I have been studying the dynamics of platform businesses for 10 years, and, with colleagues including Peter Coles, Chris Dixon, Tom Eisenmann, and Andrei Hagiu, I have documented and analyzed case studies on dozens of platform sites and products. And network effects protect their position once established users rarely leave a vibrant platform. They have modest operating costs because they don’t usually manufacture tangible goods or hold inventory. It’s not hard to see why entrepreneurs are drawn to these businesses: They create significant value by enabling communication and commerce that might not otherwise occur. What newspapers, HMOs, and computer operating systems have in common, and how to manage changing value chains.ĭespite these challenges, the number of online platforms has spiked in recent years. Should my platform be compatible with legacy systems? How can I build credibility with customers? It involves asking five basic questions:Ĭan I attract a large group of users at once? In this article he draws on research on dozens of platform sites and products to offer a framework for building a successful platform business.

Harvard Business School professor Ben Edelman has been studying the dynamics of platform businesses and strategies for launching them for 10 years. Drivers must also be willing to accept smartphone bookings. For example, it’s not enough that many customers want to book taxis by smartphone. Platforms need to immediately attract not only many users but multiple types of users. Entrepreneurs are particularly drawn to these platforms because they create significant value and have modest operating costs, and network effects protect their position once established-users rarely leave a vibrant platform.īut these businesses also raise significant start-up challenges. The ubiquity of internet access has caused a sharp rise in the number of businesses offering platforms that connect users for communication or commerce.

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