Thinking about Ecosystem vs Platform

Over the past few articles, we've refreshed your memory and hopefully clarified some terms on 2 oft-mentioned technology business concepts: ecosystem and platform. Often used interchangeably, I want to tease them apart; "ecosystem" and "platform" mean different things. While this is not new, understanding this difference is increasingly vital as the complexity of the technology businesses evolves.

Why should you care about the differences between Platform and Ecosystem?

Today's technology industry moves so quickly that it can take a lot of work to keep up.

Is ChatGPT still in single-digit releases? (Kidding, not kidding).

This pace of change can increase the complexity of some concepts, so when we make sweeping statements, we sometimes lose the implications that can help businesses identify opportunities for growth and innovation.

While both concepts are interconnected, they represent different aspects of a company's business model. For example, businesses looking to create new products or services may focus on building an ecosystem of partners and customers. In contrast, those who want to leverage network effects may choose to build a platform that enables third-party developers to create value on top of their infrastructure.

In the moment, it can be challenging to remind yourself to differentiate between ecosystems and platforms because there are common pitfalls. You don't want to charge in and build a platform without a clear value proposition or fail to foster the right ecosystem of partners and customers.

(I know none of you would do this. However, as someone who led ecosystem building - I'm simply saying I have seen it. So, as a cautionary tale, I'm offering an engaging way to remind you.)

Before we dive deeper, let's take a quick refresher.

• Ecosystem unlocks value. We defined it as a complex network of entities that serve the end users for at least one of these purposes: Value Addition, Value Creation, and Value Distribution. In a technology ecosystem, the entities include software developers, hardware manufacturers, service providers, and customers. By bringing these different players together, the ecosystem creates a network effect whereby the value of the ecosystem grows as more users join and engage with it.
• The platform is a multi-sided entity that performs 2 simultaneous roles: provider of a tech architecture and enabler of market intermediation to its users. Platforms provide a set of tools, APIs, and infrastructure that developers can use to build applications and services that run on the platform. Platforms often generate revenue by taking a percentage of the transactions on the platform.

The proof is in examples, so let's examine some differences.

Apple has built a thriving ecosystem. You know the litany of their successes - hardware like the iPhone, iPad, and Mac, software platforms like iOS and macOS, and an App Store that's the gift that keeps on giving in revenue. That's before licensing and accessories. Apple's ecosystem creates customer value by providing a seamless and integrated product and service experience

In contrast, Amazon is an example of a company that has built a successful platform. Amazon's platform includes its cloud computing service, Amazon Web Services (AWS), online marketplace, and fulfillment and logistics services. AWS provides a robust technological infrastructure that allows developers to build and scale their applications quickly and easily. Amazon's marketplace provides market intermediation by connecting buyers and sellers and facilitating transactions.

It should be noted that no one ever confuses these two, so we all know the difference. End of reminder.

So, What comes first? Platform or ecosystem?

It depends!!

You will often hear platforms come first, and the ecosystem develops around them. And plenty of examples out there, like Amazon and Roblox, showcase this as the truth.

However, as you dig deeper, you will encounter cases where ecosystems developed first, and platforms were created to support them.

The example of Linux is a perfect example of where ecosystem was developed first.

In the 1990s, a group of developers collaborated to create a community-driven ecosystem for open-source software, including the Linux operating system. This ecosystem was built on the principles of collaboration, openness, and transparency, and it attracted a community of developers, users, and businesses who contributed to the ecosystem's growth and success.

As the ecosystem grew, the need for a platform to support the community's needs became apparent. Players like Red Hat and other companies brought platforms that provided technical infrastructure, support, and services for the Linux community. They enabled businesses to use Linux more efficiently, opening opportunities for developers to build on top of the ecosystem.

Today, the Linux ecosystem is one of the most successful open-source communities in the world, transforming the technology industry. It's the backbone of many critical systems, including servers, supercomputers, and mobile devices. That ecosystem has also created a vast network of businesses, developers, and users, furthering its growth and success.

AND to confuse this even further........ 
        

There could be enormous value in simultaneously being/building both platform and ecosystem, especially in nascent technology spaces like quantum computing. In such emerging technology fields, there is often a need to create new paradigms and build an entire ecosystem from scratch.

Building the platform and ecosystem together can help create a self-sustaining system supporting the technology's growth and development. By creating a platform that enables developers to build upon it and supports interoperability with other technologies, businesses can encourage the growth of an ecosystem around the technology. This can attract diverse stakeholders, including users, developers, and companies, who can contribute to the ecosystem's growth and development.

It can also help businesses avoid investing too heavily in a single area, creating a more balanced approach to address short-term and long-term needs. That doesn't mean it's easy, but there are times when it's brilliant.

How do you decide to do one or the other or build both simultaneously?

Deciding whether to focus on building a platform or ecosystem first, or building both platform and ecosystem simultaneously is a complex decision with careful consideration of various factors.

Consider…

1. Business goals and objectives: A platform may be the best approach if the primary goal is offering specific services or functionalities. An ecosystem can address a broader support network of multiple services and functionalities.
2. Target audience: A platform may be the best approach if the audience is mainly developers who need a platform to build upon. An ecosystem works better if the audience is end-users who want to access various services and functionalities.
3. Market dynamics: If there are already established platforms in the market, building an ecosystem is your starting point. A platform is the foundation for future ecosystem development and may be the best approach if the market is still emerging.
4. Resources: Building a platform and ecosystem simultaneously requires significant resources, including time, money, and expertise. It's essential to assess whether the business has the necessary resources to execute such a strategy successfully.
5. Risk tolerance: Building a platform and ecosystem simultaneously carries more significant risk. It divides time and attention, even allowing a responsive push and pull. Assess your (or your client's) business's tolerance to and ability to handle heightened levels of risk.

Before deciding, businesses should assess their goals, target audience, market dynamics, available resources, and risk tolerance.

Founders often choose to do both and might be doing less effectively than they'd like. While building both simultaneously may sound appealing, it's essential to carefully assess the risks and challenges associated with such a strategy.

Bottom line: Both platform and ecosystem building are essential for business growth and success in the technology industry, and the approach taken should depend on the specific circumstances and goals of the business.

Posted originally on??Bridgingchasm.com?dedicated to the growers & their obsession with adoption?

Related posts here:

1. What is platform strategy
2. Ecosystem and leading with Value
3. Self sufficient ecosystem

PS: This is an opinion piece and may not reflect my employer’s official views.