Overcoming the Early-Stage Challenges of New Digital Platforms
The success of digital platforms like Uber and Amazon are increasingly inspiring entrepreneurs to build new ventures on similar lines. Despite the prominent success stories, many digital platforms fail to survive the start-up stage. How can aspiring platform entrepreneurs overcome the early-stage challenges and enable the successful emergence of digital platform ecosystems?
Anoop Madhok, the Scotiabank Chair in International Business and Entrepreneurship at Schulich, and his collaborator, Ramya K. Murthy from the Indian Institute of Management Bangalore (as well as a former PhD student at Schulich), set out to answer this question.
In their new study published in the Journal of Management Studies, Murthy and Madhok study numerous platforms in the incipient stage and demonstrate that the choice of platform sponsor scope offers a way to overcome early-stage challenges. Platform sponsor scope refers to the platform entrepreneur’s choice of value creation activities to perform internally as well as their decision rights over complements, a choice that shapes the opportunities subsequently available to providers of such complements. When such opportunities seem beneficial, the complementors and thereby consumers are attracted to participate, leading to the emergence of the digital platform ecosystem.
“The study highlights a novel set of considerations, problem and platform sponsor scope, which shifts the emphasis away from the actors – ‘who’ – to the problem being solved -‘what’ – to explain platform ecosystem emergence, a hitherto understudied topic,” said Professor Madhok.