How “Digital Platforms” Fail?
How “Digital Platforms” Fail?
Digital Platforms , In Today’s smartphones have processing power thousands of times better than the technology that sent humans on the moon in the year 1969. These devices, which are only 10 years old, connect the vast majority of the world’s population.
These Digital platforms are at the heart of five of the world’s six most valuable companies. In addition to it, we found 43 publicly traded platform firms in 2000, Global Forbes, based on a 20-year study of data. These platforms made the same amount of money, as respective non-platform equivalents, but only employed half as many people. Also, they had twice as much operating profit as they did before, as well as significantly larger market valuations and growth rates.
The failing platforms have an average lifespan of only 4.9 years. Several gig economy websites failed within two to three years due to a lack of users or investment. Given the requirement for substantial funds, it’s no surprise that solo businesses have a shorter lifespan than those purchased or founded as part of a larger company or group of companies.
The average lifespan of a stand-alone company was only 3.7 years. The acquired enterprises, which tended to have stronger sheets of the balance sheet, were able to battle for longer (an average of 7.4 years), but firms that have been a part of bigger corporations were just an average in terms of survival time.
We divided the most prevalent errors into 4 groups:
- Dismissing competition too quickly
- Under-Pricing on 1 side of the market
- Joining too late
- Failing to build trust with Partners & Users
Even though price decisions have been researched extensively, managers continue to make mistakes. To encourage any opposing side of the market to participate, a platform frequently involves subsidising only one side of the market. However, determining which side should be charged & which should be subsidised could be the most crucial strategic choice for any of the platform.
The following are the primary findings from our investigation into – Why Digital platforms fail:
1. Because so many things may go incorrect in a market of platform, entrepreneurs & managers must work hard to learn from their mistakes. Despite the significant upside prospects that platforms provide, following platform strategy doesn’t guarantee business success.
2.Because Digital platforms are predominantly determined by the network effects, determining the proper rates & determining which sides to support remain the most difficult tasks. The power of the network effects to boost volume by drastically cutting costs & prices on both sides of the market was a great insight of Uber.
Although Uber is currently battling to consider making its economics work, eBay, Google, Alibaba, Facebook, Tencent, Amazon, & a slew of the other platforms began by heavily subsidizing at minimum 1 side of the market & eventually transitioned to significant profits.
3. It’s critical to emphasize the importance of trust. Any platform firm that asks suppliers or customers to leap of faith with no history or past relationships to the other side of the market is likely asking far too much. The failure of eBay, like Alibaba’s with Taobao, to establish processes for building confidence in China is a mistake that the platform management can & should avoid.
4. Even though it may seem self-evident, time is key. Early arrival is desirable, but it is no guaranteed success: recall Sidecar. Being late has the potential to be fatal. An instance is Microsoft’s long delay in developing a competitor to Android & iOS.
5. Arrogance might result in calamity. It’s unforgivable to dismiss the competitors, even if you’ve had a significant lead & an edge at one or some point in time.
Conclusion
Because of the vastness of the digital landscape, strategy exercises must now include the entire management team, not simply the head of the strategy. The rapid rate of change necessitates fresh, serious thought about when to set a course. Annual strategy evaluations should be shortened to quarterly intervals, with the real-time revisions & sprints respond to the triggering events.
Because of the increasing complexity of consumer, competitor & stakeholder settings, the strategy must be updated to have included war games, scenario planning exercises, and playing.
Ultimately, the significance of entrepreneurial orientation means that the – “soft stuff” would dictate the strategy. As a result, the company will be able to detect strategic possibilities on a real-time basis & be ready to pivoting as it learns, tests & adapts.
