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A study of more than 250 platforms a reveal why most fail

Yoffie, David B., Gawer, Annabelle and Cusumano, Michael A. (2019) A study of more than 250 platforms a reveal why most fail Harvard Business Review.

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Platforms have become one of the most important business models of the 21st century. In our newly-published book, we divide all platforms into two types: Innovation platforms enable third-party firms to add complementary products and services to a core product or technology. Prominent examples include Google Android and Apple iPhone operating systems as well as Amazon Web Services. The other type, transaction platforms, enable the exchange of information, goods, or services. Examples include Amazon Marketplace, Airbnb, or Uber.

Five of the six most valuable firms in the world are built around these types of platforms. In our analysis of data going back 20 years, we also identified 43 publicly-listed platform companies in the Forbes Global 2000. These platforms generated the same level of annual revenues (about $4.5 billion) as their non-platform counterparts, but used half the number of employees. They also had twice the operating profits and much higher market values and growth rates.

However, creating a successful platform business is not so easy. What we call “platformania” has resembled a land grab, where companies feel they have to be the first mover to secure a new territory, exploit network effects, and raise barriers to entry. Uber’s frenetic efforts to conquer every city in the world and Airbnb’s desire to enable room sharing on a global scale are the two most obvious recent examples.

The problem is that platforms fail at an alarming rate. By identifying the sources of failure, managers can avoid the obvious mistakes.

Item Type: Article
Divisions : Faculty of Arts and Social Sciences > Surrey Business School
Authors :
Yoffie, David B.
Cusumano, Michael A.
Date : 29 May 2019
Copyright Disclaimer : Copyright © 2019 Harvard Business School Publishing. All rights reserved.
Depositing User : Clive Harris
Date Deposited : 06 Jun 2019 14:20
Last Modified : 14 Aug 2019 13:01

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