Products vs Platforms

Products vs. Platforms: Understanding the Differences and Choosing the Right Approach for Your Startup

As a product manager, one of the key concepts to understand is the difference between a product and a platform. Although these terms may seem interchangeable, they represent fundamentally different approaches to creating and delivering customer value.

This article will explore the differences between products and platforms and provide tips on choosing the right approach for your business.

What is a product?

A product is a standalone solution designed to solve a specific problem in a particular set of customers. It is usually an independent software or hardware sold to customers as a complete solution. Products are often designed to be easy to use and require minimal customization because they are intended to meet the needs of a specific audience.

Examples of products include smartphones, laptops, and consumer software applications like Microsoft Office or Adobe Photoshop. These products are designed to be used as is, without significant modifications or expansions.

What is a platform?

A platform, on the other hand, is a set of tools and infrastructure that allows others to create and deliver their own solutions. Rather than being a complete solution, a platform is designed to enable others to create their own products or services using the platform’s core capabilities.

Platforms often provide a set of APIs (application programming interfaces) that developers can use to create their own applications that run on the platform. They can also provide a marketplace or ecosystem that allows developers to distribute their products to a broader audience.

Examples of platforms include Amazon Web Services (AWS), which provides a set of cloud computing tools developers can use to create their own applications, and the Apple App Store, which provides a marketplace for developers to distribute their iOS applications.

Key differences between products and platforms

Although the products and platforms are designed to provide value to customers, a few key differences set them apart.

  1.  Solution Scope:Products are comprehensive solutions designed to meet a specific set of needs for a particular group of customers. On the other hand, platforms provide tools and infrastructure that enable others to create their own solutions.
  2.  Customization:Products are designed to be used as is, with minimal customization. On the other hand, platforms are designed to be extended and customized by others to meet their specific needs.
  3.  Ecosystem:Products are typically standalone solutions that do not have an ecosystem or marketplace of third-party solutions built around them. On the other hand, platforms often have a vibrant ecosystem of third-party solutions that extend and enhance the platform’s core capabilities.
  4.  Scalability:Products are typically designed to scale vertically, meaning they are designed to handle more users or data by adding more resources to the solution. On the other hand, platforms are designed to scale horizontally, meaning they are designed to handle more users or data by adding more nodes to the platform.

Choosing between a product and a platform

As a product manager, the decision to build a product or platform will depend on several factors, such as the size of your market, the complexity of your solution, and your long-term strategic goals.

A product may be the best approach if you’re targeting a specific market with a relatively simple solution. However, a platform may be the best approach if you target a larger market with a more complex answer.

When deciding to build a product or platform, it’s also essential to consider the level of customization and extensibility your customers may need. A forum may be the best approach if your customers demand high customization and flexibility.

Finally, it is essential to consider your long-term strategic goals. A platform may be the best approach if you want to build a vibrant ecosystem of third-party solutions around your core capabilities. However, a product may be the best approach if you are primarily focused on providing a standalone solution to a specific market.

Ultimately, the decision to build a product or platform will depend on various factors, and there is no universal answer. As a product manager, it’s essential to carefully consider your customers’ needs, market size, and long-term strategic goals before deciding.

Platform as a Product, AKA the Third Way

In addition to the differences between products and platforms, it is also worth noting that a third approach is sometimes called “platform as product”.

In this approach, a company builds a platform initially intended to enable others to create solutions. It also includes a set of pre-built applications or tools to be used as a complete solution.

This approach allows a company to provide both the scalability of a platform and the ease of use of a product, making it a popular choice for companies that want to offer a flexible solution while still meeting needs. Customers who prefer a complete solution.

However, it is essential to note that this approach can be challenging to execute correctly, as it requires striking a delicate balance between providing a complete solution and allowing for customization and extensibility. As with any product or platform decision, it’s essential to carefully consider your customers’ needs and your company’s long-term strategic goals before pursuing a platform-as-product approach.

The platform-as-product approach is a blend of the product and platform approaches, offering the best of both worlds. The company is building a platform allowing third-party developers to create solutions. Still, it also includes a set of pre-built applications or tools that provide a complete solution. By doing this, the company offers the flexibility and scalability of a platform while still catering to customers who prefer a complete solution.

A great example of the platform-as-product approach is Salesforce. Salesforce is a cloud-based customer relationship management (CRM) platform that offers a range of tools and services for managing customer interactions, sales and marketing. Salesforce allows third-party developers to create their apps and integrations on the platform, making it an extensible solution that can be customized to meet the specific needs of different businesses. However, Salesforce also offers a range of pre-built apps and tools that provide a complete solution for companies that want a turnkey CRM solution.

Another example is Slack. Slack is a messaging platform that provides various business communications tools and services. While Slack is primarily a platform that allows developers to build their integrations and apps, it also includes a range of pre-built integrations and features that make it a complete solution for businesses that want a modern messaging and collaboration tool.

The platform as a product approach is a powerful way to provide a flexible and extensible solution while catering to customers who prefer a complete solution.

However, it can be challenging to execute well, as it requires a delicate balance between providing a complete solution and allowing for customization and extensibility. As with any product or platform decision, it is essential to carefully consider your customers’ needs and your company’s long-term strategic goals when deciding whether to pursue a platform-as-product approach.

Conclusion

In conclusion, understanding the difference between a product and a platform is essential for product managers to grasp. Although products and platforms are designed to provide value to customers, they represent fundamentally different approaches to creating and delivering solutions. By carefully considering your customers’ needs, market size, and long-term strategic goals, you can make an informed decision on building a product or platform. With the right approach, you can provide valuable solutions that meet your customers’ needs and help your business grow and prosper.