How can your business compete with other platforms? What are clever platform competition techniques?
According to the book Platform Revolution, traditional competitive strategies don’t fully account for the nature of competition among platforms. You need strategies that are more catered to the platform business model instead.
Continue reading for three platform competition strategies.
Clever Competitive Tactics
One reason that traditional competitive strategies don’t work is because 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 Although experts (including Parker, Van Alstyne, and Choudary) agree that some of Porter’s wisdom is outdated because it doesn’t account for network effects, some of his advice may still be helpful for platform competition.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 platform competition 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.)
