Is There a Platform in Your Product?

Andrei Hagiu

Elizabeth J. Altman

<article-ideainbrief class="article-ideainbrief">
 <h4 class="ideainbrief-title">In Brief</h4>
 <div class="ideainbrief-contents">
  <h5>The Problem</h5>
  <p>Many companies that sell products or services either don’t realize they could turn their offerings into a platform business or struggle to do so.</p>
  <h5>The Opportunity</h5>
  <p>By becoming a multisided platform (MSP) that facilitates interactions between parties, a company may be able to provide new revenue sources while also preventing competitors from stealing market share from its product or service.</p>
  <h5>The Solution</h5>
  <p>Here are four scenarios whereby regular products or services can become MSPs. The authors take into account the advantages and pitfalls of each and the resources, relationships, and organizational changes that would be required.</p>
 </div>
</article-ideainbrief><p>Five of the 10 most valuable companies in the world today—Apple, Alphabet, Amazon, Facebook, and Microsoft—derive much of their worth from their multisided platforms (MSPs), which facilitate interactions or transactions between parties. Many MSPs are more valuable than companies in the same industries that provide only products or services: For instance, Airbnb is now worth more than Marriott, the world’s largest hotel chain.</p>

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<p>Five of the 10 most valuable companies in the world today&#8212;Apple, Alphabet, Amazon, Facebook, and Microsoft&#8212;derive much of their worth from their multisided platforms, which facilitate interactions or transactions between parties. Many MSPs are more valuable than companies in the same industries that provide only products or services: For instance, Airbnb is now worth more than Marriott, the world&#8217;s largest hotel chain. However, companies that weren&#8217;t born as platform businesses rarely realize that they can&#8212;at least partially&#8212;turn their offerings into one, say the authors. And even if they do realize it, they often wander in the dark searching for a strategy to achieve this transformation.</p>
<p>In this article, Hagiu and Altman provide a framework for doing so. They lay out four specific ways in which products and services can be turned into platforms and examine the strategic advantages and pitfalls of each: (1) opening the door to third parties; (2) connecting customers; (3) connecting products to connect customers; and (4) becoming a supplier to a multisided platform. These ideas can be used by physical as well as online businesses.</p>

Finding the Platform in Your Product

Five of the 10 most valuable companies in the world today—Apple, Alphabet, Amazon, Facebook, and Microsoft—derive much of their worth from their multisided platforms, which facilitate interactions or transactions between parties. Many MSPs are more valuable than companies in the same industries that provide only products or services: For instance, Airbnb is now worth more than Marriott, the world’s largest hotel chain. However, companies that weren’t born as platform businesses rarely realize that they can—at least partially—turn their offerings into one, say the authors. And even if they do realize it, they often wander in the dark searching for a strategy to achieve this transformation. In this article, Hagiu and Altman provide a framework for doing so. They lay out four specific ways in which products and services can be turned into platforms and examine the strategic advantages and pitfalls of each: (1) opening the door to third parties; (2) connecting customers; (3) connecting products to connect customers; and (4) becoming a supplier to a multisided platform. These ideas can be used by physical as well as online businesses.

Finding the Platform in Your Product

Summary.

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