36
DISRUPTION NETWORKS
service approach is often in order for plat-
forms to thrive.
India’s largest online bus ticket plat-
form, redBus, serves a case in point. The
company started out in 2005 with a vision
to take what was an extremely fragmented
industry and make it efficient. To do that,
redBus had to ensure buy-in from both
consumers and bus operators, but it soon
came to realize that operators were not
comfortable using the software – a funda-
mental flaw for a platform that relied upon
real time seat inventories. To fix the prob-
lem, redBus had to provide significant as-
sisted services, including a digital invento-
ry system, to ensure that bus operators
came onboard.
Sharing is not
a question of what
to open, but of what
to keep closed.
And platform pitfalls aren’t restricted to
startups – even Google has had to learn
from its emerging market mistakes. When
the tech giant launched its advertising
capabilities in the United States, its self-
serve model permitted people with little
or no experience to advertise quickly and
easily for the first time using Google Ad-
Sense and AdWords. Consequently, Google’s
services achieved high adoption amongst
small businesses, earning the platform
significant success. However, when Google
tried to introduce the same model to Asia,
the outcome was far less impressive.
In Asia, small businesses were not mar-
keting their services on the Internet.
Some didn’t even have a website. Google
realized it had to change its approach, fast.
So, instead of targeting small businesses,
it started going after ad buying agencies,
which would in turn target larger brands.
In essence, the agency became the assisted
service provider that allowed the end brand
to participate on the platform.
What the examples of redBus and Google
show us is that, with the right approach,
EMERGING MARKETS BUSINESS
SUMMER 2017
platform strategies do work in emerging
markets. So why aren’t there more success
stories to discuss? One of the problems
for emerging markets is that a lot of the
innovation occurring within them happens
in the startup space, and startups are
funded by venture capitalists. While this
may not seem like a cause concern, a lot
of venture capitalists in emerging markets
– with the exception of China – have pre-
viously invested in the United States. As a
result, they either try to replicate Western
models or overlook investment opportunities
in emerging market-specific platforms.
This is one of the main reasons why we
see fewer platform strategies in action
across the emerging world – but that doesn’t
mean that potential doesn’t exist. In the
campaign to seize it, one of the first con-
siderations is whether to create a platform
of your own, or participate in an existing one.
This decision involves multiple consid-
erations. Size is indeed one of them; if
your company’s capacity and resources
are limited, then sustaining a viable plat-
form may be tough. But examples exist that
point to the contrary. For example, in
Germany many small manufacturing firms
are becoming platform companies, and this
is because of a second factor: the platform
potential of a given industry segment. If
a dominant platform does not already ex-
ist, then even as a small company, you have
the potential to develop your own.
To do so, however, it is important to have
ownership over the relationship with the
EMB
TO CREATE OR PARTICIPATE?
THE DECIDING FACTORS
1. Capacity
Does your company have
size/capacity to sustain its
own platform?
2. Potential
Do other platforms exist
in your industry segment?
Is there room for more?
3. Ownership
Will you own the relationship
with platform participants?
4. Negotiation Power
Can you ensure partners
participate on your terms?
5. Competition
If competition is stiff,
do you have the resources
to battle it out?
6. Value Chain
If competition is prohibitive,
what elements of your value
chain can you open up?
participants who need to come onto your
platform. This means that you should have
end-user partnerships, in the same way
that retailers, rather than the brands them-
selves, tend to own the relationship with
their customers.
Related to ownership is the question of
negotiation power. If you are considering
creating a platform, you need to consider
whether or not you are able to negotiate
partner participation on your terms.
If you have the ownership and negotia-
tion power, then you stand a good chance
of holding your own, but understanding the
competition in your industry is important
nonetheless. There are certain industries,
such as healthcare, where the move towards
platforms is happening relatively slowly,
but there are others, like automotive man-
ufacturing, where everybody has jumped
on the bandwagon simultaneously – every
car manufacturer is trying to become
a platform today. If you are in an industry
where competition is high, you might have
to think once more about whether there’s
going to be a ‘winner takes all’ model, or
whether multiple platforms can exist. Based
on that, you must make the call on whether
you have the resources to battle it out, or not.
Those who don’t, need not give up en-
tirely on developing their own platforms.
Even if you don’t end up becoming
a Facebook or an Uber – which is not the
promise of platforms at all and is where
we get distracted – you can still look at
your value chain and see which elements,
if any, could be opened out. That’s how
P&G thinks about it. The multinational
manufacturer takes a holistic look at its
value chain and identifies parts that can
be opened up, such as P&G Connect and
Develop, the company’s program for en-
couraging open innovation.
If you do decide to develop a platform
that opens out limited elements of your
business – or indeed if you’re ready for
a fully-fledged approach – the following
considerations can help you on the road
to success.
IT’S NOT ABOUT WHAT TO
KEEP OPEN, BUT WHAT
TO KEEP CLOSED
In addition to these five considerations,
it is important to reassess how you view
the concept of sharing. The idea of opening
up and sharing knowledge is sometimes
met with a measure of apprehension, »
ISSUE NO. 3
37
DEVELOPING A PLATFORM: KEY CONSIDERATIONS
building out a platform:
whether you get the
supply in first, or the
demand side in first -
that’s a question that
you need to figure out.
1. Look at the markets
for interaction.
The first thing to
do is to look for
markets which have
inefficiencies and
a clear problem that
can be solved by
introducing a platform
to coordinate them.
Where there is
considerable
information asymmetry
and inefficiency, there
is often opportunity.
This is especially so for
markets that serve as
“gatekeepers”. Real
estate, media and local
commerce frequently
demonstrate these
traits and are the kinds
of markets that benefit
most from platforms.
2. Create value.
It is important to
realize that a platform
typically has no value
of its own. The value
is created when it
gets adopted.
This means there is
a bit of a chicken and
egg scenario.
Understanding how
you break that cycle
is one of the key
considerations when
3. Scale in sync.
If you solve the chicken
and egg problem, that
will give you adoption,
but it will not
necessarily help you
scale. When scaling
your platform, it is
important to make
sure that you are able
to scale the number
of interactions with the
quality of interactions
on the platform.
If you scale fast but
your model of quality
control does not
keep up, then there’s
a problem.
4. Charge with care.
When you’re building
a platform you need to
be very careful what
you charge for it.
If you’re trying to
capture value you need
to understand that
participation on the
platform is what
creates it in the first
place. So, if your
monetization model
discourages part-
icipation, then the whole
business model breaks
down. To avoid this,
it is important to
understand what parts
of the platform are
generating enough
surplus value for
users, that even if you
charge, they will be
willing to pay.
5. Assess your
market. There are
certain markets that
encourage ‘winner
takes all’ dynamics,
where just one
platform dominates.
Media is one such
market: YouTube
dominates video,
Google dominates
advertising, etc. On the
other hand, there are
markets where ‘winner
takes all’ models do
not feature. For
example, while US
pharmacy, Walgreens,
is building a healthcare
platform using the data
at its disposal, that
does not prevent
hospitals and other
companies such as
Philips or Apple from
building other
healthcare platforms.
In such industries,
where it is difficult to
capture all the user
needs on one platform,
there is a real
possibility for multiple
platforms to exist.
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