DoP Deep: Spotify, Revolut and how to productize your internal tools
A closer look at how to productize your internal tools to increase revenues - and whether it’s a good idea at all
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Hi product people 👋,
In 2009, the developers of a game called Glitch managed to raise over $10.7 million in funding to bring their vision of a Second Life-inspired game online. Despite their best efforts, 3 years later the developers realised the game was dead.
But during their time building the game together, the engineering teams, who were distributed across the world, decided to build their own communications tool for chatting with colleagues from around the world. This tool, led by Stewart Butterfield, was called Tiny Speck and it allowed teams to login and view messages asynchronously with chat rooms including a ‘random’ room for off-topic discussions. A few years later this internal tool would be renamed Slack.
In a recent Weekly Briefing we covered the story of Spotify and Revolut transforming their own internal tools into productized, commercial offerings. And in this DOP Deep dive we’ll go deeper into the concept of productizing internal tools as a way to generate new revenue streams for your product.
Coming up:
The rise of internal tools as a new way to generate revenues
A closer look at what Spotify and Revolut are building - and lessons to learn for your product
How to productize your own internal tools: critical questions to ask yourself and practical steps for transforming internal tools into externally facing commercial products
The rise of internal tools as revenue generators
This past year has seen tech companies focus relentlessly on profitability and mentions of profits, margins, free cash flow during company earnings calls reached record highs.
Unfortunately for product teams, one of the most painful tactics companies have deployed to reach profitability has been layoffs. And despite a 2023, the start of this year has been equally brutal with companies like Google, Discord, Twitch and others all announcing a fresh round of cuts.
But aside from layoffs, other tactics deployed by companies include a focus on new monetization strategies. One of these is the transformation of internal tools into customer-facing products as new revenue generators.
Productizing internal tools into commercially viable products certainly makes sense on paper. Launching a new product in this way can strengthen existing product offerings as it gives companies the chance to bundle products together and enhance their strategic moats.
It can also help teams to think commercially and collaboratively. This is especially important for folks who work on internal tools who are often seen as the unsung heroes of the tech industry. If internal tooling teams know that there’s a chance the product they’re working on might also be given to every day consumers, this helps motivate teams to build internal tools of an equally high standard.
At Uber, every employee is a customer. In a post describing how they set themselves up for success, they explain that the products they build internally are for Uber employees. And Uber employees are treated as customers.
As a global company, Uber employees rely on a host of tools and technologies to enhance our platform and support our millions of daily customers. Our IT Engineering team (IT Eng) develops and maintains the systems and services that let the rest of the company do its work. For IT Eng, every Uber employee is a customer.
The first principle to follow when building internal products is to treat your internal tools with love. Because if you do, it makes productizing them further down the line a lot easier.
A closer look at what Spotify and Revolut are building
Spotify recently announced that it is releasing its A / B testing platform as a new product called Confidence.
The product is currently in beta and includes a set of experimentation-oriented features including:
Feature flags for switching on and off features
Events for writing data to data warehouses
Metrics for measuring the results of experimentation
Workflows for orchestrating types of experiments
What’s really interesting though, is Spotify’s decision to go API-first. At its heart, Confidence is an experimentation platform that’s built as an API-first product to maximise the flexibility it offers to potential customers. This decision to build the product as an API-first offering was a result of the struggles that Spotify faced internally when trying to find off the shelf vendors who were capable of tailoring their product to Spotify’s needs:
Our choice has been to invest in building our own experimentation platform, because no tool has been able to meet our constantly changing requirements. Building your own platform is an incredible investment that's easy to underestimate.
And this is one of the reasons why products that are built out of frustrations with existing products can be so successful; if you’re scratching your own itch to solve problems that you have, the chances are that someone else has those problems, too.
Neobank Revolut did exactly the same thing with its new offering which started life as an internal tool. The company announced that it is to release a HR management platform called Revolut People.
In the PR and blog posts outlining the launch of the new product, the team made it clear that they built this new product because they too weren’t able to find something off the shelf which solved the unique problems they had.
Here’s some other examples of products which started as internal tools: