Too many companies believe that a platform move will somehow revive a struggling product. That’s a mistake. A great platform starts with a great product—one that claims a critical mass of customers and provides enough value to keep them from defecting to competitors (in other words, is defensible). The product must also attract enough frequent users to make the potential platform appealing to third parties. After all, no platform can thrive unless it creates value for those third parties.
It has long been assumed that leaders must commit to either a product-based or a platform-based business model, because each demands a particular approach to resource allocation and operations. But we found that firms making successful transitions from product to platform often employ a hybrid model.
A viable product and business model won’t guarantee success. It’s also important to convert users of your products into users of your platform. Three elements are key.
The product-to-platform transition, like any business model innovation, will invite imitation when it succeeds. One effective way to fend off copycat competitors is to identify and control the openings for value creation.
