Platform lesson #9: Be careful to open up to third parties

Every platform company I’ve worked with would love to open up their platform to third parties and get ‘free’ functionality extensions. Especially the idea of a multi-sided platform where different parties exchange value with each other and you collect a nice slice of each transaction comes across as a highly desirable state of being where free money is simply flowing into your coffers.

In my experience, if something sounds too good to be true, it typically is and this is no exception, for at least three reasons. First, there’s the mistaken belief of many that if you build it, they will come. Simply opening up your platform for third parties doesn’t at all mean that anyone will show up to the party. Also, external parties, or complementors, have a business to run, so they’ll only invest resources when there’s a viable business case. For complementors, that business case typically requires you to have a large customer base for which they have a sufficiently large addressable market slice.

Second, complementors often put constraints on the platform such as interface stability, requests for functionality that helps them rather than your customer, and so on. So, there’s a significant risk that your ability to innovate and extend your platform is restricted and that the simple fact of opening up causes you to slow down, reducing competitiveness.