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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
  • Driving Efficiency and Sustainability at P&G China By: Feng Zhu, Philip Kuai and Billy Chan
  • How to Avoid the Agility Trap By: Jianwen Liao and Feng Zhu
  • Cheerful Music By: Shunyuan Zhang, Feng Zhu and Nancy Hua Dai
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