This is Part 4/18 in the series “How to Build an Innovative New Product or Company” on the topic of how to find high $ value pools, as discussed in the “4 Steps to Develop a Strategy”
If you have an existing user and are looking for future growth opportunities, then you have two vectors to consider:
Same users + New products
e.g. find new value pools/solution for the same buyers or users you currently serve. For example, selling a Batman movie to Batman comic readers.
New users + Same product
e.g. extend your product to serve more users within your customer base, or find new buyers for your product, such as in other industries
Note that I differentiated the two choices using users, not buyers. You could structure the different options between selling a new product to the same buyer, and vice-versa, but I find considering it in terms of the user most helpful here. Specifically, because the question here is whether you want to build a platform or not.
Your product is a platform when you have earned the right to all events relating to either (a) a particular set of users or (b) a particular business objective. Over time, you can then add more capabilities.
Google is an example of (a). It has buyers (advertisers) and users (you and me). It is a platform in that once it has us as users, it prefers to offer us more (e.g. email and maps) rather than find ways to provide its core product, search, for new users (e.g. building Google search into Wikipedia). Once Google has earned the right to be in our lives as a user, it has a built-in advantage when offering us new products, especially if they have similar components, a similar look-and-feel, and/or if they talk to one another.
More common is (b). Every company has an HR system that is the single source of truth for any workflow relating to corporate HR functions: who the employees are, where they live, when they were hired, who their manager is, and so on. CipherHealth declares themselves a “patient engagement” company and is a platform for any workflow related to that business objective, which includes surveying patients when they are in the hospital on how their care and stay could be improved as well as offering training and follow ups to them after they are sent home.
One question you might want to ask yourself is: where is the battle for users’ attention likely to be greatest over the next few years. By growing in one direction (e.g. by building a multi-product platform for that user), will you have an advantage and a head start over the competition?
There are many examples of either option. One that comes to mind is DC Comics. Long stuck with a specific type of user and a specific type of product (paper-based comics), they expanded both dimensions in the 1990s. With the movie “Batman”, for example, they were able to cross-sell their current user base to a new type of product—but, more importantly, they were able to dramatically increase the types of users they were able to reach. It should be added that DC Comics was influenced in this approach by Walt Disney, who articulated it very clearly in the 1940s and 1950s: develop and leverage the connections between Disney movies, music, merchandising, comics, and experiences (e.g. Disneyland).
Some questions to help decide which direction to go in:
- Where can you get best cross-product sales leverage?
- Are you being pushed by the market to be more than a point solution? In other words, are your customers saying it’s too much to use your product and another product at the same time?
- Who are your likely acquirers? Position yourself to complement them but not compete; don’t partner with others who might take you in a competitive direction.
- Who are the major players in your industry and what are they likely to go into? Where are platforms being built and along what dimensions? In healthcare, there’s a powerhouse company Epic which started as a well-constrained Electronic Medical Records company. As it grew, it built itself to be the one-stop-shop for anything that interfaces with physicians and nurses in a hospital—i.e. it’s a platform. While it does allow third party apps on its platform, it also builds its own capabilities onto it. It is so powerful as a platform that when Epic even hints it is going to develop a particular product, any company that has a similar existing product immediately gets pinched.
- Where can you build a platform? Where can your data streams and buyer/user access allow you to easily add on additional use cases that buyers will pay more for? One reason to position yourself as a platform is that in an acquisition or fundraise, your valuation may get “credit” for potential revenues that you have not yet established if it appears all you need is to fire up a product team to build it out on top of what you have—and there would be an easily accessible customer base waiting for it.
You might think it unusual to be considering future growth opportunities as an early step in the process to build a single company and product. But I’ve found that type of thinking is at the heart of strategy.
A strategy that leads you to a single product is one thing; a strategy that spells out the direction for a multi-year, multi-product roadmap that slowly builds a powerhouse platform while no one is paying much attention is something quite a bit more powerful. A single product can be attacked by a larger competitor encroaching into your space in a few years; a platform, on the other hand, gives you the rights to land that you are playing on today and may choose to play on in the future. All of the startups I’ve been a part of have conversations about long-term growth vectors on a regular basis. This aspect of strategy is the one that is typically most heavily informed by knowing who the other major players are and what ground they’re staking.
It is also a great way to pave the foundation for a mission and vision statement for your company.