Scaling From Product To Platform Mindset

Jay Dembani at UXDX Community: India. Video: https://youtu.be/woR-iFY7BzI

Readable transcript: edited from the recording's captions for readability (fillers and false starts removed, punctuation and section headings added). Wording is the speaker's own. Timestamps are positions in the video. Names marked [?] could not be verified against the audio.

Introduction and agenda

[00:00:00] Good evening and good morning to everyone, whichever part of the world you are watching this presentation from. The topic of my presentation is scaling from product to platform mindset. As we say that product is a mindset, platform is also a mindset, and if you are looking to scale your product to a platform, there are a few things where I would like to share my experience based on my learnings.

[00:00:26] I am Jay. I am a product management professional with 16-plus years of experience, primarily in product-first implementations and platform management. At Avalara I manage a portfolio of platform integration products called connectors and extractors. The objective of this presentation today is to share my view, which I have tweaked based on my experience of working with various products in my career and the platforms which have been built out of those products. I am going to present my views on the external platforms and not on the internal platforms. In the interest of time, we'll be focusing only on external platforms.

[00:01:12] For the purpose of this presentation, I have used Amazon and Avalara as the examples to share my learnings and the principles of scaling your product to a platform, and I'll be constantly using these two examples. Why Avalara? Avalara is a global tax compliance platform, and we are in the process of transitioning and evolving ourselves from a product family to a large-scale compliance platform. Why Amazon? Because Amazon is the most relatable example for the majority of the audience, and we are also a partner with Amazon, where I've built products for Amazon related to tax compliance. That's why I've taken these two examples.

[00:02:01] Coming on to the agenda. We will start off with product versus platform: what differentiates a product from a platform, and what the similarities are. We'll talk about the core concepts which are important if you are looking to transition from a product to a platform or a multi-product platform. Then we'll touch upon the layers and the framework which are important from a platform design point of view, and then a sneak peek into how we are transitioning from product to platform here at Avalara, and from a SaaS industry perspective, how you can design into a platform. At the end we'll present the summary.

Product versus platform

[00:02:43] Starting off with product versus platform. The way I would put it, a product is anything that is available for attention, acquisition, use or consumption. A platform is a business which is powered by the ability to leverage and orchestrate the ecosystem of producers and consumers, where they all come together, an exchange occurs, and value creation happens. As in the case of Amazon, it's the platform where sellers are selling their goods and products, and we as consumers go and buy those products. So there is an exchange happening, and there are multiple partners, in terms of delivery and everything that revolves around this exchange, who are also participating. They are also participating in that exchange. That's why Amazon becomes a platform and fits into that definition.

[00:03:44] Let's understand, if you are a product company, what the key factors are that you have to keep in mind if you have to transition to a platform. There are six basic parameters I've considered for this differential analysis. When you think about a product, the core asset lies in the features. Whenever you're building a product, you talk about features, about user journeys and the customer flow within them, how a user would be using the product. But when we are talking about a platform, it takes a bigger scheme, where you don't just talk about one feature. Features are, of course, a part of the product, and products in turn are a subset of the platform.

[00:04:34] From a design point of view, whenever we are designing a product, we focus primarily on the user persona. But when we're designing a platform, it is more around the exchange, the core activity which will be happening on the platform, and everything that revolves around it. In terms of value creation, the value is created for products via understanding the user persona and the user's journey. Again, in the case of a platform, the exchange becomes the center of the entire design.

[00:05:06] From a cost point of view, when you think of a product, it is primarily subscription driven. You can think of any product in your day-to-day life that you are paying for. It is very common in the SaaS industry, where I come from, that there is a subscription and there is a freemium, where the product is generating revenue for the organization. But when it comes to a platform, there are multiple sources of revenue generation, and sometimes as a platform you also have to incur cost to ensure that the exchange is happening.

[00:05:38] What do I mean by that? When you are building a platform, subscription will be one element of it, but there are partners who are also coming onto your platform and powering that exchange. You have to share the revenue with these partners who are coming onto your platform, and at the same time they will also share revenue with you. So there are multiple revenue streams in the case of a platform. From a business drivers perspective, a product primarily focuses on users and enterprises, whereas a platform focuses on the entire ecosystem, which involves producers, consumers and partners.

Network effects

[00:06:17] Now we'll quickly jump onto the key platform concepts. The most important and primary one is the network effect. What do we mean by network effect? In theory, a network effect relates to any situation where the value of a product, service or platform is directly proportional to the number of users leveraging it. In short, the greater the number of buyers and sellers using the product, the greater the network effect will be, and the greater the value generated on that platform.

[00:06:50] Within the network effect there are multiple variations. We talk about same-side network effects, cross-side network effects, positive network effects and negative network effects. For the purpose of this presentation, I've considered a positive network effect. As I said, when we talk about network effects, the greater the number of users, the more value in the exchange will be generated on the platform. For this I've considered a very basic example of a marketplace platform like Amazon, and what you're seeing on the screen is a flywheel.

[00:07:28] The positive network effect goes like this. The more producers and sellers you have on the platform, the more options and choices you will have, because more producers are coming and selling different products of different varieties. So as a consumer, as a user of that platform, you will have more options to choose from. Once you've got more options to choose from, you will have more customers and buyers coming onto the platform to buy the goods which are being sold by the sellers. The more customers come, the higher the earning potential for the existing sellers already on the platform. That ensures that there is word of mouth, and a network effect which will pull in more sellers to come onto this platform and sell more.

[00:08:18] If you look at this circle of positive network effect, it is continuously feeding into itself. That is because this is an example of a positive marketplace platform, where each side keeps feeding the other. When you are building a product, you have to think about the various stakeholders you would be incorporating or involving once you are transitioning from a product to a platform, and you have to ensure that there is an element of network effect within your product.

The value exchange

[00:08:53] The second important concept is the platform and the value exchange. What do we mean by the exchange? The exchange primarily involves some sort of interplay, an exchange of value in terms of goods and social and economic currency. For example, if a producer or seller is creating or selling something on a marketplace platform like Amazon, he's creating something of value, and when a consumer buys it, they pay in the form of economic currency. Cut to a social platform like Facebook or LinkedIn, where you create a post, and people come and, if they find it interesting, they like it. In that case they are repaying the value which you have generated in the form of social currency. That is the economic currency and the social currency, the social one being in terms of likes.

[00:09:51] This is another important point: when you are building a product, you have to ensure that the value exchange and the value proposition of your product are very clear, so they can be scaled later when you are scaling to a platform. Here I have presented a pictorial representation of a value exchange. If you consider the exchange as an equation, you've got producers on the left-hand side and consumers on the right-hand side. Whenever a producer produces something of value, it goes to the consumer, and the consumer pays for it in the form of currency, social or economic. Then, to enhance the value of this exchange, a platform involves partners.

[00:10:38] I'll stop here and give you an example of Avalara's partnership with Amazon, and you can extrapolate that example to the other partners in the Amazon ecosystem. Whenever sellers are selling goods in any part of the world, they are liable to file taxes. If I am a seller on Amazon, say in the United States, I need to ensure that I'm filing the liability which I owe to the department of revenue. If I'm on Amazon, as a seller on Amazon I go and search for the tax compliance or tax solution partners who are tied up with Amazon, and there I find Avalara and some other tax calculation and return filing partners.

[00:11:32] Since filing taxes is an important part of ensuring the business is compliant, I go ahead and identify a partner, a player or someone else, to file my taxes. That ensures that I stay with Amazon, because Amazon is providing me access to a bunch of partners who can help me solve a particular business issue. Say, for instance, I'm looking for a delivery partner or a logistics partner: I'll have the ability to go and subscribe to those products. This way Amazon as a platform is generating value for the partners who are coming into its ecosystem, but at the same time the partners are also getting an opportunity to earn revenue by listing themselves there.

[00:12:16] That's how an exchange works. It is not simply a seller selling the goods, the producer, and the consumer buying it; at the same time there is an element of the partner, which ensures that the exchange itself is enhanced. Imagine a scenario where there was no compliance partner available on Amazon, and how difficult it would have been for the sellers selling on Amazon to do business. They would have moved to another competitive marketplace. But Amazon, being a platform, ensures that there are multiple producers for each requirement that a seller has. That's where the value is getting created, and it is getting enhanced for all the stakeholders of the system.

The 3EM framework: engage, encourage, enable and match

[00:13:00] When we are thinking about scaling our products, you have to think platform, and when you want to move towards a platform you have to think about an architecture. A platform, of course, is a very technical concept, but in terms of the thought process, how it should be, I've designed this framework that I call 3EM. It's engage, encourage, enable and match. What do I mean by that?

[00:13:32] Engage means your platform has to ensure that we are engaging producers, consumers and partners to come onto the platform. In the very initial days, whenever any platform is getting built, there are ways to attract and make the sellers and the consumers aware of that particular platform, through various mechanisms like online media, offline, or a hybrid version of that. Whenever a platform is getting launched, to create that initial attraction, they're engaging in the platforms. They're engaging the stakeholders, the producers, consumers or partners, to participate in that.

[00:14:12] Once the participants are engaged, the next level of work involved is encouraging. You have to encourage your participants, the ones you have engaged, to produce and create and contribute value on the platform, so that the platform itself powers that exchange and it remains relevant to the outside world. Then, once they're already involved in that platform, you have to enable them through role-based access, so that they're able to contribute, curate and create value on the platform. So if you are a producer, then you should be able to create your product catalog on the platform. Rajiv talked earlier about how Meesho has enabled sellers with the help of the product catalog, since they are not okay with the idea of using the access. That sort of enablement is required if you have to ensure that more and more users are coming onto your platform.

[00:15:12] Once you have got these three levers taken care of, the most important part, which is there, is that you have to match. As in the Avalara example I started with: when you are looking for a tax compliance partner on Amazon or any of the top-ranked marketplaces, you will find Avalara as one of the tax partners. So if I'm a seller looking for something, there has to be a supply of that on the platform. The same goes for the consumer side of the platform. If I'm a consumer searching for something, I need to have the variety of goods I'm looking for so I can make an appropriate choice. As I showed in the first slide, there's a flywheel effect that comes into the picture: the more sellers there are, the more options there are, and then you have to ensure that quality is also maintained.

[00:16:03] If I have to present this thought architecture pictorially, the platform is in the middle, and you have to engage the producers, the consumers and the partners, who are enhancing that engagement, so all the stakeholders are involved. Once you have engaged them, there's the encouragement, which is allowing these partners to connect with your platform with the help of APIs and microservices. Once they are encouraged, you have to enable them so that they are able to contribute and perform dual roles. A partner can be a consumer, a partner can be a producer, and all these roles are interchangeable. That's how a multi-sided platform gets created. The theory lies in enablement, how you enable them, and then, once you have done that, in ensuring that the demands are being met: that whatever I'm looking for, there is enough supply on the platform, so that demand and supply are being matched.

Platform layers

[00:17:06] The next concept I'm going to touch upon is that whenever you are transitioning your product to a platform, you have to make sure there is an element of design, and when we talk about design here it's primarily the technical design aspect. Any platform will usually have a combination of these three layers, or all three layers taken together. What are these three primary layers, and the fourth one I will talk about?

[00:17:35] The first one is the network. The network is the producers, consumers and partners who are coming onto these layers, and there is an element of community. Say for instance, if there is a social media platform, to begin with it will always start as a community-first platform. Craigslist, in its very initial days, was a network- or community-driven platform. Later on, when the number of users increased, there was a level of infrastructure which was added to it. So the first layer is the network. Any platform will have an element of network, and an element of community involved in it.

[00:18:16] To support this community, another layer is required: the infrastructure layer. When we talk about infrastructure, we're primarily talking about the tools that enable producers and consumers and give them access to this platform. It is the tools which will provide them access, which will give them the ability to access this platform. The rules, the APIs and the algorithms are what primarily constitute an infrastructure. Depending upon what the level is, which layer is high, the infrastructure layer can increase its percentage among these layers.

[00:18:51] The third layer is the data layer, where you have to ensure that your demand and supply are getting matched, and you have to see what the various activities are which users are taking on your product slash platform, so that you can design your platform accordingly and take the constant feedback which is coming from the user behavior.

[00:19:10] Now, to stitch all these layers together, there is another important layer, which is the layer of communication. When we talk about the communication layer, we don't just talk about communication between these three layers on the inbound side, but also the communication on the outbound side. What sort of positioning do you want to have for your platform when you are reaching out to your end users? These days there's the 10-minute delivery platform. That's the positioning Zepto [?] wants to create in the minds of the end users; that's their unique selling proposition. Amazon has got its own positioning and how it communicates with end users. At Avalara, we communicate ourselves as a global tax compliance platform: we make tax less taxing. So it's not just the layers you are seeing in the platform, but what communication you want to send across to the external audience as well.

Designing around the value and the exchange

[00:20:11] When you are designing it, you have to keep this basic framework in mind when scaling from a product to a platform. First, you have to identify the lowest common denominator: what is the value that is getting generated? In the case of Amazon, the value is in the core transaction, which enables a seller to sell their produce and a buyer to buy that produce. That's the basic exchange, and the value is basically a successful transaction which is getting created. At Avalara, the basic exchange is that we allow users to import all their transactions from various systems, and the value is that it ensures those transactions, once they are in the system, are tax compliant as per the laws of the land.

[00:21:02] Once you have identified these core layers and you have got a solid base built on that, that is when you can create the functions on top of it. Amazon, once it was able to capture the value in the exchange, diversified into various elements: they are into delivery, there is Amazon Pay. Based on these two basic layers, various variations of the product are getting developed. We have developed something called AvaTax [?] for calc, that is, tax calculation. We are enabling sellers to file their returns. We are also ensuring there is a document management system in place, which is a separate offering altogether. All these enhancements happening on the platform are happening because we have these basic layers in place. So whenever you design a product, if you have a platform vision in mind, ensure that the value and the exchange are being taken care of.

[00:21:55] The key drivers of the platform have to be architected into the platform. We have talked about the network effect. Behavioral design is like how you ensure that there is involvement and engagement of the users with the help of nudges and the notifications, and how you're curating with the help of smart filters, to ensure that the right set of suppliers is coming and the goods they're offering on your platform are certified.

[00:22:23] There are two other concepts we have not touched upon that I would like to talk about. You have to ensure there's something called marginal economics. Marginal economics ensures that the cost of producing every new variant of your product on the platform reduces over time. Going back to my previous example, if you have identified the value that is getting created on your platform and the exchange, and these two elements are sorted, then it will be easier for you to produce the enhancements and variations of the product for different segments of the market at a much lower cost. That is what marginal economics is all about.

[00:23:04] Then you have to ensure that virality is built into your product. If you're on Amazon and want to share a product, you must have seen that you can easily share the product you are planning to buy with your family or friends. If they are not on Amazon, the moment they click on that link, Amazon gives them an option to see it without logging in, and if they want to buy, they have to create a login. So there is a loop that has been built in. Virality is more of a design aspect than a marketing aspect, and that's how it's differentiated from word of mouth. Similarly, at Avalara we are also inching in that direction, where we are ensuring that virality gets built into our platform. With every transaction, whenever you are calculating your taxes or filing your returns, we ensure there is a viral element incorporated in the product, which will encourage more and more users to come onto our platform.

Product platforms and variations

[00:24:08] Now, product platform. The idea of a product platform revolves around a set of common components, modules or parts from which derivative products can be efficiently created and launched. What I mean by that is, if you have identified the core elements of your platform, the common systems and interfaces taken care of internally in the tech stack of your product, then there are common elements which can be shared across the various variations.

[00:24:41] Here you can see a very common example in the SaaS space, where all these products use the same subsystems and interfaces, and on top of that there are variations created for different segments of the market. It allows us to enable variations in the market based on whatever segment we are catering to. If you are a new user, you can create a free trial account. If you want to use additional features on top of that, you can use the individual plan, and on top of that there is professional, and then there is enterprise. That's how something which started off as a single product, now we as a company are inching towards a product platform.

Key takeaways for making the transition

[00:25:24] If you have to transition a product to a platform, there are a few key takeaways. You have to do a solid analysis of why you want to turn your product into a platform and what the benefits of doing that are. There are risks associated with turning your product into a platform, which means you may lose certain segments of the market because you are going broad. And there are risks because, once you are moving towards a platform mindset, you will have to involve partners, because you are building these ecosystems. When partners come onto the platform, how do you ensure that the existing experience of your customers is not hampered?

[00:26:05] You have to ensure that the kind of partners you are onboarding onto your platform are of a certain quality and meet a certain standard. If you want to become an Amazon partner, there are stringent checks and mechanisms. If you want to launch your app in the Amazon marketplace, you have to pass through those checks, and they do that so that the customer experience remains unimpacted. Because when you are becoming a platform, you are also sharing your brand with the partners. So you have to be very careful about the effect on the core customer exchange, within and outside of the product, and how the design and the journey are going to be impacted once various elements and stakeholders come in.

[00:26:45] Then there's what sort of change is needed in the organization, because a platform mindset, as I said, is a level above the product, where you have to align your resources more on the technology side to ensure that the designing of the platform is happening in an appropriate way, and that it's secure and it's scalable enough for what is coming. When you have to transition to a platform, you have to ensure that the usage of your product is high and frequent, so that you can make that bet.

[00:27:15] Then you have to identify the gaps. Amazon doesn't calculate taxes itself, because that's not the only thing they do; their core value exchange is around powering the transactions. So they have to invite partners in terms of delivery and in terms of compliance, because that's not their core job. If there are gaps in your existing product, you can do the same. Salesforce is one of the examples, where they have the AppExchange, and Salesforce invites partners of all sorts so that they can come and build applications around the customer lifecycle, the CRM lifecycle. So you have to identify those gaps and give partners an opportunity to create value. Then you have to ensure that you have appropriate integration guidelines with the help of your developer portal, and align with the development community so that they can build applications for your platform. And of course, customer communication.

Summary

[00:28:09] To summarize: you have to understand what the core value is in the exchange and functions of your product, and what benefit you would be driving if you transition to a platform. Then you have to ensure that you are designing your platform strategy for the long term, not thinking short term, because a platform is a multi-year effort. You will not get results in a quarter or in a year or so. You have to plan at least three to four years in advance for the impacts you will have to absorb once you transition from product to platform.

[00:28:49] There is an important design concept, composite design. In terms of the UI and UX, you have to ensure that whenever you are producing new enhancements to your platform, the same design is carried forward. In the process, it sometimes happens that you acquire a few other companies in a bid to become a platform, but you have to ensure that they are also following the same user guidelines and brand guidelines as the parent product, so that the entire customer experience remains intact and the messaging you are sending across to users remains intact.

[00:29:24] Then you have to define a rollout plan: what sort of enhancements, and what are the variations of your products you will identify and scale your platform to. And again, the most important aspect is the people. You have to ensure that the teams are empowered when the transition is happening, because this transition, no matter how easy I make it sound, is going to be very difficult. That's how I would like to conclude my presentation on scaling products to platforms.

Q&A

[00:29:57] Host: Excellent, thank you, Jay. That was quite a detailed dive into the differences between products and platforms. We don't have much time for questions, but the one thing that piques my interest: you mentioned bringing virality into Avalara, which is a tax compliance platform. I'm intrigued by how you can do virality in a product where privacy and security are probably among the most important aspects.

[00:30:29] Jay: When we talk about virality, as I said, word of mouth is different from virality. Virality is more of a design-related thing, as I said: within the product, how do you ensure that it happens with the different stakeholders that you have? Virality for a B2B SaaS platform is slightly different from a B2C platform. Amazon allows you to share the product you are buying with your friends and family members, and you can share feedback about it. But when you are talking about filing tax returns, virality has to ensure that the adoption of the product is high.

[00:31:10] How do we ensure that? By building in key elements that allow you to share within the team, with the internal stakeholders within the organization, if people are not using it. When we talk about tax compliance, it's not just about one person's job, an individual's job. It involves the entire organization, and within that organization, the more users that come, your finance team, your sales team, everyone, onboarding and using it, the more the overall usage of the platform increases.

[00:31:44] In the case of Salesforce, hypothetically speaking, an organization might buy 100 licenses, but effectively only 20 people are using it, while the organization is paying for 100 users. For some reason or other, adoption of the product is not happening. When you build in virality, you ensure that you are able to invite the internal users, in the case of B2B SaaS, let them know that this is the platform we are using, and enable swift onboarding of the internal users onto the platform, so that it becomes viral. So virality in the case of B2B SaaS is slightly different from the B2C aspect. I hope I answered your question.