July 17, 2019

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.

For me, platforms have been a key to my thinking ever since I read Platform Scale, which I first discovered by reading this blog, which I came to know through Jobsworth’s Blog … that I was certainly reading 10 years ago.

People, Passion, Platforms were even my ‘three words’ for a few years - but more recently I have been moving on. More on this to come - but increasingly I am seeing platforms as yes, a way to ‘lubricate a market place’, a way to do ‘better business’ and certainly ‘good platforms’ fall into place under this particular lens …


But … I can’t help thinking there is more. Platforms serve the corporate masters well. Look no further than Uber for that, but in fact do they really serve people well?

Jeremy Heimans’ ‘Power and Values’ model, I think highlights the issue perfectly. The graphic below is old, but I haven’t been able to find a more recent one. Like all good 2*2 quadrants, top right is best, bottom left is worst and the other two quadrants have their challenges [efn_note]To be fair JH would disagree with my assessment - he argues that no quadrant is wrong - so long as you understand which quadrant you are in and work accordingly. And yes of course. But I am not in any of those quadrants. I am arguing for how people can operate in a ‘Corporate First’ society - and to me - the best chance they stand is in the top right quadrant.[/efn_note].

Platforms are indeed lubricators of a a market place, but they are also a series of silos. Deep, inpenetrable tanks that inside are wonderful - but don’t work well for the outside.

Quick Example …. imagine that you work for Uber. You clock up 10,000 rides. You have a five-star rating and then you decide that you want to move to Lyft. (The same argument applies the other way round). You now have 0 rides to your name, there is no star count, your reputation is effectively locked up in Uber. You have to start again.

How hard would it be to have a universal reputation that travels with you. Spoiler alert - not hard at all (technically). Very hard if you actually want these silo’d platforms to adopt your reputation system.

More to come, but just as Sangeet was talking all that time ago abou the transition from Pipes to Platforms - so too I am asking you today to think about the transition from Platforms to Protocols. Specifically open protocols.

It’s not a new idea. It’s just that some ideas don’t get much air.

Commerce pipes platforms protocols Technology archive.pf.business

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