Donato Cutolo, Andrew Hargadon, and Martin Kenney
In the past decade, digital platforms have profoundly reorganized markets and redefined the dynamics of value creation and competition. As they have prospered, other businesses have felt compelled to join the platform economy, viewing participation as necessary for growth and even survival.
But platform-dependent businesses must recognize the power dynamics and risks intrinsic to platform-controlled markets. These include experiencing pricing inflexibility, being bundled to appear alongside competitors, and being kept at arm’s length from customers. Doing business on dominant internet platforms requires companies to develop strategies that leverage a platform’s resources while mitigating its power over them.
There are four steps companies can take to navigate the risks: experiment with changing channels, use the platform to market themselves, game the system of algorithms that govern the platform, and diversify their income streams. Businesses can also engage with their governments to argue for new regulatory frameworks to mitigate platforms’ power.
Ulrich Pidun, Martin Reeves, and Edzard Wesselink
Companies that start or join successful business ecosystems — dynamic groups of largely independent economic players that work together to deliver coherent solutions to customers — can reap tremendous benefits. Ecosystems can, for instance, provide fast access to external capabilities that may be too expensive to build within a single company.
However, less than 15% of ecosystems end up being sustainable in the long run. Drawing from a database of more than 100 failed ecosystems (including B2C, C2C, and B2B platforms; social networks; and marketplaces), the authors compared failed ecosystems with their successful counterparts. They identified key success metrics and red flags that indicate emerging challenges in each of the ecosystem’s four life cycle phases: at its launch, when it’s scaling, at maturity, and as it evolves. Paying attention to the issues that can arise during each phase can help organizations decide whether they need to try to reorient their ecosystem — or even abandon it.
Max Büge and Pinar Ozcan
Rapid scaling is a core element of platform strategy, where speed in capturing market share has been considered the decisive factor for success. But in some cases, a slower, more incremental approach works better.