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  • January–February 2019
  • Article
  • Harvard Business Review

Why Some Platforms Thrive and Others Don't

By: Feng Zhu and Marco Iansiti
  • Format:Print
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Abstract

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.

Keywords

Digital Platforms; Competition; Network Effects; Competitive Strategy

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.
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About The Authors

Feng Zhu

Technology and Operations Management
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Marco Iansiti

Technology and Operations Management
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More from the Authors

    • December 2022
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    TSG Hoffenheim; Step by Step Analysis in Excel

    By: Feng Zhu, Karim R. Lakhani, Kerry Herman and Sascha L. Schmidt
    • December 2022
    • Management Science

    Competition, Contracts, and Creativity: Evidence from Novel Writing in a Platform Market

    By: Yanhui Wu and Feng Zhu
    • September 2022 (Revised October 2022)
    • Faculty Research

    Data Privacy in Practice at LinkedIn

    By: Iavor Bojinov, Marco Iansiti and Seth Neel
More from the Authors
  • TSG Hoffenheim; Step by Step Analysis in Excel By: Feng Zhu, Karim R. Lakhani, Kerry Herman and Sascha L. Schmidt
  • Competition, Contracts, and Creativity: Evidence from Novel Writing in a Platform Market By: Yanhui Wu and Feng Zhu
  • Data Privacy in Practice at LinkedIn By: Iavor Bojinov, Marco Iansiti and Seth Neel
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