Insight

Platform Product Development and the Uncertain Travel Future

In February 2003, Amazon CEO Jeff Bezos presented a TED Talk in which he discussed the early days of electricity. Wire and other infrastructure were being built to connect every city and country around the world. During this time, no one talked about electricity. They called it “lighting.” No one could have conceived or predicted the future of electricity and its many uses, but it turned out to be the “platform” for countless industries and inventions.

Similar to the early days of electricity, new types of infrastructure are enabling opportunities for digital disruption and expansion (e.g. cloud or 5G networks). Barriers to distributing digital solutions to a global audience are far lower than they have ever been. And startups are not the only threats to market share for established products and organizations; big tech has figured out how to leverage their audiences, engagement models, marketplaces and software as a platform to enter new industry verticals at will. How will incumbent enterprises adapt? The solution to this problem lies between people and technology.

What's a platform?

Technology companies are combating disruption with “marketplace ecosystems” that have powerful digital offerings, such as advanced product discovery and distribution methods. This allows smaller producers to participate in an ecosystem that attracts a massive audience from day one.

Producers aren’t the only beneficiaries. Customers get access to more product selection, improved relevance, convenience and competitive pricing (see “Jeff Bezos’ Virtuous Cycle”). Customers have evolved to expect the convenience and/or engagement enabled by the likes of Amazon, Google, Uber, Airbnb, Facebook and Apple, which have proven powerful for business. These companies have leveraged their technology platforms to increase customer value for existing products, drive loyalty and trust, allow others to build customer value within their ecosystems, scale quickly into new markets/industries and sometimes invent new industries. They are able to do this with strong platform and product strategy and development.

A platform is not just flexible data and technology. At a minimum, all platforms must provide a useful function/service, third-party access and governance, but successful platforms must couple that with the right business strategy, product assortment and support for producers and consumers. That said, ultimately you don’t get to decide you are a platform, the market decides that for you.

The goal should be to allow for product teams to leverage the work, data and learnings of others in the ecosystem. What distinguishes product technology from platform technology is that it provides capabilities that are not specific to any one business unit. This expands the support first-party product teams can provide to encompass third-party platform participants as well as customers. Platform participants can leverage shared capabilities like analytics, performance, payment systems, fraud detection and personalization models. These foundational capabilities give digital releases a seamless guest experience and a leg-up against niche players that introduce similar products without these more mature “baseline” capabilities. These amplifiers improve the customer experience, increase demand to engage and participate, and attract more sellers – improving assortment options and competition for a more sustainable ecosystem.

Platform as a culture

As we have learned, product and platform development are nuanced concepts. Platforms are typically more complex and require more alignment. Platform product teams need to consider value generation for both producers and consumers, inherently increasing the number of stakeholders. This means clarity of business vision across products, an understanding of how those products reinforce one another and often times weighing the need to make trade-offs when prioritizing platform enhancements.

Many platform behemoths started as platforms or made the transition long ago. Shifting to a platform model is exponentially more complex for large, established enterprises because they have so many existing stakeholders and product capabilities across their value chain. Understanding and being empathetic to all of your product teams and their revenue streams is a balancing act. It’s difficult to align all teams on necessary tradeoffs – as is shifting focus to support third-party value generation.

The process is usually burdened by entangled legacy technologies or business concepts sandwiched between organization structure and politics. Culturally, organizations should invest in collaborative, creative, long-term, holistic thinking. Teams need to be mutually incentivized around a clear vision. They should be rewarded for short-term sacrifice in exchange for long-term value generation for the wider ecosystem, and ultimately customer value.

There are many ways for leaders of established companies to drive behavioral change. For example, Marc Lore, CEO of Walmart eCommerce and formerly Jet.com, leveraged quantitative and qualitative performance measurements (objectives and key results) that aligned with the customer experience. These incentives improved collaboration (often between IT and business, as the customer experience OKRs needed both) and holistic thinking spawned across the organization. They experienced breakneck rates of growth.

The goal should be to allow for product teams to leverage the work, data and learnings of others in the ecosystem.

Agile holistic thinking

One must design for the uncertainty of tomorrow as well as today. Agile is meant to handle uncertain futures. We encourage businesses to fully understand their customers and invest in what will not change. It’s hard to imagine a world where customers do not want choices or prefer worse service.

Understanding what brings in customers, what keeps them engaged and what mix of sellers you want to have in your ecosystem requires divergent thought and creative pressure tests.

Bezos famously told the Washington Post, “to be nine times bigger than your nearest competitor, you actually only need to be 10 percent better.” A few long-term thinking exercises can better prepare your company and its technology to handle whatever comes your way. This is also a great way to converge on the unshakeable principles or areas where your company should continually invest.

Long-term thought exercise

In platform product development, we like to take macro concepts and apply them as filters to test our design. What tricks could travel and hospitality providers learn from the increasingly commodified convenience of the on-demand economy? We might ask the team, “what if we were asked to build the Uber pool functionality for hotels?” Before we get into the details of how it might impact the business, we ask ourselves, “Would it offer significant choice to consumers?”

Hotels could consider offering rooms to guests for blocks of time shorter than a day. This could provide significant /value to customers. Imagine resting for a few hours during an airport layover or catching an early morning flight. Maybe you arrived late on the first day and need to leave early on the final day. Some guests might want to book a short block of time at a luxury resort simply to experience it but stay in more affordable accommodations. Perhaps locals would just want to access certain amenities, such as a gym or pool for a short period. In all of these circumstances traditionally, guests are charged for many hours that are going unused. By giving guests more choices, hotels can generate value in between the economy they have built around full-night stays.

This kind of thought exercise can reveal flaws in an existing platform design. It’s worth asking how we can prepare for possible unintended or unfortunate consequences.

This example leads to powerful thinking. What kind of producers might we want to attract into this new world and what new kinds of support would we offer them? It helps us make the right technical choices for flexibility. It can help us make the right trade-offs and even identify common capabilities we can safely invest in to boost the existing product lineup. Ultimately, if we perform enough pressure tests like this one, we can drive customer obsession from every technology layer and our framework can extend to future business models as they arise.

People walking on a sidewalk drawing of a brain

Defining new responsibilities

Product teams need consider how to improve the value of the platform as usage grows universally. They will also need to ask how products on the platform will encourage repeatable interaction, expose consumers to new relationships with additional sellers, establish clear “rules of play,” enable joint production and address issues of bilateral trust.

Further, new product teams will be required to take into consideration ecosystem-wide policies for trust and safety and defend the voice of the producers (as opposed to just consumers. Uber, for example, must vet drivers. Every product team should think about customer value and loyalty.

Automation and machine learning will take on more responsibilities to vet producers, analyse data and extend platform capabilities to new products on the platform. An example in the travel and hospitality space is how Airbnb was able to leverage its same personalization search ranking models from their homes business to their second product category, “experiences,” to help generate a 25x rate of growth when compared to their homes business in its first year. Airbnb also uses guest feedback data and shares it with the host community so they can improve their product offerings and success.

Platform product development is as much structure, mind-set and culture as it is a technical solution. Traditional product development definition of the “customer” has expanded. Organizations that are mutually vested in making the producers successful, not just their own product, will have the best chances of the market deciding they are a platform. This requires empathy. Long-term thinking and willingness to collaborate are paramount; building bridges between teams has become more valuable than ever.