Digital Transformation. That is why most digital platforms fail

That is why most digital platforms fail

Thomas Reiner | 16.08.2019

Digital platforms have become one of the most significant business models of the 21st century. They are conquering the B2B sector and the packaging sector with great momentum. Nevertheless, they are still in their early stages. A broad study has now explored why most of the new digital platforms are still failing. A closer look at the ones that failed is worthwhile. Precisely because digital platforms are still in their infancy, it is even more important to understand why they fail.

Object of investigation: US platforms of the last 20 years
Successful platforms: 43
Failed platforms: 209
Average lifetime of the failed: 4.9 years

The study assigns the most common errors in 4 categories:

1. Wrong pricing models for market participants
Platforms often need to help one side of the market to get the other side to join in. But despite intensive studies of price decisions, errors still happen very often here. Which side to pay fees and which should be subsidized, is probably the most important strategic decision of each platform.

2. Lack of confidence of the market participants
Platforms are based on two market participants networking with each other. You may already know each other or not. Crucial for this networking is the trust that the two participants have in the platform. Rating systems for users, payment options and insurance services are confidence-building measures. No trust, no business.

3. Feeling too safe too early
Hubris, overconfidence and arrogance are some of the big leg castles. Anyone who thinks he has won and conquered the market in the end quickly sees himself in a downward spiral that is slipping out of control.

4. Late entry into the market
“Life punishes anyone who comes too late.” That’s especially true for digital platforms. If dynamic competitors have already established standards, usually neither much money nor much time will help. Typical example: Microsoft’s attempt to establish Windows Phone came way too late. The dominance of Apple and Android was already too big.

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