Research identifies how to become the next Uber or Amazon

The success and proliferation 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 startup stage. How can aspiring platform entrepreneurs overcome the early-stage challenge and enable the successful emergence of digital platform ecosystems?

Professor Anoop Madhok, the Scotiabank Chair in International Business and Entrepreneurship at York University’s Schulich School of Business, and his collaborator Ramya K. Murthy from the Indian Institute of Management Bangalore (as well as a former doctoral student at Schulich) set out to answer this question.

The challenge for the platform entrepreneur in the early stage is to secure the commitment and resources of autonomous third-party contributors for a little-known entity that is yet to emerge in the form of an ecosystem around the digital platform. The contributors are vital for the digital platform, as they create complements that enhance the platform’s value to consumers but are only motivated to produce complements for a platform that offers attractive platform resources and provides access to a large base of consumers. With an ecosystem that is yet to emerge, digital platform entrepreneurs, who are typically both owners as well as sponsors of their platforms, have few resources and avenues to attract these complementors (businesses that directly sell a product or service that complement the product or service of another company by adding value to mutual customers) in the early stages.

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 the early-stage challenge of the emergence of digital platform ecosystems. Platform sponsor scope refers to the sponsor’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 complementors. When such opportunities seem beneficial, the complementors and consequently consumers are attracted to participate, leading to the emergence of the digital platform ecosystem.

The study develops a problem-solving perspective of the emergence of digital platform ecosystems and contends that the platform sponsor should choose their scope in alignment with the nature of the problem to find valuable complements efficiently. Such an alignment between problem and platform sponsor scope signals to complementors attractive opportunities and thus attracts their participation and, in turn, brings consumers to the ecosystem. Using a data set of crowdfunding campaigns to raise funds to launch digital platforms, they identify pathways for the successful emergence of complementary innovation ecosystems, open-source ecosystems and information ecosystems.

“The study highlights a novel set of considerations – problem and platform sponsor scope – that shifts the emphasis away from the actors (who) to the problem at hand (what) to explain platform ecosystem emergence, a hitherto understudied topic,” says Madhok.

Their findings suggest that aspiring entrepreneurs have agency in addressing this challenge and should focus on identifying the dimensions of the problem they confront and choose their scope accordingly to attract complementors and, consequently, consumers. Further, they demonstrate that multiple pathways exist for the platform sponsor to enable ecosystem emergence as long as the problem and their choice of scope are aligned. The underlying tenet is that the platform sponsor can shape attractive opportunities for the complementors when such an alignment is achieved.

Read the full study at onlinelibrary.wiley.com/doi/10.1111/joms.12748.