Strategy
Finding the product in your platform
On the risks of over-emphasizing platform thinking
Playlists are the core product driving discovery of new artists. They are critical for Spotify to gain a right to sit in the middle of the music value chain and not be merely a digital distributor for the top 3 music labels.
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The product in Kindle’s platform
What’s the ‘product’ in Kindle’s platform?
Again, books are inputs into the self-publishing value chain, so what is the ‘product’ that Amazon creates?
You’d be tempted to say that the physical reading device – the Kindle – is the product. That’s partly correct. The Kindle reader did introduce innovations like the e-ink electronic paper, which transform the reading experience.
But the Kindle is primarily a proprietary distribution channel, performing the same role that Spotify’s streaming technologies play. That is why it is subsidized and sold at a really low price.
So what exactly is the ‘product’ that Amazon is creating between the inputs of books and the proprietary distribution of Kindle.
Amazon’s ‘product’ is the community of book reviewers that Amazon has built up over time.
Hang in there while I unpack this: we’re not saying that the reputation system itself (as was the case with Airbnb) is Amazon’s ‘product’.
No!
To be very precise, Amazon’s production in the ebook value chain – its unique value-adding contribution beyond shaving off distribution costs – is the creative capacity of its community book reviewers.
Book reviews are critical to discovery of new books, particularly by first-time authors. But creating a robust book review and rating system is non-trivial. Unlike most product reviews, useful book reviews require significant investment of time and effort on the part of the reviewer. Hence, curating a community of book reviewers is non-trivial.
Traditionally, the large publishing houses bundled
(1) the ability to publish and distribute books, and
(2) through their PR arm, the ability to generate book reviews with media houses.
Even before the rise of the web, but particularly after it, book reviews started getting unbundled as peer-to-peer recommendations via email lists, and subsequently via blogs and social media.
Book reviewers were scattered across the web. Amazon – by establishing itself as the single place online to buy books – attracted a community of book reviewers.
Amazon curated this community of book reviewers leveraging supply of traditional published books from the large publishing houses. Leveraging this growing community of book reviewers, Amazon established itself as the point of rebundling of book reviews.
Once it had created this new locus of rebundling of book reviews in the value chain of traditionally published books, it then moved this ‘product’ into a new value chain – the value chain of self-published ebooks.
This transition is crucial. Amazon needed to play in the traditional publishing value chain to attract a curated community of reviewers which it then transferred to the self-publishing value chain. By combining the ‘curated community of reviewers’ with its proprietary distribution mechanism, Amazon established a chokehold over the self-publishing value chain.
Readers looking for new indie writing look to Amazon and its curated base of reviewers for guidance. For authors, it is far more effective to rack up reviews on Amazon than to work with hundreds of unbundled blogs and influencers.
The core ‘product’ establishes Amazon firmly at the centre of the self-publishing value chain.
The ‘product’ as new value created by the platform
The best way to understand the product is to look at Spotify’s playlist. Arguably, the user’s need of ‘help me find a song to listen to’ is already solved by Spotify’s search function.
The playlist does something else. It helps Spotify create a new dynamic for music discovery and gives it the right to sit at the center of the music value chain having created new value.
Amazon’s book reviewers play a similar role. A search box is sufficient to help consumers fulfil their need and find books. But the platform creates a ‘product’ in delivering the ability to help unknown authors get rediscovered. That is a unique ‘product’ that is not available elsewhere and is not created through mere aggregation of inventory.
This is the key idea of finding the ‘product’ in your platform.
The product in food delivery platforms
Let’s look at food delivery platforms. What’s the ‘product’ here?
Having just looked at Airbnb and swayed by the ‘sharing economy’ catch-all phrase, you might be tempted to say it’s the driver and/or restaurant reputation system.
But you’re not really engaging in market transactions based on driver reputation and restaurant reputations, while somewhat important, do not determine the key vector of consumer experience in food delivery.
To identify the core ‘product’ in food delivery, let’s turn on the unbundling-rebundling lens again.
Restaurants that would manage their own food delivery would bundle food preparation and food delivery.
Food delivery platforms unbundle food prep from food delivery and rebundle food delivery using a near-captive base of delivery agents.
In doing this, these platforms gain a unique advantage over individual restaurants that managed their food delivery. They set up a market-wide data value chain where they gather demand data across the market and transform it into their core product: route optimization and delivery stacking algorithms.
Route optimization and delivery stacking, particularly in high-density cities in Asia and LatAm, enables food delivery platforms to differentiate on faster deliveries and gain a right to sit in the middle.
Food delivery platforms which decide to backward integrate into creating ‘dark kitchens’ create another important product: the standardized minimal menu of the dark kitchen. Demand data captured at market-wide scale informs these platforms of (1) what’s popular, (2) where it’s ordered from, (3) order patterns. These three data types help determine (1) location of ‘dark kitchens’ to minimize delivery times, (2) menu, and (3) estimates for ingredient sourcing and food production.
State of the Platform Revolution
The State of the Platform Revolution report covers the key themes in the platform economy in the aftermath of the Covid-19 pandemic.
This annual report, based on Sangeet’s international best-selling book Platform Revolution, highlights the key themes shaping the future of value creation and power structures in the platform economy.
Themes covered in this report have been presented at multiple Fortune 500 board meetings, C-level conclaves, international summits, and policy roundtables.