License: CC0 Public Domain

This is the second of four parts in a management series for nonprofits on platforms as organizational forms. The series will describe the dynamics of how platforms work and how to approach balancing, growing, and sustaining them over time.

Platforms are organizational forms designed for the meaningful exchange of information, goods and services, and currency. Because, they are designed to attract both producers and consumers, or users, rather than focus on creating units of value, they are ideal for innovation and scaling. Both are necessary for social change.

Platforms attract users—both producers and consumers—by structuring incentives for participation connected to the core interaction.1 For example, PayPal first attracted customers, or consumers, by giving them $10 to sign up, which they could then use toward their first purchase with an online merchant. It also added a feature that allowed customers to ask online merchants to accept PayPal.

On the other hand, YouTube, which focuses on producers, launched with a focus on content creators, or producers, whom it incentivized with contests and allowing creators to embed their videos off-platform. This served as a marketing tactic, as it spread the word about the platform. Viewers of the site, or consumers, eventually become producers as well. YouTube then built on the core interaction with producers by giving the top content creators a percentage of ad revenue.

YouTube’s unrelenting focus on producers helped in four ways. First, it seeded the platform with content. Second, it created a curation dynamic on the platform to identify quality content by letting viewers vote up or down on the videos they watched. Third, it leveraged producers to bring in consumers. Fourth, and most important, it created a set of content creators who had an investment in the platform, had a user following, and would not be easily incentivized to invest in another one.2

Platforms are based on meaningful interactions. They start with a core interaction—the main interaction, the highest value interaction. The core interaction is between participants, value unit, and filter (or curating function). Platforms are designed one interaction at a time and develop by layering other interactions over time. The best way to do this is through the use of modules—clearly defined subsystems that connect and communicate with each other through interfaces. In order for this to work, modules must be developed according to overall design rules. It is best to design modular from the start.

There are a few key strategies for launching a platform.

  1. The follow-the-rabbit strategy involves using a demonstration project that is not on the platform to model success and attract users to the new platform built on the model’s infrastructure. Amazon, for example, started off as an online retailer and then converted itself to a platform that allowed external producers.
  1. The piggyback strategy focuses on creating value units and recruiting users from different organization(s). For example, PayPal piggybacked on eBay and was so successful that eBay eventually bought it.
  1. The seeding strategy starts with supporting one kind of user, say producers, and then using the value created to attract other users, in this case consumers. Often the platform creates the first set of value units, which allows it to define the quality desired. For example, Google launched its app offerings by offering prizes to the creators of the best apps. This created high-quality value units, which attracted consumers.
  1. The marquee strategy seeks to attract users considered important to the platform. Oftentimes, these are producers. For example, Sephora, the beauty store chain that sells its own products along with those of external producers, negotiates deals with some of these producers that limits the sale of their products to its stores.
  1. The producer evangelism strategy is designed to attract producers who bring their own consumers along to the platform. It does this by helping producers serve their consumers better, and over time the producers benefit from the other customers on the platform. This is how crowdfunding platforms like Indiegogo and Kickstarter work.
  1. The big-bang adoption strategy uses traditional marketing to attract interest in the platform. For example, Twitter tipped into success when it partnered with the SXSW festival, by the end of which Twitter use had tripled.
  1. The micromarket strategy targets a small market of users that are already interacting. This is what Facebook did when it launched at Harvard University.

Once you’ve figured out which launch strategy, or combination of strategies, works best, the next task is figuring out virality—the way the platform grows and develops. For example, Instagram “converted all its users into marketers” by incentivizing them to share their photos on external networks.3 Similarly, “your goal is to design an ecosystem where senders want to transfer value units through an external network to a large number of recipients, ultimately leading many of those recipients to become users of your platform.”4

There are four key elements to begin the process of viral growth.

  1. Sender—The sender is not necessarily talking about your platform, as in word of mouth, but spreads her own creations and indirectly generates awareness and interest in the platform.
  2. Value Unit—The value unit contributes to virality when it is spreadable, that is, it helps start an interaction on an external network. (You can also connect an opportunity to join feature to the value unit.) However, not all value units are spreadable; some contain confidential information.
  3. External Networks—These are networks outside of your platform that overlap with yours. Platforms often overlap each other, as with news sites’ “Share on Facebook” button. Sometimes, those platforms seek to restrict overlapping so that their users are not overwhelmed with external offers. Platform managers must be strategic in identifying external, value-adding networks.
  4. Recipient—Finally, if recipients find the value unit valuable, they may react, or better yet, share them further, thereby growing your platform.

Notes

  1. Parker, Geoffrey G., Marshall W. Van Alstyne, Sangeet Paul Choudary. Platform Revolution. New York, London: W.W. Norton & Company, 2016. 85.
  2. Ibid, 87.
  3. Ibid, 101.
  4. Ibid.