Sloan Director Talks Sweet Spot of Product Platforms
MIT Sloan School of Management recently published an article that conveniently breaks down what it takes to make product platforms succeed, often by “matchmaking” and sharing assets across different offerings. There are assorted challenges associated with developing the necessary assets to launch successful product platforms. MIT’s System Architecture lab director Bruce Cameron, who teaches a course on managing product platforms, puts it simply: “Platforms take a lot of work to get right.”
He explainss that “most companies fail to achieve return on investment on their platform investments” but successful product platforms have the potential to “grow revenue and enter niche markets.”
Take BMW for instance, which reused “gear boxes and other parts across models” and re-purposed the extra cash to “develop 30 percent more vehicle models without substantially growing its engineering workforce.”
Cameron explains that one advantage to a software company—to use another example—opting to reuse part of its code in 10 places is a “reduction in risk,” which will in turn generate a “higher-quality software product across the board.”
Platforms that opt to reduce their risk are faced with a double-edged sword. Cameron cites Volkswagen’s decision to install the same 2.0 liter diesel engine across multiple vehicle models, which saved significant money in the short-term. But it was discovered that the German manufacturer illegally tampered with its own internal software, suppressing the real fuel emissions of its diesel engine cars. The result may end up costing the company billions in settlement costs just in the U.S.
“The idea that this is an engineering or procurement or manufacturing initiative is flawed,” he says.
There are four common pitfalls, according to Cameron: “Forcing platform development down into one product, neglecting to articulate the value of shared benefits, evaluating returns prematurely and attempting to move to platforms without undertaking the necessary underlying organizational changes.”
Cameron says stable product platforms that offer consumer customization options often prevail. The trick is hit that “sweet spot,” like a uniform-sized home appliance available in different colors.
About the Author
Jonathan Pfeffer
Jonathan Pfeffer joined the Clear Admit and MetroMBA teams in 2015 after spending several years as an arts/culture writer, editor, and radio producer. In addition to his role as contributing writer at MetroMBA and contributing editor at Clear Admit, he is co-founder and lead producer of the Clear Admit MBA Admissions Podcast. He holds a BA in Film/Video, Ethnomusicology, and Media Studies from Oberlin College.
