To be or not to be? Positioning products versus platforms in the AI era.

As the founder and CEO of RedLine Advisors, I've worked with numerous software companies grappling with a key positioning question: Should we present ourselves as a comprehensive platform or focus on a more targeted product message? It’s a super important question because the answer will impact everything from competitive differentiation to your technology roadmap.

When answering this age-old question, I like to remind people of a few simple truisms that I have observed over the years.

1. People don’t buy platforms. People buy products.
2. Platform status is bestowed upon you by customers and partners. It is earned over time.
3. Most technology companies think their product is a platform. They are mostly wrong.??

OK. Now that I have hurled those thunderbolts down from Mt. Olympus ;-) let’s explore the pros and cons of each approach.

The Platform Play: Pros and Cons

Positioning as a platform provider can be alluring, especially for companies with broad capabilities and ambitious growth plans. The benefits include:

1. Stickiness - Platforms can foster developer communities, creating a rich ecosystem that's hard for competitors to replicate. Apple and Salesforce are great examples.
2. Network effects - As more users and developers join the platform, its value increases for everyone, creating a self-reinforcing growth cycle.
3. Cross-sell and upsell - A platform approach opens doors for cross-selling and upselling additional features and services over time. Microsoft is a super example on this front.
4. Innovation - With an open ecosystem, platforms can benefit from external innovation, driving faster feature development.

However, platform positioning also comes with challenges:

1. Complexity -? Articulating the value of a platform can be difficult and confusing for prospects.
2. Longer sales cycles - Platform decisions involve multiple stakeholders and thoughtful evaluation.
3. Resource utilization - Building and maintaining a platform requires significant investment in development and support.
4. Competitive landscape - You will be competing against 800 pound gorillas - i.e. the kind of companies I mentioned above.

The Product Play: Pros and Cons

Focused product positioning can offer several distinct advantages:

1. Clarity - It's easier to communicate how you solve a very specific problem better than anyone else.
2. Speed - A more targeted product can be developed and launched quickly.
3. Expertise - Specialization can position you as the “go-to” expert in a particular domain.
4. Agility - Simpler, more focused products can adapt more quickly to market changes and customer feedback, aka pivoting.

But this approach also has its drawbacks:

1. Growth potential - A narrow focus may cap your perceived total addressable market.?
2. Increased competition - Larger companies can potentially replicate your offering as a feature.
3. Missed opportunities - The business may overlook adjacent problems your technology could solve.
4. Risky business - Enterprise buyers may view point solutions as riskier or less strategic investments.

Navigating the Decision in the AI Era

For platform plays, AI can serve as a unifying force, powering various features and creating a more intelligent, adaptive ecosystem. But, it also increases the complexity of your offering and may require significant ongoing investment to stay competitive. It is a long, winding, and expensive road.

Product-focused companies can use AI to deliver hyper-specialized, best-in-class solutions for specific problems. This approach allows for rapid iteration and the ability to showcase concrete, AI-driven outcomes.?

The challenge lies in continuously innovating to stay ahead as AI capabilities become more commoditized. And oh yeah, the 800 pound gorillas will also enter the fray with their pre-existing platforms - hoping to kill or gobble up the competition.?

So now what?

Well here’s the thing. The product approach has a “hybrid mode” that enables companies to grow into their desired platform status over time. For example, even a very niche technology business can remain laser-focused on their core product while also providing open APIs and integration capabilities to accommodate extensibility and customization. So you can architect for the future without needing to change your fundamental business strategy or positioning.?

Conversely, you don’t have that same flexibility if you come right out of the gate and swing for the fences with the platform approach. Once you make that bet you’re committed. It’s like over-cooking a steak. There is no going back. I’ve watched many companies try…and many companies fail.

Ultimately, the right positioning for your business depends on your company's strengths, market dynamics, and long-term vision. At RedLine Advisors, we recommend a thoughtful analysis of your technological capabilities, market opportunity, and competitive landscape before committing to either path. In many cases, a hybrid approach - starting with a focused product and gradually expanding into a platform - may offer the best of both worlds.

Regardless of your choice, clear, compelling messaging that resonates with your target audience remains crucial. In the AI era, it's not just about what your software does, but how it uniquely solves problems and drives value in a rapidly changing technological landscape. RedLine Advisors can serve as your guide on this perilous journey. We provide strategic guidance and a methodology for developing killer messaging and positioning that can help you “out-swim” the sharks.