Harvard Business Review

HBR: Why Some Platforms Thrive And Others Don’t

What Alibaba, Tencent, and Uber teach us about networks that flourish. The five characteristics that make the difference
By Feng Zhu and Marco Iansiti, Professor of Business Administration at Harvard Business School
February 1, 2019   /   1 Minute Read
Why Some Platforms Thrive and Others Don’t

Below is a summary from the article published in Harvard Business Review in February 2019.

Summary. In the digital economy, scale is no guarantee of continued success. After all, the same factors that help an online platform expand quickly—such as the low cost of adding new customers—work for challengers too. What, then, allows platforms to fight off rivals and grow profits? Their ability to manage five aspects of the networks they’re embedded in:

  • network effects, in which users attract more users
  • clustering, or fragmentation into many local markets
  • the risk of disintermediation, wherein users bypass a hub and connect directly
  • vulnerability to multi-homing, which happens when users form ties with two or more competing platforms
  • network bridging, which allows platforms to leverage users and data from one network in another network

When entrepreneurs are evaluating a digital platform business, they should look at these dynamics—and the feasibility of improving them—to get a more realistic picture of its long-term prospects.

Read the entire article on HRB.com here.

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