Platforms are ruling the digital world. They are everywhere. Amazon, Instagram, and Spotify are some of the successful platforms that are part of our daily lives.
Through this blog post, I will explore the Platform Strategy for Products by looking at the transformation of Microsoft Teams from a productivity app to a productivity platform.
Windows as a Platform in the PC Era
In 1985, Microsoft released Windows 1.0, when the PC era was still in its infancy. The PC market needed a boost, and Microsoft saw an opportunity.
Bill Gates's vision was to "put a computer on every desk."
The Strategy
For this vision to become a reality, Windows was made to work on a wide variety of hardware, so that the PC manufacturers could install it on their machines. This strategy was a win-win for both parties, resulting in rapid growth for the PC market and the realization of Gates' vision.
Once customers became familiar with Windows, it was easier for Microsoft to cross-sell its other offerings, such as Microsoft Office, to existing customers.
Thus Windows became the first platform from the Microsoft bastion.
Using Windows as a platform to promote its other products and services (Internet Explorer, Microsoft Office) was a smart approach that allowed it to sell more to its existing customers. Of course, this move also caught the attention of the competition watchdog.
The Birth of Microsoft Teams
In 2014, Microsoft was considered a company in decline, having lost its mojo.
The Moment of Change
Satya Nadella took over as the new CEO, with the vision of empowering every person and organization on the planet to achieve more.
This vision led to the implementation of a cloud-first, mobile-first strategy, which required a cultural shift within Microsoft.
You can read the fascinating journey of transformation of Microsoft in the book "Hit Refresh" authored by Satya Nadella.
Coming back to Microsoft Teams, it was launched in 2016 with basic collaboration features like video calls, chat, and file sharing.
Teams Having Its Moment
It was in the year 2019, during the COVID-19 pandemic and the work-from-home mandate, that Microsoft Teams became a household name along with other collaboration apps like Zoom and Google Meet.
A starting boost to Microsoft Teams was provided by two existing Microsoft products: the Windows OS and the Microsoft Office suite.
Microsoft Teams is cleverly bundled with Microsoft Office or Office 365 (the current name). Consequently, it was easy to push Microsoft Teams to the existing Office suite customers.
Over the last few years, the capabilities of Microsoft Teams have expanded far beyond calls, chat, and file sharing.
Today, you can use Microsoft Teams to do things like:
Project planning and tracking
Manage your to-do list
Assign and track team tasks
Track your engagement during work hours
The USP
The key differentiator that elevates Microsoft Teams from a Productivity App to a Platform is its capability to integrate and host other apps.
Teams allows:
Integration with other Microsoft Business apps like PowerBI
The creation of custom apps (e.g., bots, automated flows, etc.)
The use of third-party (non-Microsoft) apps
Why Third-Party Apps Are Critical to Becoming a Platform
By adding support for third-party apps, Microsoft Teams has transformed into a more versatile and useful tool for users.
The higher the usage of a product, the higher the growth.
In this case, the usability of Teams is no longer dependent solely on features added by Microsoft; third-party apps are actively boosting it.
The Hook
These third-party apps serve as the hooks that keep users engaged on Microsoft Teams.
What it means for competition
Entry Barrier
The combination of the core platform and third-party apps keeps the customer engaged, which creates a substantial entry barrier for competition.
New Revenue Stream
Typically, third-party apps must pay a fee to the platform, generating an entirely new revenue stream.
What Is the Platform Strategy?
The platform strategy is a go-to-market approach in which the platform connects suppliers and consumers. Amazon, Facebook, Instagram, and the Google Play Store are prime examples of platforms.
In a traditional app-driven approach, the interaction happens directly between the company and the customers.
In the platform approach, the company acts as the foundation, enabling and facilitating interactions between consumers and suppliers.
The condition
For a platform strategy to succeed, cultivating a growing consumer and supplier base is critical.
Critical Alignment
In the case of Microsoft Teams, it got a ready to use Windows customer base on the consumer side early on and is now actively building out the supplier side by enabling 3rd party apps.
When does the Platform Strategy fail
A platform strategy is bound to fail if you cannot successfully balance both sides.
Windows Mobile, from Microsoft bastion, is a classic cautionary example.
Microsoft tried to grow the supplier side (app developers) by incentivizing them, but it ultimately failed because there were too few consumers using the platform, resulting in a lack of apps to serve customers. Simultaneously, there were very few customers because there were very few apps available.
Conversely, Amazon onboarded sellers for two years before launching in India because they knew customers would be dissatisfied if the products they wanted were unavailable. They focused heavily on building the supplier side first before scaling the consumer side.
The Takeaway
Platform strategies work exceptionally well for driving business growth while safeguarding the business by building formidable entry barriers.
Microsoft Teams evolving into a platform represents a "Windows moment" in the digital era, even though Microsoft has since diversified into multiple domains.
However, Generative AI has pushed the technology market into top gear. As technology firms evolve to grapple with this shift, it will be exciting to see the new business models and strategies they deploy to stay relevant in the market.
You can read more about platform strategy in our Platform Strategy series.
Comments
Post a Comment