This is Kristen O'Brien managing editor at n FX and this is the founder list audible versions of essays from Technologies. Most important leaders selected by the founder Community.
This is the three types of platform companies written by elide Gil entrepreneur investor and author of the high-growth handbook read by n FX.
People use the word platform to describe products with fundamentally different characteristics OS is like Android infrastructure products, like twilio and platforms like Facebook apis connect may all be called platform. However, the distribution approaches and product strategy for each differs conflating what makes a platform work versus for example, an infrastructure product can backfire and cause a team to have the wrong strategy for building a product or getting customers these startups tend to fail in the following essay. I attempted to
fine and differentiate between these different types of companies and their products one infrastructure infrastructure products are ones that multiple companies have to build over and over again eventually some smart entrepreneur realizes this and builds the common infrastructure product that other companies will pay to use an example of this is the founders of mailgun who built versions of the same email server for multiple employers until they realize they could build this as a general service to all developers infrastructure products are often necessary for a product to
Action, every e-commerce site needs stripe for payments but are not often a strategic differentiating by for their customer. Although stripe has managed to differentiate strategically based on its fast iteration on new features and its Simplicity as a product early on many users of twilio didn't care if they were using twilio or another telephony provider. They just want it to work quickly simply and a good price which ultimately meant using twilio due to its ease of use the best infrastructure companies have clear economies of scale or network effects. Twilio is probably able
Go she ate better and better deals with carriers on pricing the more volume it Aggregates from its customers similarly large amounts of payment data can provide scale effects for fraud or risk management an infrastructure Company Success often boils down to a handful of factors ease of use and integration cost up time differentiating features or historical customer data. This helps you lock in your customer base economies of scale. This can lead to network effects on costs pricing power of the infrastructure provider relative to its own.
Pliers or features fraud detection developers or sales channel in some cases a developer ecosystem emerges around in infrastructure product note. This is different from developers using or adopting a product. This is less common for infrastructure than people think and is more common for a true platform in rare cases an infrastructure company can move up to become a platform on its own right? This only works if the infrastructure company is able to collect and reposition unique and user data or builddirect brand recognition with his customers customers.
Forms typically have more lock-in and differentiation than infrastructure. So moving in this direction if possible can be a strong strategic move to platform a platform always grows out of an existing vertical product. For example, Facebook or Twitter and is ultimately a generalized extension of some aspects of that product such as Facebook's internal user graph identity and Facebook connect the resulting platform allows third-party developers to take advantage of the unique data services and user base of the original vertical application a platform is not easily.
Commoditize Ebola only Facebook has the social graph that underlies it or the ability to drive distribution of certain types of content to a billion users. If a developer trying to use another social products API like Foursquare instead of Facebook's they would not get access to the right type of data or the same distribution alternatively their own customers would not want to use the login with VD button in contrast a company could probably swap one infrastructure product for another without a fundamental change to how its own application functions. Almost always applied.
Most valuable due to some unique characteristic of the original vertical product from which it grew for example, Facebook connect worked in part because Facebook itself was a representation of a person's identity. It was natural for consumers to feel comfortable logging into other sites with their personal identity contrast this to Federated approaches, like open ID to which the user had no brand Association these types of build it and they will come approaches to platforms tend to fail in reality. You were building infrastructure in this case, but calling it a platform but with no user recognition or brand
for your product which comes from being an actual platform a platform usually has the following characteristics the vertical a platform is based off of owns, the ultimate end user directly the core functionality and key features of the platform are derived from the vertical app that spawned it it provides proprietary non commodity data and or distribution to applications using it the word proprietary here is key in some cases. It provides a monetization mechanism for apps on the platform and almost always takes a revenue share contract.
This to infrastructure where the infrastructure provider is paying for use of its product many entrepreneurs. I know set out to build a platform without any real vertical application underlying it in reality. They are building infrastructure most companies that confuse these two things tend to fail the key way to tell if your platform product will fail is if you need to build the first killer app for the platform yourself for your platform to succeed in other words you end up trying to build both a vertical application and a platform simultaneously
three operating system in general adoption of an OS is driven by the following the hardware that OS is typically bundled with gets a lot of distribution there exists or quickly emerges a small number of killer apps that differentiate the OS causing more distribution and adoption for example spreadsheets in the early PC market an app ecosystem emerges around the OS which creates a positive feedback loop the more users on and Os the more people develop apps for it. The more valuable the OSB comes to users in general.
Wes has seemed to follow two phases of adoption phase one a combination of the hardware plus a small number of killer apps Drive OS adoption for the early PC operating systems. This was largely spreadsheet applications, like 123 and Excel phase two. Once the OS has strong adoption. The longer tail of apps is created by the developer ecosystem who want access to paying users. This locks in users or spreads osu's to a new set of consumers similar to how the spreadsheet word processing and desktop publishing gaming help to spread.
Added option and value of pcs one could argue that a platform is its own killer app first and foremost, for example, the killer app on the Facebook platform is really Facebook. Once Facebook got adoption for itself other non Facebook applications followed. This is the primary way a platform product has similarity to an OS who cares. The reason these distinctions are important is that the strategy for building a successful platform is different from building a successful infrastructure company many people confuse the two and pursue the wrong approach.
A company signs your infrastructure company is off to a bad start many people call their infrastructure company a platform and decide that all they need to do is find a killer app as a customer to drive their own adoption since the overall Market they're gunning for is still hazy and unclear this type of company is usually started by a non market-driven technologists who thinks a new technology is really cool. Unfortunately, most of the companies that start off this way and up his small Acquisitions at best. The reason is threefold one.
The company is not starting off with a market problem in the case of a company like stripe or twilio. The founders were trying to solve a problem other developers such as themselves faced over and over again to the market may be too small and three the killer app you are seeking is where all the value in the industry comes from if the killer app truly took off. It should be able to launch the true platform in the industry and drive you out of business unless you are a piece of infrastructure.
In which case where are your customers?
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