Platform Playbook: Proven Strategies to Build, Launch, and Scale Platforms

The platform business model has transformed industries by creating new ways for users to interact and exchange value. From Uber revolutionizing transport without owning vehicles to Substack enabling writers to monetize their audience, platforms are reshaping traditional business models by connecting users in powerful ways. Success in the platform economy hinges on designing robust core interactions, leveraging network effects, and executing innovative governance and growth strategies.

This article explores the critical steps to designing a platform, strategies for launching and scaling it, and governance decisions that ensure long-term success. Along the way, we’ll highlight real-world examples from recent years, including the rise and fall of Clubhouse, Notion’s scaling journey, and BeReal’s innovative approach to launching.

Building a Core Interaction: The Heart of Every Platform

The core of every successful platform is a value exchange between two or more parties—be it buyers and sellers, creators and consumers, or hosts and guests. The core interaction is the foundation of the platform, and getting it right is essential for attracting and retaining users. The process starts with defining the value unit that participants create, exchange, and consume. For example, Airbnb's value unit is the listing information provided by hosts, which is consumed by travelers.

To facilitate this interaction effectively, platforms must pull users in, facilitate smooth exchanges, and match participants appropriately. Sangeet Paul Choudary's framework highlights three core functions of platform design:

1. Pull: Attract users by showcasing initial value.

2. Facilitate: Ensure seamless interactions through tools like matching algorithms and user reviews.

3. Match: Connect the right participants to maximize value exchange.

For instance, Notion excels by offering customizable workspaces that pull in users through templates and facilitate seamless collaboration across teams. As a result, it matches users with their specific organizational needs, creating a scalable core interaction that underpins its rapid growth. Platforms that focus on understanding user needs and designing tools that simplify interactions can create a solid foundation for sustainable growth.

Choosing the Right Platform Type: Exchange, Maker, or Aggregator

Not all platforms are the same. Choosing the right type of platform based on the interaction you want to facilitate is critical to designing for long-term success. Based on the interactions they facilitate, platforms can generally be categorized into three types:

1. Exchange Platforms: They perform matchmaking and establish trust to facilitate transactions among users.

2. Maker Platforms: Enable creators to produce, distribute, and monetize content or products. They are generally driven by content generated and consumed by users.

3. Aggregator Platforms: Collect and present information or content in a curated manner. Uses algorithms and data to personalize user experience.

Choosing the right platform model is critical for defining your value proposition. For example, Substack has empowered writers to create, distribute, and monetize newsletters, giving them total control over their content while allowing them to build a direct relationship with their subscribers, bypassing traditional media outlets. In contrast, BeReal, a social media platform, uses an aggregator-style interaction by curating real-time, unfiltered moments. The platform’s innovative approach—prompting users to share daily, real-time content—has quickly built engagement, demonstrating the importance of designing interactions that resonate with user behaviors.

The decision to open the platform to external players also plays a crucial role in determining scalability. Xiaomi’s hybrid model, which combines corporate venture capital (CVC) and an ecosystem approach, illustrates how a company can enable value co-creation while maintaining control over branding and product quality.

Designing for Network Effects: Attracting and Retaining Users

Network effects—the phenomenon where each additional user increases the value of the platform for all participants—are the engine that powers platform growth. There are two types of network effects:

1. Same-side network effects: Users on the same side benefit as the user base grows (e.g., more friends on Facebook make the platform more valuable).

2. Cross-side network effects: Users on one side benefit as users on the other side grow (e.g., more drivers attract more riders on Uber, and vice versa).

To successfully leverage network effects, platforms must reduce friction in user interactions and create a virtuous cycle where user activity generates more value. Uber has done this by creating a virtuous cycle in which more riders attract more drivers, leading to shorter wait times, lower costs, and greater user satisfaction—further boosting engagement.

Platforms like Notion enhance their network effects by building a collaborative ecosystem that grows more valuable as more users engage. As more users use Notion, its value increases for other users as well as businesses and developers that depend on or create shared workspaces, enhancing both same-side and cross-side effects.

Furthermore, companies like Apple and Xiaomi reinforce network effects through branding and quality control, ensuring complementary products within its ecosystem maintain consistency. This fosters trust, encouraging users to explore more products, thereby deepening the network effect.

Governance and Policy Decisions: Rules, Standards, and Incentives

A well-structured governance model is essential to maintain trust and safety on the platform. Governance involves setting rules, standards, and incentives that shape how users interact with each other and the platform. A good governance model strikes a balance between flexibility and control, fostering innovation while minimizing negative behaviors such as fraud or poor-quality contributions.

Airbnb ensures trust and safety through verified hosts and guest reviews, while Uber maintains quality through driver ratings and background checks. In contrast, the Apple App Store enforces strict quality guidelines for app submissions, ensuring a safe and curated environment while allowing room for developer creativity. However, poor governance can undermine platform growth, as demonstrated by Clubhouse. The audio-based social platform struggled to manage its rapid user growth and enforce proper moderation, leading to quality concerns. The platform's inability to manage growth and enforce governance at scale contributed to its decline.

A well-executed governance model also needs to evolve as the platform scales. Xiaomi exemplifies this by continuously refining governance standards across its partner ecosystem, ensuring that users experience consistency and trust even as the platform grows.

Platform Launch and Growth Strategies: Solving the Chicken-Egg Problem

Launching a platform successfully is often more difficult than scaling it. Many platforms face the classic "chicken-or-egg" problem: users won’t join without enough other users already on the platform. Here are three proven strategies to overcome this hurdle:

1. Follow-the-Rabbit Strategy: Start with a traditional business and then transition to a platform. Amazon followed this path, beginning as an online retailer before expanding into a marketplace for third-party sellers.

2. Piggyback Strategy: Leverage an existing platform’s user base. PayPal famously grew by piggybacking on eBay’s user community.

3. Marquee Strategy: Attract influential users early on to seed the platform. Airbnb employed this by partnering with property management companies to ensure a strong supply of listings at launch.

BeReal used an innovative launch strategy that solved the chicken-and-egg problem by creating time-sensitive content model. By sending notifications to users at the same time every day, the platform created a sense of urgency, which drove high engagement and rapid growth.

Growth Hacking for Platforms: Driving Rapid Adoption

After a successful launch, the focus shifts to rapid growth. Growth hacking involves using creative, low-cost strategies to scale the platform quickly. Here are three effective techniques:

1. Referral Programs: Platforms like Dropbox used referral programs, offering extra storage for each new user brought on board. This viral loop helped Dropbox scale rapidly.

2. Partnerships and Piggybacking: Airbnb partnered with travel bloggers to increase visibility and trust early on, while LinkedIn initially focused on professionals with a high incentive to connect and showcase their skills.

3. Incentives for Engagement: Uber uses driver and rider bonuses to keep both sides of the platform active and engaged, reducing churn and ensuring liquidity.

Substack used referral incentives to help writers grow their audience while building loyalty among subscribers, which simultaneously increased user acquisition and retention. By creating simple but effective growth mechanisms, platforms can reach critical mass quickly and sustain long-term engagement.

Achieving Liquidity: Ensuring Consistent Interactions

Liquidity refers to the point at which users on both sides of the platform can reliably find value in each interaction. It is a crucial milestone that platforms must reach to prevent user churn and sustain growth. Airbnb, for instance, achieved liquidity by focusing on specific cities with high demand before expanding to other locations. To reach liquidity, platforms must carefully manage the balance between supply and demand. Platforms like BeReal achieved liquidity by making every user interaction time-sensitive, ensuring that each post felt meaningful and engaging, even with a smaller user base.

The decision to focus on either a quantity-driven or quality-driven approach for onboarding participants is crucial, especially in industries where user experience is highly sensitive to matching accuracy, such as ride-sharing and short-term rentals.

Scaling the Platform: From Niche to Mainstream

After reaching liquidity, the next major challenge for platforms is scaling beyond the initial niche. Scaling involves not just expanding the user base but also adding new features, improving infrastructure, and managing operational complexity as the platform grows. Successful scaling requires a data-driven approach, clear prioritization, and constant refinement of the user experience.

1. Prioritizing Growth Markets: When scaling, platforms must identify which markets or user segments to target for expansion. Rather than expanding too quickly, which can lead to operational bottlenecks and declining user satisfaction, successful platforms use a focused approach. For instance, Uber began by focusing on densely populated urban areas where liquidity was easier to achieve before expanding to smaller cities and international markets.

   
   

   Metrics to Track:

   1. Market Penetration Rate: Measures the percentage of your target market that uses your platform. This helps track whether the platform is gaining traction in specific markets.

   2. Geographic Expansion ROI: Tracks the return on investment from entering new regions. Comparing user acquisition costs and revenues can help evaluate whether a market is worth scaling into.

   
   

2. Scaling Infrastructure and Operational Capacity: Operational and technical challenges intensify as platforms scale. Whether handling increased data loads, managing larger user bases, or maintaining consistent service quality, platforms must ensure their infrastructure can support the growth. Scaling also requires efficient operational processes. Platforms should constantly optimize onboarding, customer support, and logistics. For instance, UberEats had to scale its delivery operations alongside its user base by refining driver logistics, order batching, and delivery algorithms to ensure a smooth user experience.

   
   

   Metrics to Track:

   1. Server Uptime and Performance: Monitoring uptime ensures that your platform is able to handle surges in traffic without interruptions.

   2. User Retention Rates: As your platform scales, retention becomes crucial. A high churn rate can signal issues with user experience or operational inefficiencies.

   3. Customer Support Response Time: As the platform grows, tracking how quickly customer issues are resolved ensures that operational complexity does not degrade service quality.

   
   

3. Expanding Features and Enhancing User Experience: Platforms often layer additional services or features to expand their value proposition and capture a broader audience. For example, Uber initially focused on ride-hailing but later added services like UberEats for food delivery and UberPool for shared rides, expanding its offerings to different user segments. The key to expanding features is ensuring that each addition enhances the core user experience rather than complicating it. Platforms should base new features on user data, continuously testing and refining new offerings to ensure they meet user needs without causing friction.

   
   

   Metrics to Track:

   1. Feature Adoption Rate: Tracks how many users are engaging with new features. Low adoption rates might indicate poor integration or a misalignment with user needs.

   2. Customer Satisfaction (CSAT) and Net Promoter Score (NPS): These metrics help gauge how users feel about the platform’s overall experience, particularly after new features are added.

   3. Lifetime Value (LTV) and Customer Acquisition Cost (CAC): As your platform scales, monitoring how new features affect LTV and CAC is critical. Features that enhance LTV without significantly raising CAC are ideal for sustainable growth.

      
      

4. Managing Multi-Homing and Competition: As platforms scale, multi-homing—the practice of users participating in multiple platforms simultaneously—becomes a significant challenge. For example, in ride-hailing, many drivers and riders use both Uber and Lyft, making it difficult for any one platform to achieve exclusivity. Multi-homing can erode market share and make it harder to retain users. To mitigate this, platforms often create loyalty programs or exclusive features that incentivize users to stay engaged. For example, Uber introduced loyalty programs for drivers, offering bonuses for consecutive trips completed. Similarly, Amazon Prime encourages customer loyalty by bundling free shipping with other services like streaming.

   
   

   Metrics to Track:

   1. Multi-Homing Rates: Surveys or usage tracking tools can help determine how many users are active on competitor platforms. This helps assess the competitive landscape and user loyalty.

   2. Loyalty Program Effectiveness: Monitoring the impact of loyalty programs on user retention and engagement helps measure their effectiveness in reducing multi-homing.

Key Takeaways

By following these principles, businesses can navigate the complexities of launching, scaling, and thriving in the platform economy.

What strategies have you used in building platforms? Share your insights in the comments below!

References

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• Tong, T. W., Guo, Y., & Chen, L. (2021). "How Xiaomi Redefined What It Means to Be a Platform." Harvard Business Review.

• Ferdows, K., Lee, H. L., & Zhao, X. (2022). "How to Turn a Supply Chain Platform into an Innovation Engine." Harvard Business Review.

• Zhu, F., & Iansiti, M. (2019). "Why Some Platforms Thrive and Others Don’t." Harvard Business Review.

• Korhonen, H. M. E., Still, K., Seppänen, M., Kumpulainen, M., Suominen, A., & Valkokari, K. (2017). "The Core Interaction of Platforms: How Startups Connect Users and Producers." Technology Innovation Management Review.

• Daniel Trabucchi (2020). "Let’s Get a Two-Sided Platform Started: Tactics to Solve the Chicken and Egg Paradox." Journal of Business Ecosystems.

• Daniel Trabucchi, Luca Gastaldi, Elena Pellizzoni, & Tommaso Buganza 2018. "Launching a Two-Sided Platform: The Role of Platform Enhancers." R&D Management Conference.

• Daniel Trabucchi, Tommaso Buganza 2020. "The power of two-sided platforms to disseminate resistant innovations". Management Decision, Emerald Publishing.

• Daniel Trabucchi , Tommaso Buganza & Roberto Verganti (2020). "Quantity or

  quality? Value creation in two-sided platforms." Technology Analysis & Strategic Management