In a classic tome on new product development (Revolutionizing Product Development, Free Press, 1992), Steven Wheelwright and Kim Clark describe an “aggregate product plan.” Today, we refer to this approach as a platform strategy.
A platform is a set of core building blocks or a common technology that allows a company to develop a series of products and services. The core architecture is shared across derivative products in a number of ways. For example, Pillsbury has perfected a process to make refrigerated dough (the platform). Utilizing a platform strategy, the company then develops and sells derivative products into a number of markets: bread, cookies, and biscuits. Similarly, Toyota incorporates quality through automobile engine design (the platform) into a number of products across a variety of market segments: value (Scion), mass market (Toyota), and luxury (Lexus).
The advantages of a platform strategy are countless for a business. First, the firm can optimize their capital investment by leveraging the core technology across several market segments and for a long period of time. Of course, lower capital investment for product derivatives leads to streamlined operations and higher profitability.
Second, introduction of new product launches are managed in a more controlled manner. Timing of commercialization of derivative products is known and planned based upon the platform strategy. Upgrades and feature additions are also logically planned and leverage the core technology.
Next, markets can be segmented to take advantage of the breadth of a platform and to overtake the competition. Often the platform concept allows a firm strategic advantage due to overall market share. Consider the example of Pillsbury once again. If a competitor introduces a new refrigerated pie crust dough, Pillsbury’s platform expertise and market knowledge allows the company to respond rapidly to regain competitive strength.
Finally, a platform strategy allows a firm to focus on customers, markets, and technologies as core capabilities. Too many start-up firms fail because they have no framework to introduce follow-on products and service. Leveraging a platform strategy builds in future upgrades and product releases based upon the firm’s known expertise.
A platform strategy is a great way to leverage a company’s core strengths. To learn more about how you can add a platform approach for business growth, please contact us.