Platform Thinking: Building and Managing Product Ecosystems

The Rovio Revolution: A Platform Thinking Success Story

In 2009, a small Finnish company called Rovio Entertainment was on the brink of bankruptcy. After developing 51 games without significant success, they decided to take one last shot at creating a hit game. The result was Angry Birds, a simple yet addictive mobile game where players launch birds at structures to defeat green pigs.

Initially, the game's success was modest. But as downloads increased, Rovio realized they had stumbled upon something extraordinary. Their true stroke of genius, however, wasn't just in creating a popular game – it was in recognizing its potential as a platform.

Instead of resting on their laurels, Rovio envisioned Angry Birds as the foundation of an entire ecosystem. They began expanding the Angry Birds universe, creating sequels with different gameplay mechanics. They ventured into merchandising, producing a vast array of Angry Birds-themed products. The expansion continued with an animated series and even feature films, further enriching the Angry Birds universe and attracting a broader audience.

By 2012, just three years after the game's launch, Angry Birds had been downloaded over 1 billion times. Rovio had transformed from a struggling game developer into an entertainment powerhouse. In 2017, the company went public with a valuation of $1 billion, a far cry from its near-bankruptcy days less than a decade earlier.

Rovio's journey illustrates the transformative power of platform thinking – an approach that's revolutionizing how businesses conceptualize, develop, and manage their offerings. Platform thinking goes beyond traditional product management. It's about creating an environment where value can be created, exchanged, and grown not just by the company itself, but by a network of participants.

This approach turns products into platforms, users into contributors, and linear value chains into complex ecosystems. In Rovio's case, Angry Birds evolved from a simple mobile game into a multi-faceted entertainment platform, where fans could engage with the brand through various mediums – games, merchandise, movies, and more.

The success of Rovio and other platform giants like Airbnb, Uber, and Apple's App Store has sparked a paradigm shift in business strategy. Companies are no longer content with creating standalone products. Instead, they're building ecosystems that can grow, evolve, and create value in multiple directions.

But how can businesses harness this power? What are the key elements of successful platforms? And what challenges might they face along the way? In this article, we'll explore these questions and more, diving deep into the world of platform thinking and providing you with the insights and tools you need to transform your products into thriving ecosystems.

As we embark on this journey, keep Rovio's story in mind. Your next product might not just be a hit – it could be the foundation of an entire ecosystem, ready to take flight and transform your industry. Welcome to the world of platform thinking, where the possibilities are as limitless as your imagination.

The Platform Canvas: A Framework for Success

The Platform Canvas framework consists of five key elements. Let's explore each one.

Identify Core Interactions

This step involves defining the fundamental value exchange on your platform. It's about identifying the key activities that will draw users to your platform and keep them engaged.

Success Story: Airbnb's core interaction is connecting hosts with spare space to traveler's needing accommodation. This simple yet powerful interaction forms the foundation of their entire platform.

Outcome: Airbnb disrupted the hospitality industry, reaching a valuation of over $100 billion.

"The art of platform businesses is in the design of the ecosystem." - Sangeet Paul Choudary, Platform Thinking Labs

Attract Participants

Once you've identified your core interaction, the next step is to build a critical mass of users on both sides of your platform.

Success Story: LinkedIn allowed users to upload their email contacts, rapidly expanding its network and creating a powerful network effect.

Outcome: LinkedIn grew to over 700 million users, becoming the world's largest professional network.

"In a networked world, the best way to become a dominant player is to be an indispensable partner." - Reid Hoffman, LinkedIn Co-founder

Create Value Units

Value units are the content or currency exchanged on your platform. Encouraging the creation of these units is crucial for platform growth and engagement.

Success Story: YouTube enabled user-generated video content, creating a platform where anyone could become a content creator.

Outcome: Over 500 hours of content are uploaded every minute, attracting 2 billion monthly active users.

"Platforms beat products every time." - Marshall Van Alstyne, MIT

Foster External Innovation

This step involves providing tools and incentives for third-party developers to build on your platform, expanding its capabilities and value.

Success Story: Apple's App Store Apple provided development tools and a marketplace for third-party developers to create and sell apps for iOS devices.

Outcome: Over 1.8 million apps are now available, generating billions in revenue for developers and Apple alike.

"The biggest opportunity for innovation in platforms today is in creating new forms of collaboration." - Geoffrey Parker, Dartmouth College

Implement Governance

Establishing rules and standards to ensure quality and trust on your platform is crucial for long-term success.

Success Story: Uber implemented a two-way rating system for drivers and riders, creating accountability and trust within the platform.

Outcome: This system helped maintain service quality and user behavior, enhancing overall trust in the platform.

"Trust is the currency of the new economy." - Rachel Botsman, Author of "Who Can You Trust?"

Challenges and Best Practices

Here's a table summarising key challenges and best practices in platform thinking:

Challenges	Best Practices
Chicken-and-egg problem: attracting both sides	Start with a niche market segment
Quality control as the platform scales	Implement robust curation systems
Balancing growth with monetization	Time monetization efforts carefully
Maintaining user engagement	Continuously add value and improve user experience
Managing platform evolution	Stay adaptable and responsive to market changes

Tools & Frameworks

Platform Canvas: This visual tool helps map out your platform business model. It includes sections for participants, value units, filters, and core interactions, allowing you to see how all elements of your platform interconnect and create value.

Network Effects Map: This framework helps identify and visualize different types of network effects within your platform. It can reveal opportunities to strengthen your platform's value proposition and growth potential by leveraging various network effects.

Platform Stack: This tool helps understand the different layers of a platform business, from infrastructure to data to community. It can guide decisions about where to focus resources and how to create competitive advantages.

Two-Sided Market Strategy: This framework helps plan for attracting and balancing both sides of your market. It includes strategies for solving the chicken-and-egg problem and for maintaining equilibrium as your platform grows.

Conclusion: The Platform Revolution

Rovio's journey from a struggling game developer to a global entertainment platform exemplifies the transformative power of platform thinking. By viewing products as foundations for ecosystems, businesses can unlock unprecedented growth and innovation.

The key to success lies in fostering valuable interactions, attracting the right participants, and continuously evolving to meet changing needs. As we've seen from Airbnb, LinkedIn, YouTube, Apple, and Uber, the potential for transformation is immense.

In today's interconnected world, platform thinking isn't just a strategy—it's becoming essential for sustained success in the digital economy. By applying these principles, tools, and insights, you can begin to transform your products into thriving ecosystems that create value for all participants.

As you embark on your platform journey, remember Rovio's story. Your next product might not just be a hit—it could be the foundation of an entire ecosystem, ready to take flight and transform your industry.