Although successful digital platforms can deliver remarkable value to users and riches to entrepreneurs and investors, in some sectors it isn’t clear that anyone will turn a profit.
The dramatic influence of the internet on how businesses operate and the emergence of a handful of gigantic, digitally enabled corporations have led to breathless pronouncements regarding the importance of a new class of monopolies built on digital platforms. Such platforms, it is said, can fuel network effects that lead to winner-take-all marketplaces. This perspective is often coupled with infectious optimism and investment euphoria regarding the extraordinary scale and strength of network-effects businesses.
In theory, the key attribute of a network-effects business is its momentum-driven flywheel. Every new participant increases the value of the network to existing participants, attracts more new users, and makes the prospect of a successful competitive attack ever more remote — thereby bolstering the relative attractiveness of the business. The imagined innate indomitability of network effects stems at least in part from the breathtaking strength of notable platform businesses such as Facebook Inc.’s social network or Microsoft Corp.’s Windows operating system.
The problem is that not all platform businesses exhibit network effects that reinforce a market’s winner-take-all tendency. For every Facebook and Microsoft, there are numerous network-effects businesses operating in crowded sectors where it is not always clear that anyone will turn a profit.
Nor are digital platforms necessarily better businesses than the analog versions that they displace. Analog malls had the benefit of their shoppers being miles away from competing malls, as well as the benefit of their retail tenants being committed to long-term leases. On the internet, platform competitors are only a click away, and companies regularly and dynamically optimize their customer reach across competing platforms and directly via their own sites.
هذه القصة مأخوذة من طبعة Winter 2018 من MIT Sloan Management Review.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 9,000 مجلة وصحيفة.
بالفعل مشترك ? تسجيل الدخول
هذه القصة مأخوذة من طبعة Winter 2018 من MIT Sloan Management Review.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 9,000 مجلة وصحيفة.
بالفعل مشترك? تسجيل الدخول
Ask Sanyin: How Do You Build for an Unpredictable Future?
While the pandemic was a wild ride of uncertainty for me and many of my peers in leadership, it feels like we never regained our footing.
What You Still Can't Say at Work
Most people know what can’t be said in their organization. But leaders can apply these techniques to break through the unwritten rules that make people self-censor.
Make Character Count in Hiring and Promoting
Most managers focus on competencies when evaluating candidates but it’s character that will transform the DNA of the organization. Here’s how to assess it.
Why Influence Is a Two-Way Street
Managers achieve better outcomes when they prioritize collaborative decision-making over powers of persuasion.
Know Your Data to Harness Federated Machine Learning
A collaborative approach to training AI models can yield better results, but it requires finding partners with data that complements your own.
How Integrating DEI Into Strategy Lifts Performance
Incorporating diversity, equity, and inclusion practices into core business planning can provide a competitive edge.
The Myth of the Sustainable Consumer
Companies that understand the different kinds of consumers for sustainable products can market to them more effectively.
A Practical Guide to Gaining Value From LLMs
Getting a return from generative AI investments requires a systematic approach to analyzing appropriate use cases.
Improve Workflows by Managing Bottlenecks
Understand whether process or resource constraints are stalling work.
Craft Schedules That Work for Everyone
Business leaders can improve retention and business performance with schedules that make sense for workers’ lives.
