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• Article | Harvard Business Review | January–February 2019

  Why Some Platforms Thrive and Others Don't

  Feng Zhu and Marco Iansiti

  In the digital economy, scale is no guarantee of continued success. After all, the same factors that help an online platform expand quickly—such as the low cost of adding new customers—work for challengers too. What, then, allows platforms to fight off rivals and grow profits? Their ability to manage five aspects of the networks they’re embedded in:
  
  • network effects, in which users attract more users
  • clustering, or fragmentation into many local markets
  • the risk of disintermediation, wherein users bypass a hub and connect directly
  • vulnerability to multi-homing, which happens when users form ties with two or more competing platforms
  • network bridging, which allows platforms to leverage users and data from one network in another network
  
  When entrepreneurs are evaluating a digital platform business, they should look at these dynamics—and the feasibility of improving them—to get a more realistic picture of its long-term prospects.

  Citation:

  Zhu, Feng, and Marco Iansiti. "Why Some Platforms Thrive and Others Don't." Harvard Business Review 97, no. 1 (January–February 2019): 118–125.  View Details

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• Working Paper | HBS Working Paper Series | 2018

  Marketplace Scalability and Strategic Use of Platform Investment

  Jin Li, Gary P. Pisano and Feng Zhu

  Keywords: marketplace;

  Citation:

  Li, Jin, Gary P. Pisano, and Feng Zhu. "Marketplace Scalability and Strategic Use of Platform Investment." Harvard Business School Working Paper, No. 19-063, December 2018.  View Details

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• Working Paper | HBS Working Paper Series | 2018

  Network Structures and Entry into Platform Markets

  Feng Zhu, Xinxin Li, Ehsan Valavi and Marco Iansiti

  While some platform markets exhibit strongly interconnected network structures in which a buyer is interested in purchasing services from most providers, many platform markets consist of local clusters in which a buyer is primarily interested in purchasing services from providers within the same cluster. We examine how network structures affect interactions between an incumbent platform serving multiple markets and an entrant platform seeking to enter one of these markets. We find that having more mobile buyers, which increases interconnectivity among markets, reduces the incumbent’s incentive to fight and increases the entrant’s incentive to expand. Incumbent profits increase with interconnectivity. When advertising is inexpensive and mobile buyers consume in both local markets and the markets they visit, greater interconnectivity increases the entrant’s profit, thus encouraging entry.

  Keywords: network structure; clustering; platform competition; Networks; Market Platforms; Competition; Market Entry and Exit;

  Citation:

  Zhu, Feng, Xinxin Li, Ehsan Valavi, and Marco Iansiti. "Network Structures and Entry into Platform Markets." Harvard Business School Working Paper, No. 19-062, December 2018.  View Details

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