The Modern-Day Brand as Platform – A VC’s Perspective, Part I

Anthony Tjan August, 23rd, 2019

From my earliest days watching and participating in the commercialization of the Internet, there has been perhaps no term more popular in its use (and misuse) than “platform.” Prior to the contemporary digital era and widespread adoption of cloud computing, the metaphor of platform most often connoted itself in technology with the combination of hardware linked to an operating system that enabled others in an ecosystem to create software for that “platform.”

But over the past decade, the platform parlance within my world of venture investing has been associated more with business models and systems that embed potential network effects such as two-sided markets (e.g. Amazon and Alibaba), sharing / access economies (e.g. Uber, Zipcar, and Airbnb) or online social spaces (Facebook, WhatsApp and Instagram). More recently the platform term has come into vogue even for venture firms themselves  (see Forbes article) seeking to brand themselves as something beyond capital.  “Directors of Platform” for venture firms have represent another new new thing or at least the new new role emphasizing value-add services such as team-building, marketing support, and other company creation content and events. The “platform job” is to provide not just money, but formalize what some of the best performing VC firms have known and done for years – just without the label – of providing a human capital ecosystem (i.e. a platform) from which founders can accelerate their company via relevant relationships and knowledge.

But my biggest area of interest is the role of platform thinking and strategy as it applies to building a new generation of consumer brands, including digital native brands, innovative tech-enabled retail and experiential lifestyle services. While the concept of a brand platform has been in academic marketing circles and brand agencies for many years, it has been generally used to describe very literally a brand’s identity and positioning versus a more holistic mindset and way of doing business. Today’s platform businesses are not just a thing, but rather a cultural and business shift from: the brand as the positioning, to brand as the company, to brand as the platform.

My focus over a series of articles over the coming months, will be to discuss some of the implications of this shift and provide some examples of brand platforms and their strategic approaches. It is important to note that my perspective comes from a bias as an entrepreneur and venture investor versus a brand or marketing strategist and therefore I am trying to learn and understand how this shift towards platform thinking and strategy applies ultimately to positively altering categories in industries, changing end-user behavior and creating cultural and financial value. What and who are some of these contemporary brand platform players? Why are they so valuable? And, how are they built and sustained? Each piece in this series will look to tackle one of these questions and this first installment examines establishing a baseline and theory of the case for what it means to have brand platform.

Examples of Brand Platforms

A clear reason why businesses are re-architecting their way towards becoming more platform-oriented and why more start-ups are birthing platform brands is the presumed competitive advantages and value creation potential that comes with it. The fact is that the most valuable company in the world, Apple, is the epitome of a brand platform and its FAANG (Facebook, Apple, Amazon, Netflix and Google) siblings are also fundamentally platform business models. There is even a relatively new index fund of companies based around platform models which I don’t necessarily subscribe to as an idea (because having the strategy doesn’t mean you have the execution capabilities), but has had nonetheless, over the course of almost a year, slightly better than S+P performance.

In the private investing world, the multiples ascribed to platform brands and business models, especially with demonstrated execution tend to be higher than conventional ones. Part of the thesis for these higher multiples is that positive network effects within platform businesses create greater long-term fixed cost leverage and a structural advantage in terms of a more defensible moat. But unpacking what the criteria is to be considered a platform company or brand feels more nebulous and ethereal. In many ways, platform brands and businesses are easier to identify when you see them than to define them a priori.

Like many things we call new, platform businesses are actually not new at all. Rather, they have been around and practiced for some time in both incumbent businesses or often even in nature (more on this in a minute). What is new is less the principle or substance of the thinking, than the moniker, framework and application.  Take three pioneering consumer brands of Apple, Nike and Starbucks, without even knowing a formal definition of what it means to be a platform, it feels natural to describe each as the Apple Brand Platform, the Nike Brand Platform, or the Starbucks Brand Platform. The same is true for some path-breaking brands like Glossier, Sweetgreen, Soul Cycle and Peloton earning a right for that sought-after platform designation. So how can we get to some general definition of what it means to be a platform? 

General Platform Definition – Mr. Webster and Co-Evolution of Oxpeckers and Zebras

When researching a relatively novel subject, I always find it useful to go back to elementary-school essay writing tactics and start with Webster who since 1828 has gotten most things right: a platform according to the master of dictionaries is a plan or design; a set of principles on which a group stands; or a raised horizontal surface on which one stands.  At the highest level, I believe that these definitional principles hold true across the taxonomy of platforms.  There is a common and important theme that connects the use of platform whether it is used for marketplaces, technology stacks, social media, the FAANG’s, or my principal area of interest in contemporary consumer brands (e.g. Glossier, Peloton, Sweetgreen) is that they have an ability and an “edge” in how they create the right design, plan and set of principles that allow others to positively interact and participate on their platform. My formal definition of a business and brand platform strategy and model is that it is one that can positively facilitate a set of principles and interactions that mutually benefit stakeholders across a given ecosystem and in doing so creates self-amplifying engagement or brand loops amongst its participants.  Put simply, my fundamental thesis behind what really creates the underlying value of a brand platform is its ability to encourage high quality and relevant connectivity and relationships.   

In college I studied biology and was fortunate enough to be taught by some of the most iconic professors in the field of evolutionary biology with lectures that remain vivid even today in my mind. Evolutionary biology reminds me that nature often provides us with the lessons of what works sustainably, simply and elegantly in the world of business.  After all, mother nature has had a longtime to test and evolve many things. This is an investment philosophy being popularized by Katherine Collins of Putman Investments and Honeybee Capital. Specifically, Collins advocates for a more holistic view of investing – to not forgo the analytics and spreadsheets of left-brain thinking, but to equally ask the question of “what would mother nature do?”

Business and brand platforms practice, in my view, one of most important evolutionary biology concepts of mutualism and in particular, mutualistic symbiosis – the concept whereby individuals of different species benefit one another by the nature and association of their relationship to one another. The simplest example of this is between bees and flowers where bees seek the nectar of flowers for food, but in doing so get pollen stuck on their hairs, which they end up transporting as they fly to another flower, thus facilitating pollination. The bees get food, and flowers get to reproduce. 

Another great example of mutualistic symbiosis from nature is oxpecker birds which land on zebras to eat ticks and parasites as food, helping to keep the zebras healthy while finding nutrition for themselves.  In each of these cases, very different species have ended up co-evolving together and finding increasing ways of supporting each other. In the case of the oxpecker and zebra, the oxpecker has also evolved today to become a warning bell flying up and shrilling when they sense danger for their symbiotic zebra partner. The platform lesson from nature and biology is this: there needs to be a co-evolution and mindset directed towards supporting one another across a given ecosystem. 

In many ways, producers and consumers of a business system can be thought of as the equivalent of different biological species seeking ways to interact – these interactions may be neutral, negative or positive. I posit that the best platforms foster a symbiotic relationship that amplifies their reliance on one another and in doing so, not only co-evolve the norms and principles of that system, but create as a positive by-product the network effects that lead to greater stakeholder and financial value.  How did this biological principle find its way into the business world? The biggest change in the past five years that has allowed businesses to do this is two-fold: first, a major psychographic and generational shift in the mindset and behavior of the new millennial consumer being more conscious, more purpose-driven, demanding greater transparency and authenticity in what he or she buys and second, the ability for technology to enable more direct end-user relationships, especially the ubiquity of it as a persistent always on, always there mobile device that is truly becoming the “remote control of life.”

Digital platforms such as Uber or Airbnb stress not owning the product, but rather owning just the platform that can facilitate the supply and demand relationships between hosts and guests. They have training programs and tools to help enable better quality of interactions between the supply and demand side – from a two-way self-regulating rating system to teaching hosts how to deliver superstar hospitality by designing with empathy and striving for a “10 star experience.”  Similarly, for social media platforms, they do not own a product per se, but instead have a platform for creating connections that lead to mutually-created, derivative and original forms of new user-generated content. But for modern day physical consumer brands that do own a product or service as a core part of their brand offering, the platform thinking is a little different but no less valuable (and arguably more valuable because of the ownership of the product or service allows for brand experience and quality control). The biggest mindset and strategy shift for the Glossier, Peloton and Sweetgreen’s of the world is that their product offering is something well beyond the obvious physical good or service (i.e. beyond makeup, beyond contemporary exercise bikes and beyond salads) – in each of those cases the core brand offering should be thought of as just one key component of the overall content for the ecosystem – to facilitate positive ecosystem relationships and reinforce a brand’s purpose.  

Overall, for brand platform thinkers and builders, the components that go into making that platform – its brand offering (the commerce of what it does), the content or media supporting its education and sale, the physical locations in which the goods or services are distributed and sold (the channels) , cannot be thought of as unitary components. It is the cross-platform value that is the competitive edge and moat. To make this point clear, in the old world of brand retailing the value of a business might be derived principally from just looking at the individual unit economics or gross margin of a product – that is of course still critical, but the value of a platform brand is to think of it as a system where your objective is to have the whole be greater than the sum of the parts.

Consider the selective retail locations of Glossier – are those separate omni-channel divisions or part of a showroom brand-building system or both? As described in a recent Business of Fashion article, it could be argued that one of the most important new retail and brand metrics is to rethink the store as a form factor of media.  The article posits a thought-experiment, is there more impression value with a 15 second online video or a 20 minute in store experience? Brand platform builders are creating strategies that seek greater internal synergies and greater control of the end-to-end client journey from point of purchase consideration to post-purchase engagement. Wherever they can disintermediate an “agent of their brand” (e.g. a channel or media platform) they would with all factors being equal, try to do so – in an effort to create more direct and higher quality of relationships with their stakeholders and increase synergistic value in their ecosystem.

One of the hallmarks of brand platform companies is that they have a self-amplifying brand loop through multiple touch points of commerce (what they actually sell), content (organically generated and validated), channels (DTC and curated distribution), collaborations (with mutually simpatico brands that elevate) and communities (ultimately engagement, especially with super-fan end-users). Sometimes it feels like today that every person sees themselves as brand content in search a community seeking commerce in search of a collab! So, isn’t this what all consumer branded companies have done for years? Yes and no – while pioneers like Nike were the earliest to embed some of these platform practices, the biggest difference  today is the degree of control that the new guard of brand platforms are trying to have with the totality of the client experience and journey - especially across the holy trinity of commerce, content and community.

In addition to the commerce, content and community there is the important fourth leg of channel that has been profoundly disrupted with the rise of a new generation of DTC brand platforms. In the pre-platform world, brand owners produced a product and relied on other channels and distribution platforms for their marketing and sales. But early DTC digital native brands like Bonobos, Warby Parker, and Harry’s demonstrated an ability to have direct and greater influence and control over their brand ecosystems and better relationships with their end-users as they eschewed traditional modes of launching and distributing their brand offerings. In the boldest cases, players such as Glossier and Sweetgreen are now pushing new visions for even greater community engagement and control by suggesting that they are looking towards a future strategy to eventually disintermediate the social platforms that helped get them to where they are (think a la Apple and its CEO Tim Cook’s deep-rooted belief to control the technology and context in which Apple presents itself – it is in many ways its own closed brand loop).  But whatever degree of control and self-agency that brand platforms have of their commerce, content, community and channels, in every case of a successful brand platform, they all have started with the sine que non of authentic purpose and values.  The authenticity and quality of relationships correlate to the degree to which there is a common purpose and set of values bringing them together in the first place.

It All Starts with Purpose and Values

Starting nearly 20 years ago, I credit my business partner Mats Lederhausen for teaching me more about purpose-driven brands than anyone else – long before it became strategically accepted as not a nice-to-have, but a need-to-have imperative to long-term competitiveness.  Mats through his career and much of his philanthropic energies (as Chair of the BSR, Business Social Responsibility non-profit) has practiced this purpose-driven philosophy as much or more than anyone I know. It is a philosophy that emphasizes going deeper into the relevance and essence of a brand and consistently living and breathing it through values and cultural narratives, because it matters, really matters.  

When we talk about the purpose of a brand, we are talking about its calling beyond its product. As Mats likes to say, “purpose before product and product before profit.” For brands that understand this, they begin with a big purpose-driven vision that can not only alter a category, but equally positively shift culture and move the world forward. This purpose then is anchored by a set of committed and immutable values that serve as a river bank of principles to guide companies towards where they are trying to go.  With the right purpose and values, a company can consistently make the right cultural and brand decisions and has a prioritizing set of north star principles through which to view the world and guide business.

Today’s consumers, especially Gen Y millennials – are far more likely to buy a product or service if they feel an affinity to an authentic purpose and its associated values. A variety of research we have done at Cue Ball has shown that this can be as high as 66 percent more likely for purpose-driven, sustainable brands and companies with a super clear “why” that goes beyond just making money. As reported by the New York Times, the Business Round Table that comprises of the world’s top CEOs has formally declared in a statement that the purpose of the corporation needs to go beyond shareholder primacy. This is something that the best global brands have always understood. 

In Simon Sinek’s now classic TED Talk on “starting with why” – he powerfully shows how Apple has always had an intrinsic why and purpose to defy the status quo – to think different and make the world’s best products that support that purpose is the heart of Apple. Nike exemplified its purpose of making everybody an athlete and bringing inspiration and innovation to them through one of the most celebrated slogans – Just Do It. For Sweetgreen it is to inspire healthier communities by connecting people to real food and for Peloton is empowering people to be the best version of themselves anywhere, anytime. When companies get their purpose and why right, they are connecting emotionally – customers, as Sinek puts it, can “feel it is right.”

Today at our venture firm, we won’t invest behind a company whether it is consumer-driven or enterprise-driven if we cannot get a clear sense of the founders’ purpose. When I think of investments like Roti (a company that Mats co-founded) - it has a clear purpose all about food that loves you back or when I consider one of our founding investments MiniLuxe – a brand platform that seeks to Starbuck the nail salon, I have seen and heard the consumer narratives that support its purpose of making self-care an everyday luxury in a clean and conscious way.  The company has a vision of using self-care to empower confidence, creativity and connectivity in its team members, clients and communities (especially for women), one mini-moment at a time. I only fully understood this when I once greeted a client who gave effusive thanks not just for providing MiniLuxe as a place to get her nails done, but a place where she as a single mom who had a job interview could have a “mini-moment” of self-care and self-confidence. Purpose gets lived through the stories and vignettes of end-users’ interactions with the brand across its ecosystem. As per an article by Accenture on purpose-driven brands, the purpose behind a brand platform always has to express its deepest essence through an authentically, human, creative and progressive manner.

This why, this soul, this mission behind businesses is not just something soft but is key to the most commercially successful businesses today and certainly the starting point for any brand platform. Why? Because people don’t buy just things. They buy feelings. And because the very core of brand platforms is to have positive stakeholder engagement, you need purpose to fuel that investment of time and energy.  The best brand offerings today have something not just of utility and function but something that extends to the emotional and social realm. As Jeff Fromm, the President of FutureCast has shared in a Forbes interview this year, if you don’t have that authentic purpose in this era of digital transparency the spend will go elsewhere.

What Purpose gives you Permission to Do

An authentic and human-centric purpose offers permission and potential to go beyond being just a company towards having the almost cultish culture of a brand platform. Real authentic engagement and self-amplifying ecosystem interaction stem from stakeholders seeing themselves in the mirror of a brand platform’s purpose and values.  Again, the value of a platform rises with the quality of ecosystem interaction. With a clear purpose, the other components and aspects of a brand platform are supporting pillars and amplifiers and fall into place more easily.  Recapping, these components are:

·        The Brand Offering aka “Product”– this is the “commerce” of what you do. The physical product or service that you actually sell but that you understand is only part of the content that people are buying into. The best brand offerings connect not just to fulfil functional needs, but have purpose-driven, intangible emotional and social attributes that create aspiration and an affinity of belonging to something that matters. In the very best cases, they empower consumers to buy into not just a product but into a movement. For MiniLuxe, as an example, it is not just selling and elevating the nail care experience, but elevating it to a self-care movement that is about clean and ethical beauty and that helps create economic mobility for what has been historically an exploited class of workers often using toxic products in poor working conditions.

·        The Brand Content – it is clear today that the new generation of brand platforms are using a combination of controlled narrative for their own content-driven marketing (think Goop) and are focused on organically validated digital content – especially user-generated content from their super-fans. While influencer and ambassador partners are still critical towards the online content strategies of brand platforms, increasingly the quantity of social followers is being balanced against the quality of them. Buying influencers is the modern-day equivalent of hiring a “talking head” and today’s consumer is much too sophisticated to fall for that over time. This does not mean that they can’t be helpful, it is just much better when there is organic validation where these influencers actually like your brand offering rather than being paid to like it. The trend towards more authentic micro-influencers, true experts related to the offering and super-fans that are warriors of your purpose.

When you have authentic and content that connects, what is interesting is that you do not need to begin with product. It often does start there, but it can also start with content and community.  Emily Weiss, founder of Glossier, wanted to provide make up advice that sounded like it was coming from a friend and in 2010 started a blog, Into the Gloss while she was working at Vogue. Her voice and storytelling were the foundation for what eventually led to cult beauty products and a brand platform that is now valued at over a $1 billion. Today her most powerful advocates for the brand come from the user generated content of Glossier’s most ardent consumers who equally provide critical feedback loops for developing new product offerings.

·        The Brand Community and Ecosystem Engagement – if the baseline for brands today is to have a great product and content supporting it, the goal of those two things has to be to enhance engagement within the ecosystem and community that surrounds those things. Weiss of Glossier has opened up headquarters to the public, “the lifeblood of our company is interacting with our customers,” she says. Glossier from its earliest days is also known for its hosting of events including some pretty chic rooftop fetes. A similar strategy has been part of Sweetgreen in that it too has hired event managers within local communities to get closer to their user and on the supply side they have made it a point to get to know their farmers and tailor those stories into the local design of their stores – national and global brand standards, but with punctuated points of local and community-driven engagement and identity. In the end, it goes back to my general definition of all platforms – in their steady and successful state, they are facilitating positive relationships and engagement across the community and disintermediating past agents of those roles. That is to say - such brands have direct and deep access and engagement with their stakeholders and do everything possible to own the “context” of that engagement. Some of the newest crop of brand players are even pushing direct ownership to be part of another buzzword of an expanded platform - the “circular economy” where consumers and producers are supporting each other directly in the production, recycling / upcycling of goods. In places where it is perhaps one level down from this, but not any less impactful is where there are collaborative opportunities with kindred brands or “co-production” opportunities with end-users (consumers are more than focus groups for positioning, but a virtual product development partner).

It is clear that when you are building a real brand community that the real-world matters. It is just harder for a purpose-driven brand to have a human element if it resides exclusively in the digital world. Nike got this right early with meet-up runs at their flagship locations and bringing your end-users together in some form of convening is a powerful brand statement. Human-to-human interactions are key to brand platform building and even the most ardent digital native brands have learned that it is hard to create a complete experience if it is only online. In fact, the central strategic approach of these brand platforms is to see how they can collapse commerce, content and community across physical and digital environments.

I consider one of our most recent investments in Haute Hijab a great example of converging commerce, content and community across the online and offline world.  Haute Hijab is a digital native brand and modern-day women-led and focused modest fashion company that is changing the cultural narrative and assumptions around contemporary Muslim women by empowering them to purchase a wide range of self-expressive hijabs. When Haute Hijab and its founder Melanie Elturk traveled to Dearborn, Michigan to meet with a subsegment of its most loyal hijab and head-scarf users, there was a fervor of excitement and feeling amongst the group that they were truly part of building something special. For Melanie, this was much more than the equivalent of a travelling “trunk show” or appearance event, it was a moment of organic gratitude, connection and feedback from those who love the brand the most in a very human real-world environment.  It is no surprise that Melanie is one of the most successful early entrepreneurs we have backed in terms of engaging with a community. Beyond the physical and human interactions, Haute Hijab and Melanie have a social following of nearly 500,000 her platforms, organically and authentically generated.  To put this in perspective, as a seed-stage investment she has garnered about 15 percent of the Instagram presence followership as Glossier. With such end-user super-fan engagement, you begin to rethink your product development (because of deeper insights) and how much of your marketing spend should be on media versus ambassadors behind your purpose (more on this in a future post on super-fans and brand platforms). If Glossier started with content to launch a brand platform, Melanie is garnering the power of her community to begin owning her own emerging platform.

Finally, I also cannot help but think of iconic fashion entrepreneur, Tory Burch (disclosure: I sit on the Board of her Tory Burch Foundation). When I think in terms of people who get brand platforms, Tory was one of the first to embrace both company-owned locations to showcase her brand but equally and contemporaneously take on e-commerce from her founding days, before DTC was an obvious thing to do.  Her thinking and strategy have always been platform-oriented which is to own the commerce, content and community of her brand and then deliver as much of that comprehensive Tory Burch user experience as much as possible in an end to end way. Each interaction with her brand always reinforces the underlying purpose behind her company – which was to start a foundation that was about women “embracing their ambition.” Ultimately, when you get platforms right, you are facilitating and feeling the positive relationships in an ecosystem that feed off of each other. Last year, for example, Tory Burch hosted a community-building salon series during International Women’s Week to discuss how we can empower the ambition of women entrepreneurs.  The positive emotional and social energy that was generated amplified not just the mission of her foundation but towards supporting what the brand stands for in its for-profit endeavors.  One of the most beautiful things that can happen is when platform as a commerce brand can expand its reach and movement to the community of a foundation that is seamlessly integrated.  All of these examples emphasize how owning the context of your entire brand experience in a holistic, omni-channel way enhances value through positive human-to-human interactions across the platform.

Summary and Next Posts

The mindset and strategy of a brand platform player is one that always starts with purpose and how that purpose can serve its stakeholders. The best platform players therefore work to maniacally understand their constituent base not as a set of customers, but as an audience of super-fans and an ecosystem of stakeholders.  They represent their own mutualistically symbiotic systems that would make nature proud. A platform brand becomes a self-organizing purpose-driven community where value accrues as more positively interactions are created.  The best brand platform builders do this by authentically finding ways to express and reinforce their purpose at every node and touchpoint of the participants in their ecosystem. When this reaches the minimum critical tipping point – the true prize of a brand platform kicks in – the direct and indirect network effects that create a self-amplifying flywheel for the brand, or what I refer to as self-generating brand loops.  Like nature, it becomes self-sustaining.

That the real value of brand platforms is inextricably linked to the quality of the relationships that it helps facilitate and create should not be too surprising. The American psychiatrist and Harvard Professor, Dr. Robert Waldinger and Director of the Laboratory of Adult Development at Massachusetts General Hospital,  oversees the longest study (over 75 years) tracking what leads to greater happiness and better health and well-being. The findings of the study point to one simple conclusion:  no other factor drives our quality of life and happiness than the quality of our relationships. People who live longer and happier deeper and more meaningful relationships in their lives. Brand platforms that help create deeper and more authentic relationships are a light and living version of this study in the commercial world – where end-user delight comes from feeling more connected and relevant to the purpose and people in the brand ecosystem. No, brand platforms won’t necessarily help us live longer or make us healthier, but the underlying premise that we want to be more holistically and mutualistically connected with a sense of belonging to a group with common values and common standards is just human nature.

In future posts on brand platforms, I will discuss the role of Super-fans and Hero Products; why omni-channel is key to the future of brand platforms, and also talk on the critical role that technology is playing to reframe and enable traditional brand products and service retailing into next generation end-to-end platform plays.