Product Vs Services Vs Platforms

Most technology businesses fall in one of the following three categories:

1. Products
2. Services
3. Platforms

Products

Products are finite games. You are building something completely before shipping it. The industrial revolution was all about products. Softwares used to be products till Internet came along. The Internet is all about services. And though you can call your SaaS a product the way it works is actually service. Most products today are hardware products.

Products have a high barrier to entry despite the fact that the Internet has removed most of the distribution challenges.

Services

Services are infinite games. You are not aiming to build something complete but rather your focus in on shipping fast and then iterating over it. Like I said above most Internet businesses are services. They remain an easy entry business but success barrier is still high.

Platforms

While products and services seem different. In a way they are same. In both cases, you have to build something and then wait for users to buy your product or use your service. For a platform, you need other companies/developers to build on top of your product/service. Of course, you need a product or service first and a critical mass of users second in order to stand a chance of building a platform.

Let me try to give you some examples you are already familiar with. Apple is a product company. All their efforts concentrate around making one product better than anything else. It can be a phone, tablet or a laptop. They have services and that business is growing. But it’s capped by the number of hardware devices they sell. Services themselves don’t mean much to them. What’s iCloud without an iPhone? Essentially nothing. And that’s because they are a product company.

Products need differentiation. Apple differentiates on design and user experience. Samsung uses their marketing and distribution muscles for leverage.

Google is a services company. What they are building needs continuous iterations to be useful. Imagine one-day google.com stops crawling websites. How useful will that be in next year or even month? Also, services need to be everywhere. Google doesn’t discriminate what device you are using to search the web. For them, iPhone, Samsung, Pixel, Chromebook; all are equal. Two exceptions here:

1) In the early days of Android, they tried to prioritize their services for the said platform. That was a mistake which they realized a couple of years ago.

2) They are trying to build Pixel a product that’s differentiated by Google Assistant. And that makes sense because unlike search, Google Assistant does not have a business model of its own.

Much like Apple, Google champions user experience. Facebook prioritizes engagement over user experience.

Platforms are toughest to build but they last longer. They create a vicious cycle which is hard to break. Developers follow users and users are where most apps are. Apple apps store is a platform. Although it’s massive in actual number it’s vulnerable. It’s dependent on one device i.e. iPhone—for the most part. If somehow iPhone becomes irrelevant everything will fall apart. But even for that to happen we need 5-10 years. Google’s play store is more powerful in that regard because it’s not dependent on any one device or vendor. But it has a weak business model.

Amazon is the best platform company in the world. Not only everything they do is essentially build a platform, the entire company functions as a platform. Every division is in service to every other so on and so forth. Amazon retail is the biggest customer of AWS.

Why is all this important? A fundamental mistake most startups make is not to answer this question. Figuring out if you are building a service, product or platform enables you to:

1) Determine your business model. As hard as it is to build a product/service, nailing your business model remains the toughest job in the Internet age.

2) Once you know what kind of company you are, it becomes way more easy to say no to thousand cool things happening around you. I probably don’t need to tell you how hard it is to say No.