The digital platform—connecting people, organizations, and resources in an interactive ecosystem through technology—is taking the business world by storm. The platform model powers many of today's biggest and most disruptive companies, like Amazon, Airbnb, and Uber. Platform businesses bring together producers and users in efficient exchanges of value (think Uber drivers and passengers), and they leverage network effects—the more participants, the greater the value produced.
Building a platform business differs from traditional product or pipeline marketing in a number of ways, perhaps most notably by virtue of its pull (rather than push) strategies. Instead of creating awareness through channels like advertising and PR (that's the push), the goods and services of a platform must attract users with incentives for participating (the pull). In network businesses, marketing must be baked into the platform. While push strategies are still valuable to a platform model, they can easily get lost in a sea of abundance and distraction.
However, platforms and the pull they require poses a conundrum. How can you begin to build a user base for a two-sided market when each side depends on the prior existence of the other? Geoffrey Parker, a visiting scholar and research fellow at the MIT Initiative on the Digital Economy, refers to this as the chicken-or-the-egg dilemma in Platform Revolution: How Networked Markets Are Transforming the Economy – And How to Make Them Work for You. In the book, Parker and his co-writer’s Marshall W. Van Alstyne and Sangeet Paul Choudary, propose eight strategies for beating this dilemma and successfully launching a platform business. We summarized them briefly here, but you can learn more about them in depth in Parker's online MIT Sloan Executive Education program, which starts next week (November 7).
- The follow-the-rabbit strategy: Use a non-platform demonstration project to model success and attract users and producers and then convert to a platform. (Amazon, for example, started as an effective pipeline business, then converted itself into a platform by opening its system to external producers.)
- The piggy-back strategy: Connect with an existing user base from a different platform, such as when PayPal piggybacked on eBay’s online platform, or when YouTube offered its powerful video tools to MySpace members.
- The seeding strategy: Create value units that will be relevant to at least one set of users, and other users (who want to interact with the first set) will follow. Take Adobe, for example, which launched its PDF document-reading tool in part by arranging to make all federal government tax forms available online. The IRS saved money on printing and postage, and taxpayers got fast and easy access to documents. Millions of people were turned on to Adobe this way and since adopted Adobe as their document platform of choice.
- The marque strategy: Provide incentives to attract key users (consumers or producers) whose participation can make or break the success of your platform.
- The single-side strategy: Create a business around products or services that benefit a set of users, then later covert the business to a platform and invite the other side. How can this possibly work? Take OpenTable. To work as a platform, they needed both a large base of participating restaurants (to attract the patrons), and a large base of patrons (to attract the restaurants). So they started by distributing booking management software that restaurants could use to manage their seating inventory. Once they had enough restaurants, they built out their consumer side.
- The producer evangelism strategy: Attract the producers first, who can bring their consumers with them. The education platform Skillshare signs up influential teachers and allows them to easily host online courses, which then prompts their students to get on board.
- The big-bang adoption theory: Use traditional push strategies to attract a high volume of interest and traffic. If it works, it can trigger a simultaneous on-boarding effect. While push strategies, as mentioned above, have become increasingly ineffective at sparking large-scale growth, there are exceptions. Twitter’s breakout moment, for example, occurred at the 2007 South by Southwest festival. They installed giant, flat-panel screens where users could see their tweets in real time. By the end of the festival, Twitter usage had tripled.
- The micromarket strategy: Start by focusing on a tiny market of members who are already engaged with one another. Facebook’s launch in the closed community of Harvard ensured the creation of an active community at launch. It also enabled them to improve the quality of the interactions among its members before expanding.
Learn more about platform business models, launch strategies, and success stories in the upcoming program Platform Revolution: Making Networked Markets Work for You (online)—the next session starts November 7th, 2016. Led by Geoffrey Parker, the online program includes weekly live webinars, pre-recorded video lectures, and learning module videos, making it a flexible learning option for busy executives. It is as applicable to entrepreneurs and executives in small and medium businesses as to executives in larger companies.