Product

Feature or Product? Platform or Peril? How to Avoid Building the Wrong Thing

Austin McDaniel

11/20/2024

The tech world is buzzing with innovation, and nowhere is that more true than in AI. But while the pace of breakthroughs is exciting, it’s also brutal—especially for startups. In recent years, we’ve seen a wave of AI startups crash and burn, many within months of launching. Why? Because they fell into the trap of building a feature instead of a product.

It’s a harsh reality: when your entire business hinges on solving a narrow problem or relies too heavily on a larger platform, you’re at the mercy of forces you can’t control. Platforms like OpenAI are constantly evolving, and as they implement more features natively, many startups lose their competitive edge. In fact, 90% of AI startups fail—often because they didn’t take the time to evaluate whether their idea was a standalone product or just a feature.

If you’re navigating this tricky terrain, you’re not alone. At Good Code, we’ve helped startups wrestle with this exact challenge. Let’s break down how to spot the difference between a feature and a product, and what it takes to build something truly lasting.

Here are two key questions to ask yourself:

• How easy would it be for a platform (e.g., OpenAI) to implement your idea and render your company obsolete?

If your core offering is too simple or tied to an existing platform’s ecosystem, there’s a real risk that the platform itself could integrate your feature. When that happens, customers won’t need you—they’ll get your feature as part of the larger product for free.

• Does your idea provide enough value for someone to pay for it as a standalone solution?

Does your idea replace an existing product or process in a meaningful way? If it doesn’t, does it still deliver enough value that customers will willingly purchase it in addition to what they’re already using? If the answer is no, you may be in feature territory.

Let’s look at an example. Notion Forms was a tool that added form functionality to Notion databases—a simple, effective feature. But it was also just a feature. Notion eventually recognized this gap and built the same functionality natively into their product. Now, Notion Forms has been outdone by the very platform it relied on, leaving it as more of a “not needed anymore” tool.

This dynamic is common in the AI startup space, too. Many companies build niche features on platforms like OpenAI, only to be overtaken when those platforms integrate the same capabilities. A staggering 90% of AI startups fail for this reason—they’re feature companies, not product companies.

In the early days of generative AI, dozens of startups emerged with tools that promised to revolutionize writing—AI assistants that could draft emails, blog posts, and marketing copy in seconds. These tools gained quick traction by leveraging APIs from platforms like OpenAI’s GPT-3, allowing them to offer advanced capabilities without needing to develop their own models.

But here’s the catch: these startups were essentially feature companies. They depended on OpenAI’s platform for the core functionality, and their unique value-add was often little more than a polished UI or a few tailored prompts. It wasn’t long before OpenAI itself released ChatGPT—a native product that offered similar capabilities but with broader reach, deeper integration, and a more robust ecosystem.

For many of these startups, the launch of ChatGPT was a death knell. Without control over their technology stack or the ability to differentiate meaningfully, their value proposition evaporated. A few managed to survive by pivoting to niche applications or forming strategic partnerships, but most faded away.

This case underscores a critical point: if your business is entirely dependent on a larger platform’s roadmap, you’re building on quicksand. The platform will always prioritize its own growth—and your feature may just become their next release.

That’s not to say it’s impossible to build a successful business around a feature. Sometimes the parent company won’t prioritize your feature because it doesn’t align with their vision or because it’s not lucrative enough. In those cases, your feature might fill a valuable niche for a time.

However, don’t expect big VC funding for a feature company. VCs are looking for scalable growth, and a feature doesn’t have the same risk-reward profile as a platform. To them, a feature simply doesn’t move the needle enough.

A product solves a specific problem for a specific audience—it’s standalone and complete. A platform, on the other hand, is a foundation on which other products can be built.

Platforms have compounding potential: every new product built on the platform generates more value and revenue. This scalability is how billion-dollar companies are born. If you want to aim big, think about how to transition from a feature to a platform—or build one from the ground up.

If you realize your business idea is just a feature, don’t panic. You have options:

• Build a Product Under Your Feature

If you’ve got the runway and customer interest, consider broadening your scope. Develop a full product to support your feature, differentiating yourself from the platform you’ve built on.

• Form Strategic Partnerships

Align yourself with the platform. Become a valued partner that helps sell their core product rather than a competitor. This approach can grant you insights into their roadmap—and might even lead to an acquisition.

At Good Code, we’ve helped over two dozen startups build software their customers love—whether they were pivoting away from “feature land” or doubling down on creating easy to use platforms. If you’re a security company planning your next big project, or you’re wondering how to transform your idea into a product (or platform) that stands the test of time, we can help.

Reach out to schedule a strategy session or audit—we’ll help you nail your launch from day one.