kidmercury

The concept of Yin and Yang essentially centers on the idea that there are two complementary but opposing forces that are embodied in all things in the universe. Humanity consists of males and females (opposing but complementary); peace has no definition without war; death is not possible without life; light comes from darkness; the list is infinite.


It is not surprising, then, that in business strategy, there is a yin and yang as well: products and platforms. Products are "things" (goods, services, experiences, etc) that are sold; platforms are the intermediaries that deliver products. True to Yin/Yang form, the two are complementary yet opposing as well; platforms cannot exist without products, and products need platforms to be put into context and to be found.


Let me get quickly to the point: the Internet favors platforms. In fact, I suspect that virtually every Internet niche will come to be dominated by a platform type of company; an intermediary that helps buyers find products. Why? Consider what the Internet has done:

• By making the entire world accessible and easy to communicate with, it has increased the number of accessible products.
• The digitization of many products -- content and software in particular -- has caused supply to be a non-existent factor.
• As a result, product-centric strategies have decreased in value. The real issue now is in finding the best product for you. And that is what a platform does.

The Web 2.0 phenomenon, if we choose to call it that, is largely about recognizing that in an interconnected world like the Internet, every company has, to some extent, the ability to become a platform. Who can you connect? How can you help make meaningful connections that add value to both parties that are being connected? These are the questions that need to be asked.


The image below attempts to conveniently illustrate the product vs. platform paradigm.





Of course, this is by no means an end to product-oriented companies -- just look at the iPod. For many if not most companies, products will still be needed, and will still provide a valuable source of revenue. But with that said, firms that choose to ignore platform capabilities will severely limit themselves, and anyone who is truly aiming for the top of their market needs to be thinking in platform strategies over the long run.


The next article in this series will take a look at how product companies can make the switch to becoming platforms.

Articles in This Series

Products vs. Platforms: The Yin/Yang of Business Strategy
Flippin' the Script: How to Switch from Being a Product to a Platform
Built for Evolution: The Organizational Structure of Platforms
The Future of Platforms: RIP Nations and Corporations