White paper (unpublished)

If they ever remake the 1967 movie “The Graduate,” up at the top of the to-do list will be figuring out how to update that iconic career advice offered to young Benjamin Braddock. “I just want to say one word to you,” he’s told at the party thrown to celebrate his (presumed) imminent entry into the workforce: “Plastics.”

 

My suggestion for updating that line? Just change “plastics” to “platforms.” Surely today’s unsolicited vocational mantras would be more likely to namecheck business processes rather than materials or product categories. And as was the case with plastics in the 1960s, the one-word advice to pursue “platforms” would be simultaneously profound – and ridiculous.

 

Certainly plastics – whatever that meant in 1967 – was a growth market, just as platforms – whatever that means in 2013 – offer growth opportunities today. But like “plastics” half a century ago, the word “platform” gets bandied about so much that’s it’s become vague, ambiguous, and a bit slippery to understand – and not just for freshly minted graduates. Even well-established companies can easily become disoriented in their efforts to create and deploy a platform.

 

Any word as long as it’s “platform”

 

Platforms can be a powerful tool for protecting and growing market share, creating innovative line extensions, and – ultimately – generating revenue and profits. But the word “platform” is often misused and misunderstood by companies and analysts trying to explain or rationalize themselves. It’s often not clear how they expect their platform to actually generate results. All too often, there isn’t a well-defined plan that articulates how that platform fits into their overall business strategy.

 

To paraphrase Mark Twain’s quip about the weather, everybody talks about platforms but almost nobody does anything about them – at least not from a holistic business perspective.

 

A company with a healthy platform deployment will understand how the platform supports their business strategy. A sure sign that a company’s thinking about their platform is muddled is if they equate their platform with a business strategy. If you hear someone utter the phrase “We’re a platform play,” there’s a fair chance they have a misguided idea about what those words actually mean.

 

A platform in and of itself isn’t a strategy any more than, say, a key executive or a patent portfolio or a market insight is a strategy.  A platform is simply a system with a leverageable asset. There should be a strategy for deploying a platform – just as there should be a strategy for deploying a key executive or a valuable patent – but the platform strategy ultimately needs to be in service of a broader business strategy.

 

Not all platform models are created equal – and they shouldn’t be. Different industries, different companies, and different market conditions call for different platform approaches. At Jump Associates, we’ve defined a typology of four distinct platform models to help companies advance their thinking about designing successful platforms. Because there is much misinformation and many preconceived notions about platforms, some context may be helpful before delving into the details of our typology.

 

Even the word “platform” carries baggage that suggests a particular type of platform model. The word harkens back to the formative years of the automobile industry. Ford’s Model T platform offered consumers the benefits of mass production (primarily price) while rival GM’s A-Bodies platform offered the benefits of mass customization (primarily choice). Henry Ford encapsulated his company’s platform strategy with the oft-quoted promise that you could get a Model T in “any color – so long as it’s black.” In contrast, GM countered by offering the consumer any color, period.

 

Both of these systems were based on the actual platform – the chassis – on top of which the rest of the car was designed and manufactured. In the same era, but in a very different market, a platform with a very different geometry emerged, Gillette’s razor-and-blades platform wasn’t based on a physical foundation for their products. Instead, the company had various design assets that Gillette was able to leverage into market creation, expansion, and an endless parade of line extensions over the decades.

 

More recently, platforms are frequently associated with software and operating systems, whether virtual or embedded into hardware. These platforms typically reflect another distinct approach that is best understood by using a different metaphor. Consider, for example, Apple’s iTunes platform. It not only straddles both its native Mac OS platform as well as the arch-rival Windows platform, but also encompasses multiple mobile platforms, as well as the platforms for the marketing and distribution of recorded music and video. A significant factor behind iTunes’ success is the consumer’s ability to, for example, buy a song on one device, and play it back on another – including devices that compete directly with Apple’s. In contrast, a significant factor behind Gillette’s success was the fact that once you bought a Gillette razor, you were locked in to buying Gillette blades for life.

 

Outside the tech sector, you’ll often find platforms of a different flavor. With its NikeID platform, the house that swoosh built created a design platform that lets consumers create a seemingly infinite variety of shoes and other apparel. Appliance manufacturer Dyson has leveraged its cyclone technology into a wide range of line extensions for its iconic vacuum cleaners, as well as products in new markets such as bladeless fans, heaters, and hand-dryers.

 

We’ve found some patterns that suggest a useful way of thinking about platforms that will provide the best approach for a variety of companies in different markets at a specific moment in time. Our platform typology is based on four different metaphors as a way to understand some of the more nuanced differences among platforms and the different roles they can play in driving business growth.

 

Just Your Typology

 

The four distinct models for platforms differ in a variety of ways, but a key differentiator among them is the how they answer this question:  how open are they – that is, how much freedom and flexibility do they offer to all of the groups that participate in the platform ecosystem. In addition to the company (or organization) that defines and steers the platform, the participants can include partners and other companies (some of which may be competitors), standards bodies, regulatory agencies, consumers, and other stakeholders.

 

A relatively closed platform is typically used only for internal exploitation. It may, for example, accelerate the speed at which new product iterations or line extensions can be developed. A more open platform can be leveraged by a wide range of third-party companies, choosing and using elements of the platform to build, package, and sell their own products.

 

In our platform typology, the models range from the most proprietary– the Scaffold Platform – to the most open – the Toolbox Platform. In between lie the Interface and Socket Platforms.

 

Scaffold Platform

 

At the most proprietary, closed end of the scale is the Scaffold Platform. Like the scaffolding used to facilitate a construction project, this type of platform is built around the needs of, and for the benefit of, a single specific company or project. These internal-facing constructs act as a catalyst to accelerate the creation of new offerings. A core function of these platforms is to democratize company assets – proprietary data, content, or technologies – so that teams across the company can be more nimble and effective in the development of products and services.

 

The Netflix Internal API is a good example of a Scaffold Platform. While keeping the company’s intellectual property private and squarely in the firm’s control, this platform supports internals teams in their efforts to quickly build new services for a wide range of third-party devices. Other examples of Scaffold Platforms include the NikeID system and Dyson’s line extensions mentioned earlier. 

 

This type of platform won’t be suitable for every company, and isn’t without its business challenges. The visual imagery of a familiar construction scaffolding helps to make these limitations clear. From the outside, a scaffold may appear to offer support for the project and protection from outside elements, but the view from the inside may feel quite different. The same pillars that provide support and protection can also create a cage confining anyone behind its bars. The Scaffold Platform limits the company’s ability to work closely with outside partners. Internally, it also constrains the range of available options, forcing teams to focus on only a few, pre-ordained assets, in order to ensure they become and remain best in class. As a result of these limitations, the user base may not grow as quickly as it would in a more open model.

 

Interface Platform

 

An Interface Platform offers a model with a degree of openness, but it remains a platform clearly driven and steered by a single party. The aim of this type of platform is to standardize the way in which multiple parties (including third-party vendors and end-user customers) interact within a particular domain. While open to multiple parties, the platform creator not only dictates the rules of engagement inside the ecosystem, it also monitors the behavior of all parties and enforces the consequences of misbehavior.

 

Perhaps the most emblematic Interface Platform is Apple’s iOS. For consumers, iOS provides a consistent user experience across multiple devices (iPhones, iPods, desktops running iTunes software) and multiple third-party apps. The platform provides easily understood discovery mechanisms that streamline a customer’s ability to find and obtain what they want, and that provide third-parties with a relatively frictionless mechanism for entering the marketplace. (App developers and musicians might grumble about the stumbling blocks that can slow the process of getting your wares into the App Store or the iTunes music marketplace. But the sheer vastness of what’s ultimately available is a testament to the overall openness of the platform.) The centralized nature of the platform – with the consumer’s purchases aggregated through a single vendor – whether it’s an app or an album or a software update – makes it much easier to maintain and retain an active and robust relationship, even if they are only an occasional customer.

 

Other established examples of Interface Platforms include Apple’s MacOS, Microsoft Windows, game platforms such as the Nintendo Wii, and commerce platforms such as the Ebay Marketplace. Newer platforms – such as Kickstarter’s platform that helps individuals find and fund startup ventures and Mint’s platform for consumer financial transactions and services – are also built around an Interface Platform model.

 

This model can, however, be challenging for smaller companies to create and maintain. They need to be prepared monitor, police, and filter the actions of all partners and customers on the platform, to ensure they abide by its rules and standards. Consumers may also face frustrations if they want to connect their activities inside one Interface Platform with their activities inside another Interface Platform. (If you bought an iTunes song on your laptop, playing it on your Kindle Fire won’t be as seamless as playing songs you buy from Amazon.) This can be an impediment to end-user adoption of your platform, and it can also give the platform manager a greater burden to shoulder. You might think of the Interface model as the Spider-Man Platform: With great power comes great responsibility.

 

Socket Platform

 

A notch more open than the Interface Platform, the Socket Platform model supports ecosystems with more flexibility for the third parties that want to create complementary products. They can, for example, customize how content or data is displayed, making it easier for this content or data to be used in creative new ways by additional third parties.

 

The “socket” metaphor suggests the much greater ease with which third parties can plug into the platform. While an Interface Platform may impose a complex set of rules for participating on the platform (including rules governing technical matters, content constraints, and commerce mechanisms, among other things), the socket structure suggests a limited set of ground rules. Consider an electrical outlet. It’s designed to support anything that operates within safe electrical parameters, and has the right number of prongs with the right size and shape. Beyond those limited constraints, the third-party device could be a lamp or a sewing machine – or some future device yet to be invented; an electrical socket installed in the 1930s has no problem powering a laptop or a Blu-Ray player, devices that couldn’t have even been imagined when the electrical socket platform was designed.

 

Google Maps presents a more contemporary example of a Socket Platform. Its API has plug-and-play versatility that makes it easy for other developers to create mashups that leverage a common data set provided and managed by Google.

 

Because Socket Platforms impose fewer constraints than Interface Platforms, they offer fewer barriers to entry for third-parties, reduce or eliminate the burden of monitoring and policing the platform, and allow greater flexibility for innovation in user interface and other aspects of the customer experience.

 

However, the flipside of this increased flexibility is the greater risk of consumer confusion. When the end-user experience is inconsistent from partner to partner, the result can be a slow adoption curve or a higher requirement for end-user support. And while the manager of a Socket Platform may be relieved of the burden of oversight for every partner’s every interaction with the platform, this may also go hand-in-hand with the surrender of control over the financial chokepoints for the platform.

 

 

Toolbox Platform

 

Toolbox Platforms are the most open model in our typology, offering a broad range of options for others to incorporate elements of your platform for their own purposes. Third-party players can pick and choose specific tools from the toolbox, and apply them as needed. The end results can be packaged and sold by as part of new products or services in which there will often be no evidence of the use of the underlying Toolbox Platform. Toolbox Platforms are often supported by licensing fees as a source of revenue.

 

A prime example of a Toolbox Platform is Amazon Web Services (AWS). This platform provides services for other companies to run their businesses in the cloud, as Amazon does. Amazon is able to transform what would otherwise be operating expenses into a portfolio of diversified revenue streams.

 

Third parties can customize Toolbox Platform components, or they can pay the platform creator to do so for them.  While a potential source of additional revenue, this can also create more of a complex support burden for the platform creator. And with the flexibility and customizability of what can be created within a Toolbox Platform, the end-user experience with these third-party products or services will often vary widely. This means that the platform creator and all of the third-parties using the platform lose some aspects of their ability to control their own destiny. For example, one notable AWS customer is Netflix. If AWS experiences a system outage, Netflix subscribers may suddenly find themselves unable to watch Breaking Bad.

 

 

Mommy, where do platforms come from?

 

This typology framework might leave you with the impression that creating and nurturing a technology platform is a straightforward matter, one that can happen organically in a thriving company in a growing market. That’s rarely the case. Successful platforms don’t just arise organically.

 

The starting point for the successful execution of a platform is a clear articulation of the strategy for how the platform will support a company’s overall goals. Because a platform typically touches many pieces of a company’s operations – product development, sales, design, intellectual property management, business and partnership development, legal, finance, recruiting and retention, and employee morale, for starters – the ability to make right choices involved in creating and managing a platform most likely rises to the CEO level. No single business operation is likely to have the context needed to balance the competing interests that factor into the decisions required to design a thriving platform.

 

Google offers an example of the kinds of nuances that need to inform a company’s platform design, and why the vision needs to be driven by the CEO. What is the core of Google’s platform strategy? Search? Consumer data? Advertising products and services?  The Android operating system? Those are drivers of Google’s revenues, but they’re not at the core of Google’s platform strategy. If they were, it would be difficult to understand why the company dabbles with things like self-driving cars.

 

Rather, Google’s platform strategy is likely driven by some combination of machine learning, AI, design and UI,/UX, and the technology behind page ranking. These assets are leveraged across nearly all of Google’s activities – Maps, Android, Gmail, AdWords, and so forth. With a platform based on these leverageable assets, it’s not really a stretch to understand how exploring self-driving cars (and a host of other seemingly misfit products and services) fit into the mix. It’s also easy to understand how the stewardship of a platform that involves such disparate components needs to come from the top.

 

Another example of CEO-driven platform can be found at Amazon. Could even the most senior-level executive responsible for all of Amazon’s ecommerce operations champion a platform for Amazon Web Services that would land a major contract with the CIA, beating out formidable competitors like IBM? Not likely. Even the Amazon Prime service seems poised to become a viable platform blending delivery services for both physical and virtual goods. Amazon’s powerful blend of cloud services, ecommerce, media players, and content creation require the holistic view from Jeff Bezos’ office.

 

Finally, after the untimely passing of Steve Jobs, the ubiquitous question on every analyst’s mind was whether anybody could fill his shoes. The question was, in many ways, a referendum on the viability of Apple’s platforms without Jobs’ top-down vision to guide them. The height from which Jobs viewed these platforms was sometimes even higher than the CEO level; he designed these platforms with entire industries – not just Apple – in mind. And in some cases, these platforms were even designed to serve industries that didn’t even exist yet.

 

The actor who had the “plastics” line in The Graduate was a man named Walter Brooke. According to IMDB, he later regretted not taking his own “advice” and investing in the plastics industry. As IMDB notes: “Apparently the market took off in 1968 because of that one remark.”

 

That might be a skewed view caused by the distorted lens of life in Hollywood – does life imitate the movies, or do great films reflect the times? Historical accuracy aside, it’s an instructive parable for understanding the roles platforms can play in driving business growth. Like the right word in a screenplay, if a platform fits the needs of the moment, is artfully articulated, and if its delivery is pitch-perfect, the results can be astounding.