Want hyper-growth for your Platform? Focus on flywheel
Buried in Postman’s recent massive Series D investment round [USD225M] announcement was a quaint reference by their founder Abhinav Asthana to the “Postman flywheel”.
Here he laid down their journey starting with how internal development teams initially used the Postman API platform to build, test and manage their APIs and collaborate with other internal teams which then had a significant compounding effect. Eventually, this morphed into public API networks [if customer chose to use it]. Postman also offers demo accounts for customers to access and try APIs in a sandbox environment. By creating both public and private API networks and becoming a go-to destination developers globally, Postman effectively managed to achieve the revered “flywheel effect” and catapulted to Unicorn status.
In the now fabled treatise Good to Great, Jim Collins originally made the case for the “flywheel effect” with the following observation:
In building a great company or social sector enterprise, there is no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment. Rather, the process resembles relentlessly pushing a giant, heavy flywheel, turn upon turn, building momentum until a point of breakthrough, and beyond.
Since then, the advent of Technology Platforms in conjunction with the flywheel has now made this even more of a potent combination. From Amazon to Telsa, the Platform flywheel business model is now ubiquitous.
One more definition on the topic of Platforms before we go further. Here’s Jonathan Clark’s definition that resonated with me the most.
“Platforms are structures that allow multiple products to be built within the same technical framework. Companies invest in platforms in the hope that future products can be developed faster and cheaper, than if they built them stand-alone. Today it is much more important to think of a platform as a business framework.”
Now that the definitions are settled, based on my experience if you are looking to build a Platform flywheel, there are some key questions you must address or prepare for. Have categorised these questions around the following pillars.
1. Tangible/Intangible Assets
The first ingredient is probably the toughest one. What set of superior assets do you have at your disposal that enable sustained competitive advantage and continuous new product development to catalyze growth ?
For Facebook, it’s their Social graph, for Google it’s search algorithm and ranking and for Tesla it’s superior battery technology and supply chain.
If the answer is it’s this one killer app or that flagship feature, you probably need to seriously rethink the response.
Also, read Why Trello Failed to Build a $1 Billion+ business: https://nira.com/trello-history/
2. Increased Network Effects
Are you able to successfully harness new customer insights as you onboard more to deliver more prescriptive features ? Does the Platform have a strong eco-system play and help it’s users/participants accrue monetization.
In recent years, Marketplaces and Developer platforms have gotten incredibly popular leveraging network effects. While Atlassian, Salesforce and Intuit are notable examples on the marketplace side, companies such as Github, Gitlab, Twilio & now Postman have ridden the developer platform wave and have built strong ecosystems around a dedicated user base.
3. Achieve Hyper-scale
Does your Platform enable 5x-10x increase in customer or partner onboarding & activation without corresponding increase in marginal costs ? If not, how do you plan to reduce friction around this both in short-term & mid-term ? This is relatively easy in a Cloud-only environment but has special challenges in balancing on-prem, Hybrid and Cloud environments.
4. Lower cost-to-deliver product
Are you able to solve the distribution problem [i.e distribution of insights, features, APIs, SDKs] faster and in a more automated manner than your competitors esp. as product portfolio widens and business model evolves [products -> products+services, Paas -> SaaS] ?
5 Increase switching costs
On a scale of 1–10 with being one being easy & 10 being nearly impossible, how hard would it be for a customer to switch from your platform to another ? Tip: Try doing this yourself as an end-user of your platform. It will add to the fun. Is the customer lifetime value increasing on a CAGR basis?
What challenges have you faced in building or evolving your platform flywheel ? Please drop comments below…
