The purpose of this paper is to capture and highlight the arising opportunities that are embedded in the topic of MSPs and deliver the results in an accessible way for managers. To further establish a basic managerial guide on how to approach the possible implementation of a MSP into an own organization or as an independent start-up, an introduction to the fundamental mechanics of platforms is given. The guide holds a major focus on the challenges that are inherent to the technology, concept, and structure of MSPs to raise the awareness of managers early on and give a balanced overview of the topic at hand. This term paper is written for the seminar Digital Transformation in Organizations and is therefore limited to a theoretical nature in form of a literature review and will not engage in any form of empirical study. Regarding the above mentioned successful and failed platform businesses, the guiding question can be derived: What are the strategic challenges managers need to consider when they want to launch their own successful MSP? Relating to the considerable effort that is linked to these strategic challenges, each chapter will give a short overview of what managers should focus on when they want to tackle this specific problem.
The topic of digital transformation attracts more and more businesses, mostly because they want to ensure their viability in now rapidly changing environments. Others seek to gain an edge over their competitors by utilizing new technologies and structures. Multi-sided platforms fulfill both criteria and their ever-growing success in the recent decade led to many all-out hunts for the next big platform. With seven out of ten of the most valuable businesses worldwide utilizing multi-sided platforms, many strategically acting managers seek to better understand the topic before trying to implement it as any successful multi-sided platform is accompanied by numerous failures. This paper contributes by uniting fundamental knowledge and new findings to create an easy-to-read handbook about the most essential features of multi-sided platforms. In the main part, the challenges that are inherent to the platform technology are analyzed. A focus lays on creating condensed guidelines that managers should consider when facing specific problems.
Table of Contents
1. Introduction and research background
2. Definition and distinction of MSPs
3. Differentiation and functionality of MSPs
4. Shared challenges of MSPs
4.1 Network effects
4.2 Sides
4.3 Pricing
4.4 Design
4.5 Governance
5. Conclusion
Research Objectives and Themes
This paper aims to provide a comprehensive management guide to understanding the fundamental mechanics, strategic challenges, and inherent risks of multi-sided platforms (MSPs) in the context of digital transformation, helping managers evaluate and successfully implement their own platform business models.
- Theoretical overview and definition of multisided platforms
- Strategic analysis of value creation and platform functionality
- In-depth investigation of core operational challenges, including network effects and chicken-and-egg problems
- Managerial guidelines for platform design, pricing strategies, and governance structures
Excerpt from the Book
1. Introduction and research background
The existence of multi-sided platforms (MSPs), also just called platforms, can be retraced to the early beginnings of civilizations and societies. This is due to the theoretical nature of the topic, a MSP can be understood as any exchange-system where the interaction of two or more distinct groups are regulated by the platform provider. Hagiu (2007) confirms the long history of MSPs with an example of an old village market and matchmakers. However, the topic of successful platform businesses expanded drastically in the recent decades with the introduction of the internet and the possibility to reach a broader target group, thus increasing the value of MSP businesses exponentially. Since this time. MSPs can act as a disruptive force that can shake the fundamental concept of many traditional industries like Airbnb and Uber did for the accommodation and transportation industry respectively.
Summary of Chapters
1. Introduction and research background: The chapter establishes the historical context of platform businesses and sets the research focus on the strategic challenges managers face when launching an MSP.
2. Definition and distinction of MSPs: This section provides a clear categorization of platforms, emphasizing their role as central matchmakers that provide value through the connection of distinct customer groups.
3. Differentiation and functionality of MSPs: The chapter categorizes platforms based on how they reduce search costs and create value, distinguishing between innovative participation systems and transaction-based platforms.
4. Shared challenges of MSPs: This chapter analyzes the critical strategic decisions and trade-offs regarding network effects, platform sides, pricing models, design, and governance rules.
5. Conclusion: The concluding chapter summarizes the complexity of building a successful platform and reiterates the need for a consolidated, thorough analysis of existing platform types and environments.
Keywords
multi-sided platform, MSP, digital transformation, strategic challenges, pricing, governance, network effects, chicken-and-egg problem, platform design, value creation, transaction, matchmaking, scalability, business model, platform ecosystem
Frequently Asked Questions
What is the primary focus of this paper?
The paper focuses on the strategic challenges and managerial aspects involved in conceptualizing and launching a multisided platform (MSP) in the modern digital landscape.
What are the central themes covered in the work?
Key themes include the definition and functionality of MSPs, the dynamics of network effects, the structural challenges of managing different platform sides, pricing strategies, and the governance of platform interactions.
What is the main research question being asked?
The guiding question is: What are the strategic challenges managers need to consider when they want to launch their own successful MSP?
Which scientific methodology is employed?
The paper utilizes a literature review methodology to synthesize existing theoretical knowledge and academic findings into an accessible guide for business leaders.
What topics are discussed within the main part?
The main part systematically examines five core pillars: network effects, the selection of platform sides, pricing strategies, platform design, and the governance of user interactions.
What keywords characterize the research?
The research is characterized by terms such as MSP, strategic challenges, network effects, platform design, pricing, and governance.
Why are network effects considered a double-edged sword?
While network effects are primary drivers of rapid growth and high valuation, they also introduce the "chicken-and-egg problem," where the platform struggles to attract one side of the market without an established opposite side.
How should managers approach governing their platform?
Managers must find a balance between tight and loose governance; while tight control helps ensure quality and safety, it increases operational complexity, requiring a careful alignment with the platform's brand image.
What role does platform design play in long-term success?
Platform design functions, such as filtering tools or signaling mechanisms, should be optimized for long-term endurance rather than short-term revenue to avoid alienating core user groups.
- Quote paper
- Tom Scheffler (Author), 2022, Multisided Platforms. A Managerial View on Implementation, Challenges and Obstacles, Munich, GRIN Verlag, https://www.grin.com/document/1334542
