The Stages of Platformization

The Stages of Platformization: From Applications to Full-Fledged Platforms

Introduction

The rise of platform-based business models has reshaped industries by enabling scalability, collaboration, and flexibility. While some companies start with application-first approaches and evolve into platforms, others are platform-first from inception. This article explores the origins and stages of platformization, the different paths companies take to become platforms, and the typical evolution stages they encounter on this journey.

Origins of Platform Thinking: Two Paths to Platformization

Platforms typically evolve over time based on both insights from their usage and the associated ROI of platform capabilities. Two primary paths characterize this evolution:

1. Application-First Approach

In this approach, businesses start with a specific product aimed at solving a focused problem. Over time, these companies often expand their offerings to adjacent use cases or target additional user segments. As they grow, certain commonalities in infrastructure or functionalities across their products become evident, often leading to the realization that some elements can be modularized. This modularization marks the beginning of a platform, initially for internal use and eventually, for external consumers.

? Example: AWS initially developed infrastructure tools for internal use but later recognized the value of making these tools available as external products. Similarly, Salesforce expanded beyond CRM into a data cloud platform, enabling businesses to leverage their data across multiple applications.

2. Platform-First Approach

Some companies, however, begin with a clear vision to create a platform from the outset. While convincing stakeholders to invest in building a platform can be challenging, those who recognize the potential scale and versatility of a platform often proceed to build a platform product. By doing so, they not only offer solutions to specific problems but also enable other organizations to leverage their capabilities.

? Example: Twilio built a communications platform that developers could use to integrate SMS, voice, and other communications into their applications, creating a foundational tool for customer engagement from the start.

Stages of a Company’s Platform Evolution

The journey of becoming a platform typically involves several stages:

1. Vertical SaaS Application: Companies initially focus on a specific problem within a vertical, creating a standalone SaaS application that serves a particular use case.

2. Modules: As additional requirements emerge, companies develop modular components to address specific needs across multiple teams or departments.

3. Platform: When these modules become integral and interdependent, the company begins to pivot towards a platform, evolving beyond product silos into a more cohesive infrastructure offering.

Stages of Platform Maturity

1. Services Mode

In the early stages, companies realize that although centralizing and standardizing certain capabilities could make sense, these components aren’t yet ready to be used in a plug-and-play manner. This phase involves collating requirements from different products and consolidating efforts into a single team dedicated to fulfilling these demands.

Primary Goals:

? Aggregate requirements across products to form a unified roadmap.

? Centralize knowledge and capabilities into a single team.

? Develop foundational documentation and focus on scalability.

Challenges:

? Limited resources to address all incoming requests.

? Balancing core development with the support of various teams.

2. Consultation Mode

As the demand for platform capabilities grows, a single team may not suffice to meet business timelines and requirements. At this point, the core platform team begins to enable other teams to extend platform functionality and contribute directly to its growth.

Primary Consumers: Internal teams, primarily backend developers.

Primary Goals:

? Open platform capabilities for use by other internal development teams.

? Improve documentation to support wider usage and autonomy.

? Provide guidance to teams integrating with the platform to ensure consistency.

Challenges:

? Ensuring the platform remains extensible.

? Expanding documentation and reducing the need for one-on-one support.

3. Platform Mode

At this stage, the platform has reached a high degree of maturity, with well-documented, API-driven capabilities that allow other teams to quickly integrate and deploy. It’s now ready for external consumption, as the platform is stable and scalable enough to support developers from customer organizations or third-party providers.

Primary Consumers: Internal teams (both backend and frontend developers) as well as external partners and developers from other organizations.

Primary Goals:

? Ensure ease of integration for both internal and external consumers.

? Establish backward compatibility to support future updates.

? Solidify architecture to meet scalability, reliability, and availability demands.

Challenges:

? Developing a robust and scalable architecture.

? Addressing backward compatibility and meeting non-functional requirements (NFRs).

Conclusion

The journey from a product or application to a platform is a significant transformation that requires foresight, investment, and a clear strategy. Whether starting from an application-first approach or a platform-first vision, companies must progress through various stages of platform maturity to create a scalable and extensible ecosystem. By understanding these stages, businesses can better navigate the complexities of platformization, ultimately creating solutions that serve both internal teams and external consumers effectively.

Each stage in the journey to becoming a platform has distinct challenges and opportunities, and recognizing these can help leaders strategically guide their teams through the transformation. Whether internally focused or poised for external expansion, platforms represent the future of scalable, integrated solutions that drive innovation and competitive advantage.

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