Strategies for Two-Sided Markets

The crucial strategy question is, Which side should you subsidize, and for how long?

Users will pay more for access to a larger network, so margins improve as user bases grow. In traditional businesses, growth beyond some point usually leads to diminishing returns: Acquiring new customers becomes harder as fewer people, not more, find the firm's value proposition appealing.

{ Networked Markets / Side 1 / Side 2 / Platform Providers }

Cross-side network effects: If the platform provider can attract enough subsidy-side users, money-side users will pay handsomely to reach them.

Same-side network effects: snowballing pattern, when drawing users to one side helps attract even more users to the same side.

Charting the strategy

Drawing a strategy canvas - 1. strategic profile of industry, 2. strategic profile of current/potential competition (which factors to invest in strategically), 3. company's strategic profile (the value curve)

Focus - setting the agenda;
Divergence - look for uniqueness; value curves of innovators' strategies always stand apart; create new factors;
Compelling tag line - strong and authentic; (Southwest Airlines: "The speed of the plane at the price of the car - whenever you need it.")


4 steps of visualizing strategy - visual awakening, visual exploration, visual strategy fair, and visual communication

Value innovation is about offering unprecedented value, not technology or competencies, and not the same as being first to market -- achieved through a combination of eliminating features, creating features, and reducing and raising features to levels unprecedented in their industries. A radically different value curve is difficult for incumbents to imitate, and the volume advantages that come with value innovation make imitation costly. 3 platforms on which value innovation can take place: product, service, and delivery.

Pioneers - value innovations. Migrators - value improvements. Settlers - me-too products.

Marketing: Customer Intimacy and Other Value Disciplines

operational excellence - superb/lean/efficient operations, reasonable quality at competitive prices with minimal inconvenience (FedEx, American Airlines, Wal-Mart, Dell Computer)

customer intimacy - segmenting and targeting markets precisely, tailoring to match specific demands of those niches, so to build long term customer loyalty. The business processes stress flexibility and responsiveness. (Nordstrom, Home Depot, Staples, Ciba-Geigy, Kraft, Frito-Lay)

product leadership - strong in innovations, brand marketing and commercialize ideas quickly, relentlessly pursue new solutions to solved problems, lifetime value concepts, products/services that consistently enhance customer's use, thereby making rival's goods obsolete (Johnson & Johnson, Nike)

... pick one value discipline and vigoriously pursue it while meeting industry standards in the other two ...

MBA: Marketing Strategy/Policy + Strategic Management

Information Technology Management was completed. Marketing Strategy/Policy and Strategic Management are now started. Also, enrolling into Business Simulation for the summer semester.

Strategic Issue - Each level of strategy must be consistent with - and therefore influenced and constrained by - higher levels within the hierarchy. The 3 major levels of strategy in most large, multiproduct organizations are (1) corporate strategy, (2) business-level strategy, and (3) functional strategiess focused on a particular product-market entry.

A strategy is a fundamental pattern of present and planned objectives, resource deployments, and interactions of an organization with markets, competitors, and other environmental factors.