Do you work in platform management? What’s a strategic platform administration?
Once you launch your platform, you need to manage it carefully to ensure its success. To help you accomplish this, we’ll cover three key management principles.
Take a look at the three principles of platform management.
1. Strategic Platform Administration
A strategic platform administration system can help you in platform management as you maintain control of your platform’s quality as it grows. This is important for two reasons: First, platform experiences are an increasingly significant part of life for countless people, and they have real-world implications. For example, banning a user from a social media platform could impact their ability to contact their loved ones. To keep users happy, Geoffrey G. Parker, Marshall W. Van Alstyne, and Sangeet Paul Choudary state that your administration must be straightforward, clear, judicious, and fair.
Second, Parker, Van Alstyne, and Choudary argue that strategic administration can increase the value of your platform. One reason for this is that poor administration can lead to “market failures,” an economic phenomenon that occurs when producer-consumer connections are unsuccessful or exploitative or result in harm to others. A preponderance of market failures decreases the value of your platform by diminishing its reputation, reducing user engagement, and decreasing revenues.
The authors explain that strategic administration systems prevent market failures in four ways: First, they lay down hard-and-fast rules with clear consequences (for example, you might prevent market failures by banning users who incite violence). Second, they proactively promote desired behaviors (for example, promoting engagement by notifying users of trending activity and prompting them to contribute). Third, they develop software that deters market failures (for example, an automatic moderation feature that removes posts and listings made by bots). Fourth, they use economic tools to shape supply and demand and minimize risk (for example, they might eat the costs of market failures like fraudulent sales, fostering user trust and participation).
2. Tailored Performance Measurements
Parker, Van Alstyne, and Choudary say that many traditional performance measurement tools can’t account for network effects, so they won’t be useful for evaluating the financial health of your platform. They recommend using metrics that capture one of three key indicators of platform performance, depending on which stage of life your platform is in.
For new platforms, measure the value you offer to users. Quantifying this value helps you prove that your platform will grow and succeed. There are many ways to measure value to users. For example, Parker, Van Alstyne, and Choudary recommend evaluating user satisfaction by tracking users’ activity and measuring their trust that the benefits of participating in your platform outweigh the risks.
For scaling platforms, determine the equilibrium between producers and consumers and the value each user type offers. Parker, Van Alstyne, and Choudary explain that if there’s a mismatch in the number or quality of producers and consumers, you must implement strategies to ensure users are still getting value from the platform. To illustrate, imagine there’s been an influx of producer bots on your platform, resulting in unfulfillable sales listings. You’d need to remove the bots to keep consumers happy.
For well-established platforms, study users’ activity to determine opportunities to improve your value to users. For example, this is why Facebook began Facebook Marketplace—it noticed its users were using the platform to buy, sell, and trade. The authors explain that determining opportunities to improve value helps you remain competitive—a necessity we’ll talk about in the next section.
3. Clever Competitive Tactics
According to Parker, Van Alstyne, and Choudary, traditional competitive strategies, like those described by Michael Porter in Competitive Strategy, don’t fully account for the nature of competition among platforms. One reason for this is that platforms disrupt markets by leveraging network effects. For example, consider how Spotify fundamentally changed the music market by introducing a streaming library, which shifted the consumption model from ownership to access, reshaping supply and demand. Instead of trying to steal artists from their record labels (the old competitive mode in the music industry), Spotify collaborates with a large network of stakeholders, including artists and their labels, to negotiate deals that it claims create value for everyone.
(Shortform note: For decades, business experts recognized Porter’s Competitive Strategies as the quintessential framework for strategic management. Although experts (including Parker, Van Alstyne, and Choudary) agree that some of Porter’s wisdom is outdated because it doesn’t account for network effects, some of his advice may still be helpful for platform competition. For example, Porter explains that analyzing your competitors’ strategies can help you anticipate and counter their strategic moves, like in a game of chess. This tactic can give platform managers important insights—for example, managers could look at pricing, innovations, and other strategic decisions by rival platforms and think through how to counter or match them.)
The authors recommend a variety of competitive strategies you can use to enhance your platform’s value. We’ve already covered three strategies: acquiring external developers’ valuable creations, tracking user data to identify opportunities to improve value, and partnering with competitors to share value, as Spotify did. Let’s discuss three more:
Offer better quality than your competitors. This can help you attract new users who are dissatisfied with your competitors or to gain the trust of existing users. For example, you might set yourself apart from your competitors by offering better customer service, smoother in-app performance, or extra features.
(Shortform note: In Ten Types of Innovation, Larry Keeley, Ryan Pikkel, Brian Quinn, and Helen Walters explain that innovation can help you offer the best possible quality to users. According to these experts, there are ten types of innovation. Some may be particularly useful for platform managers: for example, these include product innovations that improve your platform’s basic functionality or ability to interface with other softwares and capability innovations, like those that harness new technologies to help users achieve what was previously unattainable.)
When a competitor offers a form of value you don’t, develop your own alternative. Innovation helps you stay relevant, which diminishes your chance of losing users to another platform. For example, Instagram developed Reels on the heels of TikTok’s success, which helped it recapture the interest of a percentage of TikTok users.
(Shortform note: In Competing Against Luck, business consultant Clayton Christensen advises strategists on how to identify and capitalize on opportunities to create consumer value. Christensen says that people buy products to accomplish specific tasks, so to meet their needs and sell them your product, you must have a deep understanding of the tasks your target market wants to accomplish. In a platform context, you can leverage Christensen’s guidance to identify the key tasks your competitors help users accomplish and innovate accordingly to meet similar needs.)
Discourage “multihoming,” or the use of multiple similar platforms, by enforcing exclusivity. This way, you can create a specific brand experience that appeals to your users more than competitors’ brand experiences, which incentivizes user loyalty. For example, Playstation forms exclusive deals with game developers to incentivize users to choose its platform over competitors.
(Shortform note: To reap the benefits of an enforced exclusivity approach, platforms must reliably deliver the specific brand experience they’ve promised their users—otherwise, users might become dissatisfied and fall away. The makers of Playstation encountered this problem following the release of the fifth generation of the platform, the PS5: The company failed to secure enough exclusive deals with game developers, and as a result it anticipates slower sales, which may hurt the company’s bottom line.)
