The Wrong way to Build a Startup Technology Platform

Technology Platforms have become instrumental for many tech companies to develop innovative products and maintain competitive advantage. However, there remains ambiguity around what constitutes a true technology platform.

What is a Platform?

Some definitions focus on optimizing investments across product portfolios, while others emphasize the strategic management of technological competencies. There are also distinctions drawn with product platforms, industry platforms, and multi-sided platforms . Though that's a follow-on article that I'll write in the future.

In practice, the term technology platform is used very loosely to describe anything from an operating system to a software application. But without a clear definition, it's hard to evaluate platform capabilities promised by tech vendors.

I define a technology platform as a synergistic group of technologies forming a foundation to develop derivative products. The combined effects are greater than the sum of individual technologies. It's an interconnected web of knowledge and artifacts, not just a modular stack.

This differentiation is key as companies expand into broader platforms from initial applications. With a nuanced understanding, we can better examine those journeys and challenges.

Going from SaaS to PaaS

Every startup these days starts in the Cloud. SaaS is the objective for a solution or application they are creating to meet a niche. Planning ahead to build out a broader platform to form a PaaS can provide optionality and a safety net of agility, to promote future growth is a great thing. However, product teams must be thoughtful in finding the right product-market fit and gradually expanding the platform.

It's tempting to do this all at once, but there are many steps along the way to a PaaS, and eventually a platform that has a full Platform ecosystem.

Quick Primer of IaaS vs SaaS vs PaaS

Before we continue, here's a quick primer ihe context of cloud computing of the traditional 3 types of platforms: Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS).

• IaaS provides the infrastructure such as virtual machines and other resources like virtual-machine disk image library, block and file-based storage, firewalls, load balancers, IP addresses, virtual local area networks etc.
• PaaS provides the runtime environment for applications, development and deployment tools, etc. It is used to develop web and mobile applications using the provided platform and tools.
• SaaS model allows to provide software applications as a service to the end users. It refers to a method for delivering software applications over the Internet, on demand and typically on a subscription basis.

The Siren call of a PaaS

Expanding beyond a single application into a larger PaaS can benefit startups in many ways:

• Increase stickiness by cross-selling additional modules
• Capture more value from power users willing to pay for premium capabilities
• Benefit from economies of scale in infrastructure and development
• Leverage network effects as the ecosystem grows

Salesforce is one of the best success stories of this approach. It started as a CRM SaaS app (now Sales Cloud) and slowly expanded into a broader customer engagement platform including sales, service, marketing, commerce and more. While at the same time releasing a PaaS in Force.com, as it was named back then - with this seminal white paper , and launching the Salesforce AppXchange .

Focus or PaaS? Risks and Challenges

For mere startup mortals just starting out, a form of "platform thinking" also comes with risks that leadership and product teams must mitigate:

• Fragmenting focus from delivering a stellar core application
• Increasing complexity across all customer-facing touchpoints
• Lengthy time to value realization as the platform develops
• Never reaching critical mass if core value proposition is not fulfilled

You Build it, they will NOT necessarily Come

A major pitfall is creating a technologically perfect platform without achieving correct product-market fit. "If you build it, they will come." never works out for Technology-led Product and Engineering teams that fall in love with leveraging the latest capabilities like Generative AI , while not focusing on the acute pain point for customers.

"The great thing is you built a platform. The bad thing is you built a platform."

Without focused utility, a generic platform won't gain initial adoption. Partial solutions only create partial interest.

Salesforce avoided these pitfalls by maintaining CRM as the core focus early on while methodically expanding into complementary capabilities via strategic acquisitions and in-house development.

Expanding the Platform: Organic vs. Inorganic Growth

Every startup, depending on the VC backing and equity or funds they have at their disposal can expand their platform through:

• Organic product development
• Mergers and acquisitions

Organic expansion allows for tight integration and alignment with the core platform strategy. However, development cycles can be lengthy.

"Don't lose sight of the core value prop as you add more capabilities. Sometimes less is more when it comes to platforms."

Acquisitions provide quicker access to new capabilities and customer bases. But integrating disparate technologies poses challenges and risks diluting the central value proposition.

"Acquiring capabilities is faster but plan for 6x more integration effort than you expect. And align engineering teams early."

Salesforce has effectively pursued a hybrid approach, blending strategic acquisitions like MuleSoft, Tableau, Slack and many more with in-house innovation.

You can take a walk through the official history of Salesforce to the present day on their website here

Building a Partner Ecosystem

Partnerships are key for bringing complementary solutions to the platform and growing the ecosystem. But early-stage platforms face a chicken-and-egg problem attracting partners before reaching scale.

"Opening up our platform via APIs is powerful, but be ready for the support burden. Take a measured approach."

Platform providers must demonstrate enough value and momentum for partners to invest in integration and joint go-to-market initiatives. This requires building evangelists across potential partners through developer outreach and support.

Best Practices for the Product Marketing (PMM) and Sales Teams

As previously mentioned, it's crucial for startups to get a handle on how they market and sell their products, focusing on achieving PMF. Anthony Pierri ?? and Robert Kaminski ?? principals of FletchPMM produce some of the best guidance for product positioning, marketing and sales strategy available today on LinkedIn. I strongly suggest you follow them.

The diagram above from this LinkedIn post by Anthony eloquently describes a powerful approach

Best Practices for the Product (PM) Team

There's a lot more to consider when building out and offering a PaaS. Most startups are better off executing on a SaaS strategy for product-market fit . The steps of which also include defining and going beyond TAM analysis . Creating a platform as the foundation, and then gradually evolving towards PaaS. Some best practices for product managers overseeing platform expansion that I've executed upon in my career include:

• Execute on the basics first of your core offering. Get the process, from inception to product launch correct , to benefit from efficiency, quality and repeatability
• Ensure the product vision is clear, and that you have cross-functional buy-in and trust by instituting a clear and transparent product prioritization framework
• Institute customer advisory boards and user testing for new capabilities
• Create innovation jams to ideate on strategic growth areas
• Develop frameworks for determining open vs closed approach by capability
• Model pricing changes as platform expands and diversifies
• Design bundled packages and partnerships to promote the broader platform using this guide
• Establish metrics and observability into feature-level engagement
• Maintain consistent UX and seamless interoperability as platform grows
• All this while aligning with your company leadership's North Star and vision

Is the Juice worth the Squeeze?

For SaaS startups, taking a measured approach to platform building is essential. Keeping the core user value proposition front and center throughout expansion maximizes the odds of success.

While the risks are real, the rewards can be immense in terms of product stickiness, efficiency, and ecosystem value creation. With robust planning and execution, product teams can safely navigate the journey from point solution to integrated platform.

Finally, startups are hard! Don't kill yourself trying to build a platform. #workwiser and live your best life . And as ever, if you found this useful, please comment share, or reach out if you'd like to connect.