Q. How do you motivate potential participants to pay to join a platform?
A. A company that operates a multi-sided platform must convince participants to pay an affiliation fee to access the platform. The challenge is to determine what it will take to motivate the participants to pay to collaborate with each other.
To motivate participants to pay an affiliation fee, a multi-sided platform must deliver unique value to the various stakeholder groups its sides represent. For example, if a platform is designed to generate revenue from three stakeholder groups: developers, users and researchers, it must deliver unique value to each of these three groups. Developers must receive more value from participating in the platform than the value received from not participating in the platform. The same holds true for users and researchers.
To generate revenue, a platform must be designed to deliver compelling value propositions for each stakeholder group. To illustrate how this can be achieved, we will describe five lessons learned while defining value propositions for a technology company.
Lesson 1: Defining value propositions for multiple stakeholder groups at the same time is a challenge because the platform features and the number of platform groups are not known with certainty. Figure 1 shows that the definition of multiple value propositions, platform features and the number of stakeholder groups are interdependent.
A process and tools are needed to concurrently define the number and nature of stakeholder groups, value propositions, and platform features.
Figure 1. Key Dependencies in Platform Design
Lessons 2: Each value proposition is comprised of three or fewer statements that describe the platform’s points of difference that deliver the greatest value to a particular stakeholder group. The points of difference should be defined in terms of the next-best alternative available to the stakeholder group.
Lesson 3: The multiple value propositions need to be internally consistent. To make sense, a value proposition for a stakeholder group needs to be consistent with the value propositions of the other stakeholder groups. Viewing each side of the platform as a single-sided market segment may result in the development of a set of single-sided value propositions that are inconsistent with each other.
Lesson 4: The process of defining multiple value propositions is highly iterative and requires significant domain knowledge. For example, one can start with “system integrators” as a stakeholder group, but as value propositions are being prepared you may realize that “co-creators” is a better stakeholder group.
Lesson 5: After a set of value propositions is prepared, the strength of the externalities between the stakeholder groups should be assessed. This is required because the value of the platform increases only if the value to a platform participant increases with the size of the participants in the other stakeholder groups.
Figure 2 illustrates an externality matrix. We started with 6 x 6 matrix (36 cells) given that we were considering six stakeholder groups. For each XY cell we asked the question, if we increase the number of platform participants in stakeholder group X, how does this affect the value to platform participants in stakeholder group Y? We then captured the answers in the cells. If the answers were similar, we merged the cells. For example, Figure 2 illustrates that all the answers for the Research and Educators column were the same for all cells.
Figure 2. Externality Matrix
Creating a multi-sided platform from scratch is a challenge. Future research will provide answers to some of the obstacles we encountered. There are numerous challenges that result due to the recursive dependencies. But the answer to the question is clear: if you want to motivate potential participants to pay to join a multi-sided platform, the platform must deliver unique value to the various stakeholder groups its sides represent.