To Design a Platform is Easy – validating it is Hard
What’s the right way to develop a validation mindset as you develop a platform? What are the critical elements of validation that are typical of platform strategies?
How to validate a platform? This is certainly not an easy question. In recent years, we witnessed an incredible flourishing of design practices (ok we’re culprits here…), and as a result, it’s nowadays much more at hand for a designer or entrepreneur to explore a market and an ecosystem, analyze a value chain and come up with a platform-product strategy for the creation and launch of a particular platform, with a certain business model, a bundle of products and services, and more.
At Boundaryless we often work with teams and help them in the initial phases of exploration and design and – as we sometimes coach them through validation and venture building – we have identified the most pressing risks related to underestimating the role of validation and downplaying its importance as things move forward. A rigorous approach to validation is not just a problem for early-stage teams, but it also affects teams that have made some solid progress product-wise: they may have a product in the market – at different stages – and still downplay the need to validate key elements as they move forward such as business personas, pricing, the feasibility of certain go to market strategies or the effective value created and perceived as a result of certain network effects.
In this post, we introduce a new research thread that is going to characterize the next few months: codifying validation (or better validating) for platforms. In the post, we’ll quickly provide an outline of what this research space is: the key risk of undervaluing validation (in short: ruin), how to frame validation in platforms (a mindset and habit and not a step), and what are the key elements of validating that is typical of platform strategies with their complexity.
Subscribe to our newsletter if you don’t want to miss a thing!
The five key risks of lacking a validation discipline
There are a relevant number of risks involved with approaching platform design with a light mind on validation. Among all of them, it is worth mentioning five of the most recurring and impactful risks related to lacking a discipline of validation:
- the risk of making design choices based on assumptions, and cognitive biases, that are not representative of the real situation or opportunities.
- risk of having an excessively narrow understanding of the market opportunity wrestling with a narrow vision of the customer (for example seeing it as a pure consumer where she has capabilities of creating value and evolving into more productive roles)
- risk of creating products that lack desirability at scale (a market), due to the absence of a community of users with a common need (something which is extremely important in platforms where scale contributes to driving product value and differentiation)
- risk of not being able to run the product/business, even with a properly validated value proposition for a lack of technical feasibility at scale
- risk of creating a non-viable business, despite its feasibility and its desirability, due to the fact that – for example – unit economics don’t work at scale with the pricing/business model used to validate the initial value proposition
Furthermore, a typical “background problem” is the tendency to rely too much on planning: planning is a great idea, but how many times have your plans gone smoothly without major deviations?
As a consequence – if the above risks are not prevented – such issues can cause a high rate of rework/redesign, introduce higher costs or make them uncontrollable, cause delays, lead to poor traction, market/opportunity under-exploitation, unstable growth, and lack of competitiveness.
Validation: not a phase but a mindset and habit
The key to reducing these risks is enclosed in one word: validation. We normally prefer the verb validating since the latter recalls a cultural attitude of continuously testing and experimenting out of the building to maximize learning around unknown elements as a key way to inform better design decision-making and execution.
The validating approach is something that accompanies the designer, the product owner, and the entrepreneur through the entire product lifecycle. It’s not only limited to one phase. The confusion may come from the fact that – when the original term validation was introduced by Steve Blank in the early 2000s – it was as a specific reference to the validation of the product-market fit.
It’s very important instead to understand that – depending on the focus we’re currently having – we can always validate our assumptions. This reflection also helps us to clarify another thing: platform-product development is not necessarily only a step-phase process, but rather a set of focuses you’ll always have to carry on. A loyal reader will have noticed that we’re currently developing a new series of posts on techniques of platform design and we’re reframing the techniques along what we call: “macro-problems”. Validation as a need and macro-problem exists along all the focuses!
In addition to the need for a correct validation discipline and doctrine, when coming to the design of platform models, strategies, products, and services, things get more complicated.
Validating two (or more) sides
First of all, a platform designer is often asked to validate assumptions over two sides (and more sometimes): typically indeed, as you launch a marketplace feature, you deal with the supply and demand side, when you extend your product with an extension platform framework you’ve normally to validate not only the core customer need but also the attraction that you can exert on vendors and third parties providing “plug-ins” and “apps” and other extensions in general (check our clear articulation of the various value propositions you’ve to deal with when creating platforms here).
Validating your domain knowledge of the current Ecosystem
Moreover, any loyal reader and adopter of our open-source exploration, design, and product growth frameworks know that a platform is an amplifier of (not fully expressed) potential in the ecosystem, and therefore the platform strategy must be designed with attention to the emergence. Achieving this goal may be very a complex task: scanning the ecosystem, and identifying key entities and existing interactions is paramount. In a few words, it’s the process of validating the designer’s assumptions on the ecosystem (the equivalent of validating assumptions on the “problem” side vs the “solution” side of a typical simple product VP) that is critical. Validating your assumptions on the current ecosystem experience is essential to understand how to design the two major elements of value that the platform strategy brings: reduction of transaction costs through the creation of better channels and providing onboarding and evolutionary learning services to attract users.
Validating the perception of value from accessing niche solutions
Another essential element that platforms need to validate is normally the perception of value related to accessing niche, highly personalized solutions. This is indeed a typical driver of platform value versus traditional industrial solutions: if no value is perceived through enabling niche interactions (finding the *right* solution for my needs through connecting with a specific provider) this is indeed a good hint that a traditional “organized” solution, or at least a heavily managed marketplace, with marketplace picks, a “super-supplier” as Dan Hockenmeier once called it (a la Uber) would fit the customer needs better.
Validating the impact of liquidity
Furthermore, another grand challenge of platform strategy development is to understand the impact that liquidity has on the perception of the value proposition and identify when critical mass will be hit, triggering then the network-effects-based growth. Liquidity – essentially a function of the ratio between producers and consumers connected to the network – is indeed essential for providing:
- consumers with the right “depth of choice”
- producers with a good utilization rate
It’s therefore important in the early stages of the development of the strategy to be able to experiment to “simulate” or validate these elements and reflect on the achievability of such in the long term. In the absence of feasibility of reaching such levels, it may be important to reconsider some elements of the value proposition or adjust goto market strategies for example by focusing on one side subsidizing the other (for example by playing the role of the supply side by hiring supplies and organizing their work for maximum efficiency and usage).
There are of course a number of further ancillary validations areas when working with platforms, for example:
- Identifying the sustainable take rate for the marketplace side
- Understanding the unit Economics and long-term sustainability of the growth engines you decide to use for customer acquisition (content, sales, paid acquisition…)
- Test and play with services pricing and identifying the purchasing flows (who’s going to call the buying decision), especially for product-led platforms in B2B (that seems to be a hot market nowadays)
- Figure out the Value Metrics to correctly understand what is the customer’s Job to be done and what she wants to purchase (especially related to the willingness to pay for the SaaS side of your platform)
- Validating the best alternative to your platform-product
And much more, typically depending on the project context.
Below you can find the same picture as above with the four key focuses, with evidence of some of the validation items that usually emerge along that focus:
Conclusions and what’s ahead
As we’ve seen above, the peculiarities of developing platforms, introduce relevant specificities in validation and call for the reinterpretation of some widespread and well-adopted lean startup validation practices.
Moving away from the customer-problem/product-market fit, into the ecosystem-potential fit first (i.e. understanding first if the ecosystem shows weak signals of hidden, not fully expressed potential to be transformed at scale) and as a second step, into the platform-ecosystem fit (i.e. the platform is accepted as a “solution” by the ecosystem for its enablement) is not only a more complex problem but also a fairly iterative and evolutionary process.
Having in mind the well-validated (excuse the pun) approach and mindset of lean validating, Boundaryless is now actively researching the field of Platform-specific validation practices with the aim of producing another practical and well-researched guide to be released in creative-commons.
We want to provide platform designers with both theoretical elements, and practical tools, by leveraging real-world stories (for which we’ll soon produce a series of webinars similar to what we did with growth) and integrating best practices and existing tools into a reality-grounded methodology. We’ll also focus on heuristics and mindset that can help you adapt to the contextual elements that will help you go as you continuously sense and probe your ecosystems, to increase the success rate of your platform strategy.
Check out our existing guides on Exploration, Design, and Growth in the meanwhile!
How to participate
If you have experience in successfully validating and developing platform strategies, we would love to get in touch with you and listen to your experience, successes, and failures, and the tricks and tips you’ve adopted in validating a platform strategy. Bonus point if you used the Platform Design Toolkit for your exploration and design phase. If you want to be featured in the research, either as a webinar guest or interviewee just reach out.
If you’re involved in developing a platform strategy and lack the capacity to embrace a validation-oriented mindset, or if you need coaching to run your validation sprints and experiments, please reach out with the form below and we’ll be in touch at the earliest for help.
Furthermore, we’re about to launch a training format that is focused on accelerating teams through exploration, design, and growth: teams will be accelerated during collective sessions and then receive dedicated coaching for the execution of an experimentation and validation sprint. If you’re interested please subscribe on the Platform Design Sprint preregistration page!
Do you need help with your validation sprints? Reach out below!
A New release of the Platform Opportunity Exploration Guide: Arena Scanning for Ecosystem breakdown
In this post, we present the release of a new version of the Platform Opportunity Exploration Guide. The new release...
In this post, we present...
October 17, 2022