What is the difference between managing a product and a platform?

I’ve already explained about the differences between a product and platform in a previous article. I also explained what is software product management. Now I want to talk about the differences between managing a product and a platform.

When we talk about software products, our only concern is with one type of customer. In a single-side platform, besides worrying about understanding one single type of user, it is necessary to understand the relationship between users.

When we talk about a multi-side platform, we should take into consideration two or more different types of users, and the relation between users of the same kind and of different kinds. In other words, the concerns, both from the product manager and from everyone who works in developing the platform, can be more complex than the ones regarding a product with one single kind of user.

A platform strategy must take into account that the customer does not perceive value only from the features of the product, which are 100% under the platform owner’s control. Aside the features, the customer seeks value in interactions with third parties, and it is the platform owner’s responsibility to manage these relations in order to create the best value both for participants of the platform as well as for itself.

New concerns in platform management

Besides all concerns of software product management that I’m describing in my articles, those who manage a platform must also take in consideration other aspects:

The platform features depend on the participation of users. We use the expression tipping for this concern, i.e., how to make the platform attracts and retain users so it can be useful for those who participate in it? Some strategies for tipping are:

  • First user: to get a first user who by himself attracts other ones. This is a tactic used by shopping malls when they sign contracts with department stores that by themselves attract enough consumers. Later, you can offer spots to other stores, that will certainly be more interested in being at the mall. 
  • Social: another way of getting users is to engage in social networks and engines. Something like “tell your friends from Facebook”.
  • Leader user: discover what is the user profile that will be strongly attracted by the idea at the point of being the first one to adopt the platform. Bitcoin attracted several people from technology areas initially who fell in love with the idea of a currency not linked to any government, and they defend the idea passionately.
  • Think about the benefits as a product. The product itself has to have enough benefits. Instagram, before the feature of sharing photos, was able to make photos look cool. OpenTable, before the booking feature, was a good ERP for restaurants.
  • Consider lowering prices. It is a strategy valid for attracting users, but is good to remember that it is difficult to raise the price later, especially if you lower it to zero. Sure, you can subsidize it with ads, but you need to know if your users will like those ads and if you are going to get advertisers willing to invest.

There are also the features that depend on users’ behavior. The term used for that is coring, i.e. how to guarantee that they are not taking advantage from each other, ensuring that every participant has benefits? Some strategies for taking care of coring:

  • Promote trust: auction and online payment sites usually do this, holding up the buyer’s money until he confirms that he received the product sold to him.
  • Offer quality information: a typical example is user-made ratings. The big risk here is to manage false ratings; or positive evaluation made by the analyzed person or company; and negative ones made by competitors.
  • Restrict the use: make usage more restrictive, even forcing participants to pay to access the platform. This will bring you less users, but quality users. That’s what the online dating website eHarmony does. It charges a fairly expensive monthly fee (US$ 50.00) and gives you a very extensive form for you to fill up. In addition, even if its matchmaking algorithm finds you several options, it will only present you a limited number in order to ease up the process of choice.

It is important to understand if you are working on a product or a platform, because there are some differences in managing each one of them.

A platform needs a strategy for attracting the first users, and this is equally or more important than the features. As software product managers, we tend to get excited with technical features. However, in platforms the focus is concentrated on users, on their relations and on how to attract the first users (tipping). In addition to that, managing a platform requires control and relation governance inside the platform itself in order to guarantee that all participants are benefiting from it (coring).

Once we understand what is software product management and what are the differences between managing a software and managing a platform, what we need now is to understand what is a software product manager. That’s the subject of my next article. Stay tuned!

Product Management: Delight your customers with your software

In 2015 I wrote a book on Software Product Management in Portuguese. In the beginning of 2016, Paulo Caroli talked to me about how he enjoyed the book and how this book could be useful to people in the software industry not only in Brazil but anywhere in the world. For this reason, we decided to create an English version of my book.

The book is organized in 5 sections:

  • Definitions and requirements
  • Life cycle of a software product
  • Relationship with other areas
  • Product portfolio management
  • Where to use software product management

This book is suitable for anyone working with software. Even companies that do not have software as its core business use software in their day to day and often have developed some software that interfaces with its customers such as a website or a mobile application. It is important for these companies to understand the software product management role and responsibilities, so they can better manage this software and increase its chances of success.

We are working on the translation but as we progress we are already releasing the content. If you want to see the work in progress, please visit the book page at LeanPub. Still in beta but already with valuable content. Feedback is always welcome!

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