1. Based on articles from April 2016 issue of Harvard Business Review magazine
Technology Platforms:
Top 6 Pitfalls
Presentation by Thane Ritchie

2. Transforming a product or service
into a platform can dramatically
increase its value…

3. …But the path can be treacherous,
and many attempts have failed.

4. Studying the successes and failures of platform
businesses, three authors include their latest
research findings and provide expert tips and advice
about what works and what doesn’t work when
transforming a product or service into a platform.
Their work is featured in the April 2016 issue of
Harvard Business Review magazine.

5. Based on these findings, Here are
6 key errors to avoid:

6. Failure to optimize
“openness”
It’s critical to carefully manage
the platform’s “openness” – the
degree of access that consumers,
producers, and others have to a
platform, and what they’re
allowed to do there.

7. 1. Failure to optimize “openness”
Example Case
Study:
Most successful platforms manage
openness to maximize positive network
effects. For example, Airbnb and Uber
rate and insure hosts and drivers,
Twitter and Facebook provide users
with tools to prevent stalking, and
Apple’s App Store and the Google Play
store both filter out low-quality
applications.

8. 1. Failure to optimize “openness”
Key Takeaway:
Platforms consist of rules and
architecture. Their owners need
to decide how open both should
be. An open architecture allows
players to access platform
resources, such as app developer
tools, and create new sources of
value.

9. Failure to engage
developers
It’s not enough to open the door
and set the table. Successful
platforms engage in platform
evangelism, providing developers
with resources to innovate,
feedback on design and
performance, and rewards for
participation.

10. 2. Failure to engage developers
Example Case
Study:
Some platforms encourage
producers to create high-value
offerings on them by establishing
a policy of “permission-less
innovation.” Rovio, for example, didn’t need permission to
create the Angry Birds game on the Apple
operating system and could be confident that
Apple wouldn’t steal its IP. The result was a
hit that generated enormous value for all
participants on the platform.

11. 2. Failure to engage developers
Key Takeaway:
A simple rule for platform managers
is to take less value than you make,
and share value fairly with all
participants.

12. Failure to share the
surplus
Having valuable interactions is the
reason to participate on a platform.
The consumer, the producer, and
the platform all win if the division
of value works for everyone. But if
one party gets insufficient value,
then they have no reason to
participate.

13. 3. Failure to share the surplus
Example Case
Study:
If a traveler opens the Lyft app and
sees “no cars available,” the platform
has failed to match an intent to
consume with supply. Passengers who
see this message too open will
eventually stop using Lyft, leading to
higher driver downtimes, which can
cause drivers to quit Lyft, resulting in
even lower ride availability.

14. 3. Failure to share the surplus
Key Takeaway:
Healthy platforms track the
participation of ecosystem members
that enhances network effects -
activities such as content sharing and
repeat visits. Facebook, for example,
watches the ratio of daily to monthly
users to gauge the effectiveness of its
efforts to increase engagement.

15. Failure to launch
the right side
Sometimes at launch it’s important
to focus on attracting consumers
over producers, sometimes it’s the
reverse, and sometime both sides
need equal attention from the
outset.

16. 4. Failure to launch the right side
Example Case
Study:
Google Health, for example, focused
first on the consumer side of the
market when they needed to focus on
providers first - the other side of the
market. Securing their participation
was critical for this health-
information platform to succeed. As a
result, the Google Health platform
failed.

17. 4. Failure to launch the right side
Key Takeaway:
Platform managers have to
carefully determine which side
of the platform market to
emphasize, and when.

18. Failure to put critical
mass ahead of money
With a new platform, the critical
asset is the community and the
resources of its members. A strategic
aim for platforms should be strong
up-front design that will attract the
desired participants, enable the right
interactions, and encourage ever-
more-powerful network effects.

19. 5. Failure to put critical mass ahead of money
Example Case
Study:
Hewlett Packard (HP) made the mistake
of emphasizing products over platforms.
Before the iPhone launched in 2007,
HP dominated the handheld calculator
space for science and finance. Yet
today, consumers can purchase near
perfect calculator apps on iTunes or on
Google Play and at a fraction of the
cost of a physical calculator.

20. 5. Failure to put critical mass ahead of money
Key Takeaway:
Even after the subsidies end,
platform monetization that comes
at the expense of building network
effects is rarely sustainable in the
long run as it works against the
core mechanism by which
platforms create value at scale.

21. Failure of
imagination
Because platforms require new
approaches to strategy, they
also demand new leadership
styles.

22. 6. Failure of imagination
Example Case
Study:
Media mogul Rupert Murdoch bought the
social network Myspace and managed it the
way he might have run a newspaper - from
the top down, bureaucratically, and with a
focus more on controlling the internal
operation than on fostering the ecosystem
and creating value for participants. In time
the Myspace community dissipated and the
platform withered.

23. 6. Failure of imagination
Key Takeaway:
Traditional pipeline firms must
develop new core competencies -
and a new mindset - to design,
govern, and nimbly expand
platforms on top of their existing
businesses.

24. Best Practices
Here are four best practices to help ensure success:
1.Start with a defensible product and a critical mass of users.
2. Apply a hybrid business model focused on creating and
sharing new value.
3. Drive rapid conversion to the new platform.
4. Identify and act on opportunities to deter competitive
imitation.

25. Harvard Business Review (HBR) Magazine,
April 2016 issue
Sources:
Articles:
“6 Reasons Platforms Fail”
“Pipelines, Platforms, and the New Rules of
Strategy”
Authors:
Marshall W. Van Alstyne
Geoffrey G. Parker
Sangeet Paul Choudary