Platform lesson #7: Constantly optimize commodity for TCO

In earlier posts, I’ve introduced the Three Layer Product Model (3LPM). Similar to all other software, platforms have three layers of functionality: innovative and experimental, differentiating and commodity. Functionality typically starts as innovative and, when it resonates with customers, becomes differentiating. The differentiating functionality drives sales and market share, causing competitors to develop similar functionality in response. Also, customers often get used to functionality. As a consequence, it commoditizes over time.

Functionality should be treated differently, depending on the lifecycle stage it’s in. During the innovation stage, the focus should be on testing many variations with customers to ensure that we have the best possible realization. Once the functionality is differentiating, we should focus on maximizing the value for customers in various ways, including adding variation points and variants. However, once it commoditizes, the focus should be on minimizing the total cost of ownership (TCO).