Platforms can be a strong source of competitive advantage. But how do you build a successful platform if you only have products? In our recent HBR article, we explain the fundamentals of transforming products into platforms. Like riding a bike, it’s easy to describe the physics but hard to actually do. What are the “best practices” of building platforms from products?

In our research, we found that platforms emerge and grow akin to companies, people, and products. They don’t just appear — they evolve. Thoughtful management on both the demand side and the supply side can smooth the transition.

Demand-Side Evolution

Creating a new platform out of your product involves attracting a large number of users, but our research suggests that user growth isn’t linear. It occurs in stages:

  1. Structuring an external product “love group”
  2. Transforming the love group into early platform adopters
  3. Leveraging early adopters to accelerate platform adoption

Makerbot, the 3D-printer developer, followed this approach by first attracting a group of devoted product fans among the maker community and rallying them to the cause of making desktop 3D printing accessible to all. Makerbot structured and expanded this group through a series of projects, conferences, and events that built momentum for the product (phase 1). For example, many of the early product fans helped build printers for Makerbot when demand began to overwhelm the company’s production capabilities.

After this, companies transform the enthusiasm of the love group into early adopters for the platform (phase 2). For example, the enthusiasm of the Makerbot love group to propelled the growth of its then-new Thingiverse — an online platform where makers can post designs and users can download them to print.

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Finally, with the early platform in hand, Makerbot leveraged the work and devotion of their early adopters to create broader momentum for their platform, their product, and for 3D printing (phase 3).

Makerbot’s cultivation of its users as it moved from product to platform was immensely successful. As you consider the demand-side evolution, note the role of emotion and support: Companies nurture their users’ enthusiasm and support them through these different stages. Both familiar players like Google, Apple, and Microsoft and lesser-known companies like Minecraft, Valve, and Id Software have gone through similar stages on the user side to get their platforms off the ground. That Makerbot has faltered lately, however, has everything to do with the fact that its core product was difficult to defend — demonstrating one reason that so many product-to-platform attempts fail.

Supply-Side Evolution

As firms move from product to platform, the company also evolves through several stages:

  1. Internal product R&D + external complementors
  2. Internal platform R&D + blended complementors + community management
  3. Hybrid business model management

During the first phase of company evolution it is appropriate to have an internal development team focused on creating momentum for a great product through continuous refinement of the core product so that it inspires customer adoption and enthusiasm. But as companies start the move to platforms they often benefit from including outsiders in the process. For example, Lego benefited from the Stanford graduate student who saw the opportunities in opening up the code for the company’s Mindstorm robots to create a platform, transforming a toy into a tool for schools for education and experimentation. In these early stages, firms don’t necessary need to sweep out their development teams but they do need to engage external complementors to explore new opportunities to create value through a platform (stage 1).

In the next stage, firms typically have to expend a fair amount of internal R&D effort to create the platform itself from the initial seeds of ideas from complementors. But at the same time, not all this effort is exclusively internally focused. Instead, platform project leaders find themselves increasingly managing two key groups: complementors who may be outside the company or transitioning to internal roles inside the company and a growing community that can benefit from an internal function inside the company devoted to promoting and managing it.

Nest, the smart thermostat that has become a home products platform, has to actively work with other companies to develop Nest compatible products, deciding which complementors to keep outside the company (nurturing them without scaring them away) and which to bring inside the company. To illustrate, Nest recently acquired Dropcam, which produces cameras that allow customers to see and monitor their home — ensuring that Dropcam would become a complementor rather than a competitor to Nest.

In the final stage, companies embrace a hybrid business model and reallocate revenue streams to optimize for total value creation and capture rather than focusing on one — the product or the platform — at the expense of the other. Qihoo, one of China’s most successful internet firms, started as a security software product that cross-subsidized the development of a new platform with products that they gave away for free, creating more value in the end for the entire platform.

The real challenge is to create the business model flexibility to iterate on a well-established product and turn it into a platform. Several of the companies we studied appeared to have developed potentially viable platforms out of their products, but struggled to move from capturing value based on products to capturing value based on the combination of products and platforms through a hybrid business model that combined both product and platform elements.

Like many transformational strategic moves, the successful transition from product to platform should happen in stages that demand flexibility. The reward is that they are hard for others to imitate and create enduring growth.