A platform company is a business that creates foundational technology upon which other companies are born and scaled. The businesses that have world-changing strategic exits or become large, sustainable and independent franchises are platform companies.
A larger vision and the ability to execute on it in a milestone-unlocking way are what separate the good businesses from the great ones. Typically, by executing on the maturation from feature to product to platform, numerous copycats, fast followers, and technology industry elite will enter the fray to make it competitive and create a category in a burgeoning field.
How Do Platform Companies Work?
A platform company builds core technology that supports multiple products and services. This tech acts as the backbone of the business, making it easy to integrate new features and innovate. Platform companies attract third-party developers, partners and customers, creating a thriving ecosystem where everyone benefits. And the more people that use a platform, the more valuable it becomes.
For example, in social media, each new user adds content, which attracts even more users. Similarly, each new app or service built by a third party makes the platform more valuable, drawing in more developers and users. This positive feedback loop can drive rapid growth.
Data also plays a big role in how platform companies operate. The data they collect from users and interactions within the platform helps the companies develop new features, improve their user experiences and target their marketing efforts more effectively.
Finally, platform companies often use a modular design, which means they can change or update parts of the platform without disrupting the whole system. (Think of an ecommerce platform that might have separate modules for payment processing and inventory management.) This approach allows platforms to quickly adapt to market needs, integrate new technologies and provide custom offerings to different customer segments.
How to Become a Platform Company
To become a platform company, create technology-driven, automation-focused and deeply integrated approaches to solving business challenges. The platform business model is not only good for customers, it’s a massive differentiator as it pulls many disparate product, use cases and value propositions into one offering.
Here are four keys to becoming a platform company by enabling — and nailing — the move from feature to product to platform:
1. Enable a Platform Company Vision
Investing in and/or shifting your business to a platform business model requires patience, and it isn’t for everyone. But if your company has a basic and repeatable use case with advanced or targeted add-on module potential, or several complementary products that combine to create huge value propositions for your customers and prospects, integrating the products and developing additional tools that continue to differentiate your business could propel your growth story.
Become a Platform Company
your expertise into a functioning, sellable product.
Usually, a more narrow use case to an offering brings value to a market, and as the opportunity opens up, it can evolve into a platform sale. But before startups can see a true platform approach, you have to see how existing products can deliver on a larger promise for customers. After that, you can go find that “platform market fit.”
Having the vision for a platform sale is also necessary for any business to continue to be an independent player or achieve that large and enviable monetary event via strategic exit or IPO. This is especially true in an ecosystem where companies with unique tools or services are targets for companies that already have a platform play in place, with a large customer base and proven go-to-market (GTM) machine. Building out a platform and successfully rolling it out to customers — and ensuring they embrace it — is a big challenge, but with big challenges come big rewards.
2. Build What Customers Want – and Validate
It may seem obvious to build products well-tailored to customers’ wants and needs, but too many SaaS tech founders and product development teams fall into the trap of iterating based on their own visions. This is a product-out approach.
Taking a market-in approach to company building — knowing the competitors cold and creating a differentiated intellectual property moat with your offering — opens up the potential for a distinct platform play. Focusing on your core uniqueness relative to your overall competitive landscape is what fuels strategic growth over the long haul.
Customer needs must dictate your product roadmap to platform. Acquisitions or partnerships can round out your platform and consolidate your market as you evaluate “build, buy, partner” decisions. As customer needs get filled, companies must constantly challenge themselves to deliver more, which leads to a natural progression in thinking from feature to product to suite to platform. The platform should always be the goal, regardless of market size, because the more ingrained, the more sticky, which drives tremendous land-and-expand contract behavior.
This market-in, rather than product-out, mindset is imperative as companies encounter risks to success throughout the operating cycle. It’s critical to match maturation with the macro trends happening across the industry you play in that are affecting buyers of companies big and small. Timing is everything.
3. Empower Leadership for a Full-Throttle Change
Building the vision and strategy and green-lighting the move to a platform business model is one of the most significant decisions leadership teams can make. You must earn it first but when it arrives you must align, communicate and move quickly. Not only does it signal a serious shift in marketing, sales, and customer success/support approaches, but it requires a mammoth undertaking by product and engineering teams to build the software and harden the infrastructure that enables this shift.
Many times products are utilized by customers with siloed interaction points. This user experience needs to be elegant with clean workflows and user interfaces or via robust APIs. And the entire operating model of how your company engages with its users needs to follow suit.
While it is a true team effort to develop the strategy and action plan for the platform play, it is also crucial for the plan to be communicated to leaders across all functions, levels, and roles in a company globally, and understood and internalized by all staff. Your staff then becomes your mouthpiece to the market and you can light them up with the tools to make your drumbeat marketing strategy a success.
Pivoting to a platform company is a huge decision, and you need to ensure the message is resonating and being communicated across all departments and through all disciplines to all third-party audiences. It can take a different set of leadership talent, notably on top of the marketing, sales, and customer apparatus, to meet this platform approach. If you want to have a big vision for your company’s future, you truly have to go all in.
4. Reorg and Resize
You can’t move to a platform business model without shaking up your organization significantly. In 2015 at Dyn, where I was an executive for more than a decade, we shifted focus in many areas of our business and had to reorganize teams and assets to meet the challenges we placed on ourselves as we became a ubiquitous edge infrastructure platform. This is never an easy proposition for a business, but if leadership articulates the vision, charts the course, and firmly plants the flag, your business will be set to optimize for the exciting opportunities ahead.
Sometimes it even requires new talent with fresh ideas across product, finance, and GTM to transition, and these people need time to make their mark. For Dyn, it clearly positioned us as a strategic acquisition target for the technology juggernauts and Fortune 500 purchasers where we famously found our home inside Oracle. I’m certain that if we didn’t uplift our messaging, product strategy, and GTM, which resulted in getting such a compelling buyout offer, the retrench and broader lens we placed ourselves in as a platform would have hardened our moat for tremendous independent scale. Either way, Dyn was a massive win for all making a genuine impact on the world. Your company will be too if you commit, are consistent, and play the long game.
The Value of Platform Companies
It’s not about selling feeds and speeds. It’s about selling business value to enterprises.
The amount of times I need to repeat this, notably to technical or engineering founders and CEOs, is uncountable. It’s why we preach a market-in, not product-out, approach to company building. It’s why we deploy our drumbeat marketing program to the world to evangelize it. And it’s why you need to shift from a product company to a platform company.
York IE is certainly not alone in our SaaS platform-first approach. Ajay Agarwal from Bain Capital penned a solid piece for Forbes called “From Product To Platform: The Secret To Building A $10 Billion SaaS Business” that encompasses much of the same thinking. Core to executives’ growth strategies over the coming decade will be this continued shift to platform-based business models with clear consumption-based pricing, add-on modules services, and capabilities for advanced use cases.
Change is never easy, especially in already-successful organizations, but if you want to be sustainable and outlier-level impactful, you need to see the future and set a foundation to get you there. Employees, long-time customers, and other stakeholders might question a shift in focus and challenge you to keep your eye on them, which is what makes it so hard. But moving from feature to product to platform play requires opportunism, guts and vision with a commitment to taking on the challenges of tomorrow, today. Go and get it!
York IE’s product development and strategy team can help turn your expertise and services into a scalable platform. Learn more.
