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Commerce Technology

Platform Failure

Sadly, this wasn’t what I thought this was going to be about.

A Study of More Than 250 Platforms Reveals Why Most Fail

“Platforms have become one of the most important business models of the 21st century. Five of the six most valuable firms in the world are built around these types of platforms. However, a study of 252 platform companies showed that 209 of them failed. The most common mistakes into four categories:

(1) mispricing on one side of the market,

(2) failure to develop trust with users and partners,

(3) prematurely dismissing the competition, and

(4) entering too late.

Researchers have extensively studied pricing decisions, yet managers still get them wrong. A platform often requires underwriting one side of the market to encourage the other side to participate. But knowing which side should get charged and which side should get subsidized may be the single most important strategic decision for any platform.”

Kyle Westaway

Interesting what each of us takes away when we read articles. The quote above is from Kyle Westaway – and indeed nothing wrong with his takeaway. But there is more – and even the HBR article doesn’t really get down to it.