Are You Missing Growth Opportunities for Your Platform?

Digital platforms have been remarkably successful businesses for both native platform firms and traditional corporations. Seven of the world’s 10 most valuable companies have launched platform businesses, as have over 60% of unicorn startups. Many companies that didn’t start out as platform businesses—from retailers Walmart and Amazon to software providers Salesforce and ServiceNow—have also successfully accelerated their growth through platform strategies.  But numerous companies have missed out on growth opportunities.

Why does one platform company succeed at growth while another does not? The authors’ research on the paths of more than 50 platform companies, including several that have become platform giants, points to four main reasons: Unsuccessful firms don’t systematically consider all growth options; they mistakenly believe they must own the various kinds of interactions that occur on the platform, not realizing that huge growth often lies in not owning them; they overlook options to engage companies that can add value or even disrupt their businesses; and they don’t identify a compelling theme that broadens their scope.

The building blocks of platform growth are interactions (the types of actions or exchanges that take place between two or more users on a platform) and sides (unique user groups and complementors). For platform businesses, growth lies in four key areas: increasing engagement in existing interactions (growing the number of users on the platform and boosting the number of interactions per user), adding new interactions (add complementary interactions or substitute interactions to enhance growth), adding new sides (that share interests with existing sides or that can be served with existing platform resources), and adding new interactions and new sides simultaneously. Platform owners use the tools of architecture (the interfaces and technical design of the platform) and governance (the rules and incentives for participation) as levers to add and grow sides and interactions.

Share the Growth Opportunity.  Partner with complementary platforms or apps that are gaining traction and whose offerings align with the needs of existing users. Companies can identify those needs by asking users what’s missing, deploying data analytics to profile users and understand their activity, and tracking traffic on and off the platform to see where users are going and where they’re coming from. By forming partnerships, platform firms consolidate services into a single access point and generate network effects through shared users, data, and costs, thereby benefiting all parties.

Not owning` the various kinds of interactions that occur on the platform.  To profit from the innovations of numerous other players in an ecosystem, a platform doesn’t need to acquire or partner with them. Instead, managers can open the platform to arm’s-length affiliates that meet certain criteria and adhere to rules of governance. In this way platform managers can capture new ideas from people they don’t even know, lowering the risk of their own irrelevance. The strategy is especially useful when the variety and scale of use cases exceed what one company can build or even understand.

Define a Compelling Theme.  By focusing solely on core interactions, platform managers overlook other potential avenues of growth. Instead, they should strive to define a compelling theme for expansion in which platform interactions relate to one another in a coherent logic.  Platform owners should start by establishing a theme that is broad enough to contain many growth options.

Repeatedly employing the four growth mechanisms can lead a platform to become a “super app”—a platform that provides a single point of access to a multitude of related interactions.

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