Ideas Made to Matter
What makes a product platform succeed?
Whether it’s through strings of software code or entire automobile engines, many firms aspire to save money, reduce risk, and achieve competitive advantages by sharing assets across different product offerings.
Developing those assets, also known as product platforms, is not without strategic, financial, and management challenges. Execution typically takes multiple product cycles, and firms must balance individual product needs with larger organizational function.
“Platforms take a lot of work to get right,” said Bruce Cameron, director of MIT’s System Architecture Lab and a lecturer in the Department of Engineering Systems.
Cameron teaches a two-day MIT Sloan Executive Education course on managing product platforms that aims to help leaders in technology-driven industries with engineered products and services make the most of their product platform investments. Here, he shares some insights from the course.
Success means buy-in across the organization
While digital platforms work best as matchmakers across an industry, product platforms stay within an individual firm. When platforms succeed, firms can grow revenue and enter niche markets, Cameron said.
Over the last decade, BMW has used this strategy to develop 30 percent more vehicle models such as the Mini Countryman without substantially growing its engineering workforce. Reusing gear boxes and other parts across models allows the company to spend more on the differentiating touches that BMW customers expect.
However, as the recent MIT Commonality Study of 30 firms discovered, most companies fail to achieve return on investment on their platform investments. Cameron pointed to four common pitfalls: 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.
Taken together, these pitfalls demonstrate that platforming is an organization-wide challenge.
“The idea that this is an engineering or procurement or manufacturing initiative is flawed,” he said.
It’s true that the experience of line managers will help firms determine where an individual component or module of software code can be reused and where variety is necessary, Cameron said.
“For companies to really make this part of a competitive advantage, [the platform] has to touch a number of firm functions and be communicated by a strategy by executive leadership,” he said. “At the end of the day, there’s someone seated at a desk saying, ‘Do I use this piece of code or write my own?’ If they don’t understand the strategic intent of reusing code, you have a failed initiative on your hands.”
Understanding risk in product platforms
One benefit to reusing that common piece of code is a reduction in risk, Cameron said.
Say a software company decides to reuse part of its code in 10 places. Quality assurance for that code then becomes a high priority; the quality assurance team may spend three months working on that code string instead of one month. That takes longer, but the code is less likely to have bugs—and three months is still much shorter than one month of quality assurance for 10 separate pieces of code, Cameron noted.
“You will have a higher-quality software product across the board,” he said.
Risk can be a two-sided coin, though. Volkswagen has built a “platform” through which multiple vehicle models use the same 2.0 liter diesel engine. This provides a sustained competitive advantage, as Volkswagen saves money by not designing and maintaining different engines for different vehicles.
But when there’s a flaw—such as software in 475,000 Volkswagen vehicles that enables the engine to cheat on emissions tests—the risk extends to all products on the platform, and not just one or two. In this case, Volkswagen may have to pay $15 billion in settlement costs in the United States alone.
“When you have a common issue, you have a much bigger problem on your hands,” Cameron said.
Stability, customization drive platform success
Whether a firm can benefit from a product platform comes down to two key criteria, Cameron said: Stability and customization expectations.
Markets that see a lot of product instability or architectural change are not well-suited for product platforms, which require long-term planning. That said, success is possible, Cameron noted: Intel has built a technology roadmap around “step changes” in the size of the wafers in its digital chips, which allows the company to better control the amount of change that occurs.
Meanwhile, Cameron said, platforms work best in a “sweet spot” where there is some customization—just not on a wholesale level. Take, for example, a washing machine; a customer can get a different color for a particular model, but not a different shape or size.
“In home appliances, variety is aesthetic,” he said. “There’s no conversation between Whirlpool and a customer on an individual basis to say, ‘Can it be 2 inches wider?’”