.
The anticipated record profits of companies like Samsung driven by specific business segments should be viewed with caution due to external factors beyond their control. Heavy reliance on one dominant business segment, as seen with Samsung’s chip business accounting for a significant portion of its profits, exposes companies to risks if that segment faces challenges like oversupply or technological disruptions.
While symbiotic relationships between tech giants like Samsung and Apple can yield mutual benefits through collaboration and innovation, they also underscore interdependencies and potential vulnerabilities within complex supply chains. Balancing cooperation with competition in such relationships presents ongoing challenges that require careful navigation to ensure long-term success for all parties involved.