L02 Harvard Bus Rev 2017 Edelman

Question 1

What five questions should aspiring entrepreneurs ask to help them
make the right strategic decisions as they build their
own platforms?

Answer 1

(1) Can I Attract a Large Group of Users at Once?
(2) Can I Offer Stand-Alone Value?
(3) How Will I Build Credibility with Customers?
(4) How Should I Charge Users?
(5) Can I Make My Platform Compatible with Legacy Systems?

Question 2

Getting a mass sign-up at the outset can almost eliminate uncertainty about a platform’s prospects because it effectively builds critical scale into the platform’s network from day one.

A new platform can do this only if at least one of two conditions is true. State the two conditions and give an example.

Answer 2

(1) The company already has the users it needs on another platform.
(Google Adword –> Google Adsense

(2) User data is publicly available.
(Zillow’s property listings)

Question 3

What should platform businesses do if signing up large numbers of users is not feasible? And give an example of how this has happened in the past.

Answer 3

Platform businesses should look for ways of providing value to individual users even if no one else is on the platform.

Consider the VCR in the 1980s. The device could tape television broadcasts—and this benefit didn’t require that anyone else own a VCR or that any studio offer content on a video cassette.

Question 4

Which two strategies should you consider when you are figuring out what stand-alone value to offer and to who?

Answer 4

(1) Start with an industry niche.

A good approach for many platforms is to target customers in a relatively narrow market where the platform can more readily gain traction.
(Yelp)

(2) Find or build small social groups.

For some platforms, success comes through identifying and
serving the social needs of small groups.
(Skype)

Question 5

Successful platforms have worked two important pricing levers. State them and give an example.

Answer 5

(1) Pay-as-you-go.
Offering pay-as-you-go pricing is a powerful way to reduce the risks of a platform
for some types of users.
(Groupon, AWS)

(2) User subsidies.
Whether it’s launching a cereal brand or opening a restaurant, marketers widely use discounts and promotions to encourage consumers to try new offerings. For platform businesses, subsidies play an even more important role, because low usage at the outset often means that a platform’s early benefits are not great enough to outweigh the cost or hassle of joining.
(Lyft)