Linda Gorchels blogs

Product Platforms: Definitions and Pros and Cons

There are two very different types of platforms: digital platforms in technology, and physical platforms in other fields.

Digital Platforms

A digital platform is an ecosystem designed to enable different groups to co-create value through “plug-and-play” capabilities. The technology infrastructure of the platform touches customers and developers beyond the firm’s boundaries. LinkedIn, FaceBook, Google and Amazon—in fact most technology businesses—have platform-based business models.

Physical Platforms

Physical platforms in other industries refer to product family or product portfolio platforms intended to reduce manufacturing and development costs for new products. In this case a platform is a common architecture, collection of assets, component designs, subsystems, or other elements shared by several products.

Example Automotive Platform Strategies

The automotive industry is well-known for its use of shared platforms across various car models. By using the same chassis for different vehicles or using modular sub-systems or common components, companies can improve time-to-market and cost efficiency. And the use of the approach has escalated. Volkswagen, prior to the diesel hit on its reputation and profitability, had designed a mega platform strategy which was considered by many in the industry to be a game-changer. As described in a Carscoops article:

Both analysts and the auto industry believe that the MQB could prove to be as revolutionary as Henry Ford’s production line or Toyota’s “just-in-time” system. VW has been working on it since 2007, [its investment reaching] nearly US$70 billion. Considering that Morgan Stanley estimates it will result in annual gross savings of US$19 billion by 2019, that’s money well spent.

Since the MQB is designed for models with a transversely-mounted engine, VW also has two other aces up its sleeve: the MLB platform, for models with longitudinally-mounted engines, and the MSB, for premium rear- and all-wheel drive models from Porsche, Lamborghini, Bentley and, probably, Audi too.

So that makes a total of three modular platforms, each designed from the outset to use a huge set of common components and be able to accommodate gasoline, diesel and even hybrid powertrains.

Over the past decade, other car companies worked toward similar cost-cutting measures. Just Auto suggests that General Motors will be following a plan “to use ten core architectures, many of which will have shared modules, for all future vehicles.”

It’s worth noting that the internet of things is affecting even the car companies. Connectivity is central to many of their growth strategies and they will be using global technology platforms in addition to vehicle platforms.

Both types of platform strategies are important, but the focus here is on product platforms.

Pros of product platforms

There are many benefits to using a product platform strategy: reduce overall costs, force a long-term perspective, and build on customer loyalty.

  • Reduce overall costs. Use of common components and subsystems can reduce overall, long-term costs and leverage available resources to be more efficient and effective. Given that the components and subsystems have already been debugged and tested, the resulting products should have higher quality. Since platform development occurs less frequently than product development, major platform decisions do not need to be made as often. This has the potential to foster lean product development.
  • Force a long-term perspective. Since product platforms are intended to “fit” many future products, the approach is designed to accommodate future product expansion. This forces a long-term perspective and has the potential to open up diversified revenue streams.
  • Build on customer loyalty. As customers develop preferences for certain platforms, they may become more loyal. This can be especially true in situations where the customer would need to change behavior to use a different platform.

Cons of Product Platforms

On the other hand there are potential drawbacks: high upfront costs, risk of platform obsolescence, risk of platform recall affecting numerous products, and potential duplication of effort.

  • High upfront costs. The upfront costs of platform design and development can be significant. As indicated in the Carscoops article, Morgan Stanley estimated that the upfront costs of the VW mega platform strategy was in the range of $70 billion. Significant savings have to be forecast to justify the investment.
  • Risk of platform obsolescence. The difference between platform planning beforehand and launching derivatives from an existing platform is one of timing. With a platform strategy, the architecture for the foundation of several future products is decided in advance. The potential risk is that the underlying assumptions were flawed and the foundational approach won’t work as planned. And product platforms are not necessarily evergreen. If they become obsolete and are not periodically rejuvenated, the derivative products also risk obsolescence. Therefore product platforms need occasional updating.
  • Platform recalls. There are also quality considerations. If there is a product recall necessitated by a problem in the platform, a greater number of products will need to be recalled than would be the case without the platform strategy.
  • Duplication of effort. Some platforms provide the common architecture for offerings of different product managers. Unless there is strong communication between product managers, there may be duplication of efforts and reduced cost savings.

So as with all strategies, product managers have to weigh the positives and the negatives to make the best decision for their product line.

Product Strategy & Roadmaps

Excerpted from Product Strategy & Roadmaps by Linda Gorchels