One of the most intriguing challenges for businesses is having sustained success. Hitting the jackpot once, or doing reasonably ok for a couple of years in a row is already an achievement, but when companies and entrepreneurs have large scale, long term success and consistently do better than their peers, then understanding how they do it can be a great learning tool for us.
Michael A. Cusumano, a professor at MIT is one of the few authors that writes in depth about ISV’s (from a product software perspective). For this post, I will be referencing a book he authored named ‘Staying Power’ where he relates six key principles to manage strategy and innovation in an uncertain world. The content of this book describes the struggle going in our target market quite accurately and so, I can really relate to it. Over the next few weeks, I will blog about these six principles, one per post along with a review of my own observations and experience.
The posts will follow the same structure Cusumano outlined in his book to make it easy to follow in case you decide to get a copy of the book for yourself (which I would highly recommend):
- Platforms, not just products
- Services, not just products (or Platforms)
- Capabilities, not just strategy
- Pull, Don’t Just Push
- Scope, not just scale
- Flexibility, Not just efficiency
1. Platforms, not just products
The software industry is a typical product industry. Traditionally, the holy grail of software success has been to create a product that is successful in the market. Once the success is combined with zero cost of making extra copies, real money can be made.
Another interesting perspective of the software industry is viewing it as a total landscape of products, services and complements, and to try and benefit from that entire ecosystem. This is what Cusumano terms as ‘Platforms’. (As opposed to technology platforms)
Software companies that are successful in understanding the network effects of such a platform ecosystem can turn it into their advantage and realize greater success than a single product could ever bring. (Platforms can also work for other industries too btw)
Examples of such platforms are: MS Dynamics and Apple’s ITunes+Ipod/pad/phone offering. What is important in recognizing a platform is to identify product aspects, services aspects and complements around these two. With MS Dynamics you have products (AX and NAV), services (hordes of service providers on MS technology) and complements (ISV’s that have prefab or even a full-fledged Dynamics solutions for sale).
Cusumano sees 4 levels that are important in a platform strategy:
- Scope- This is about what the platform leader is going to do on its own and what is going to be left to the complementors)
- Product Technology (modularity of architecture and openness/accessibility of interfaces and IP)- This is about how easy it is to interface and also how easy/difficult it is to mimick the technology (balance is crucial here)
- Relationships with external complementors This is about how well a company is able to manage/influence the world of complementors around it
- Internal organization This is about how well a company can align its internal and external stakeholders in a favorable manner
I have personally witnessed that all these aspects are indeed factors to deal with in the right manner.
Scope is extremely important. I have seen quite a bit of struggle dealing with this particular aspect. Deciding what to do in-house and what to outsource to a partner is a crucial decision. Sometimes, you may need to start with complements yourself in order to get the platform running, but you need to know when to back out so that you don’t starve your newly found complementors to death: find the balance and you have level 1 under control.
With product technology, even when an invention is very interesting, if it is easy to copy, , then making a profit on it will become extremely hard. At the same time, if it is too complex to interface with, it will become hard to use and subsequently, hard to sell as well.
The relationship aspect is also interesting: it focuses on how well a company is setup to interact, negotiate and work with its network in order to influence decisions and make sure that the platform can thrive. If done well, beautiful things can happen and when it’s not, it can seriously hurt the company.
The aspect of internal organization is about how well a company can set itself up to create a win-win situation whenever possible. It all boils to dealing effectively with conflicts of interest. This has been my own experience at coMakeIT as well: we attempt to remove the conflict of interest between our customers and us by implementing a transparent pricing structure and open calculation. This way, our customers know exactly what they are paying for and where profits are being made. This establishes firm trust for a long-lasting relationship.
Having discussed all the difference aspects, I just want to conclude with this: the key to success is finding the right mix and making it work for the platform that you are trying to become. It is harder to reach success as a platform than it is as a product, but the rewards are also proportionately greater!
In our next post, we will look into the aspect of Services, as one of the complements to products, and an important aspect of staying power.
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