The Benefits of Converting Your Offerings From Products to Platforms

What’s the difference? The traditional product-based company is a love ’em and leave ’em type of organization, wooing anonymous consumers to make one-off purchases, then abandoning them once they have done so. Platform-based companies build relationships with consumers at the center. These relationships extend beyond a product sale and impact the way people engage with a product long after the transaction is complete.

More importantly, platform companies seek to understand the intent behind the purchase, layering complementary services around their product offering that enhance the experience for the consumer.

“Platform companies seek to understand the intent behind the purchase, layering complementary services around their product offering that enhance the experience for the consumer.”

One company that has done a good job of leveraging their product to extend their relationship with consumers is Gatorade, which is now leading the way for sports brands.

With sales falling behind strong competitors in the sports drink market, PepsiCo implemented a 40% increase in R&D spending in 2011 and 2014 with a focus on building a unique smart cap technology system that would deliver customized formulas, a significant enhancement on their existing squeeze bottle product.

The resulting analytics-driven platform was designed to help athletes better understand their unique hydration needs, and optimize performance. From sodium and electrolyte deficiency to sweat production, Gatorade’s turbine censored smart cap and skin patch are individually linked to each player, retrieving and sending data back to a software program after each sip and sprint, catch or kick. The suite of critical new physical, digital and service-based consumer experiences is built around an established product; designed to better understand, engage with, and ultimately sell additional offerings to its consumer.

Similarly, startup Little Bits embraces a business model that goes beyond toy seller or ‘electronic Lego’ supplier. Instead, the toy company has developed a prototyping platform for children that is not as much a store as it is a learning lab, enabling product line extensions by virtue of a true understanding of customer wants and needs, and richer engagement with its audience.

Implementing a consumer-centered platform
Transitioning from product to platform is a process, requiring a complete customer interface transformation. Equally as important, it necessitates an internal transformation of the corporate culture. The traditional corporate paradigm is not built to interact with the consumer in this manner. Choosing to pursue a path of omni-channel consumer engagement without organizational change is an exercise in futility.

Here are 5 keys to an effective internal transformation to enable this crucial product to platform transition.

1. Know thy customer. Your company must invest in sophisticated customer engagement to understand why consumers purchase your product and how they use it, once owned. Once limited to survey results performed by marketing research departments, companies now need to leverage data from social media, sensors, geolocation, wearables, and syndicated sources, as well. Today’s consumers expect more from the brands and services that shape their lives, and this data intelligence provides companies a starting point to offer new, meaningful experiences.

Omada Health partners with major insurance companies to identify highly motivated individuals at risk of diabetes and other chronic illnesses, and then coaches them into a healthier lifestyle. Omada’s Prevent program begins by connecting each user to a personal health coach and devices such as a digital scale and pedometer so they can track their progress. From there, Prevent offers weekly fitness and nutrition lessons; a way to track food, drinks and activities; and regular feedback—from the personal coach, as well as from other participants. Omada is not selling a behavior change program but, instead, it is selling a result. The company is so tied to this platform approach that it has switched to a performance-based pricing model, charging health plans and employers based solely on how well participants do.

2. Know thy team members. Productization creates silos, which a platform model can’t—and shouldn’t—sustain. Platform companies need to engage ALL the people in the company that don’t regularly talk to each other, but are somehow still responsible for creating a product or engaging with the customer.

3. Know thy self. Perhaps your corporate model is one that is flexible enough to accept disruption; in which case the organization can, as a whole, move full steam ahead in pursuing this platform model.  But maybe it’s not. Maybe there is a strong heritage brand that would complicate such an initiative, in which case it makes sense to set up a separate innovation enterprise to create a platform initiative. Upon success, the heritage organization can then reabsorb the trial company, or some iteration of it.

4. Pilot, pilot, pilot. Don’t let perfection be the enemy of good enough. Trial platform models with real-world customers quickly. Too often, companies only pilot once ideas are fully realized initiatives. Float trial balloons once the batter is conceptualized, not after the cookies are baked.

5. Listen and learn. Finally, remove the shield of secrecy from the innovation process. Open the closed doors, pilot platforms and other consumer engagement projects by actively soliciting feedback from consumers, themselves, and from your employees. Improve on the fly, from real learnings.

Google Glass is an interesting, if much maligned, example of this process. Rather than undertake an expensive investment in partnering with eyewear companies and putting in permanent business infrastructure, Google chose to allow some early, influential adopters to trial a prototype version of Glass and be part of its “Explorer Program.” What most observers did not understand was that this was a social experiment more so than a product rollout. Through this strategy, Google was able to get thousands of people to challenge society’s conventions on privacy and connectedness without having to address it directly. What we now see is the platform company refocusing Glass technology on business customers, and putting their crucial Glass learnings into R&D for future consumer IoT products.

These internal innovation ingredients can seed the foundation for a corporate pivot from product to platform. For those struggling to determine whether this platform transformation is appropriate for their organization, recognize that soon there will be no choice at all. Whether or not you make the transition, your competitors will.

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