Growth Hacking & Liquidity in Platforms
By: Manfredi Sassoli De Bianchi
Tags: Design, Startup, Platform, Lean Startup, Growth

Design to facilitate launch

Earlier on I wrote how the boundaries between design and growth are blurring: in the cases below the two overlap completely. Design should be made to facilitate the launch.

Single player mode

This tactic entails building a SAAS solution for one set of people, (generally the producers), get to critical mass, monetise and then add the demand side of the equation.

This solution is particularly popular as it’s easier to implement and it can generally be a viable business even without the demand side, thus decreasing risk and making it easier for investors to fund it. Interestingly in a recent interview James Currier, founder of NFX and guru on launching new platforms said:

“….not all our new portfolio ventures are two sides, but they are all network effect oriented”

The likelihood is that a number of the companies they are following are adopting a single player mode strategy. The most classic example here is Amazon: initially, they were just an online bookstore with a huge catalog and a huge warehouse to store that catalog; once they reached critical mass they became a marketplace, allowing third-party bookstores to sell through their site.

On a smaller scale, I recently met with a start-up that built a tool to help office managers manage the office supplies: once they reach critical mass it will be easy for them to add supplier on the platform.

When building a single player solution, the key is to always start with an MVP, or a pretotype (many tips on this on the book “The right it”).

Often times the solution built is distributed for free to increase penetration and speed, but it doesn’t need to be the case. Similarly, the solution can be designed for multi-player collaboration (see above section: Build for virality).

Enhanced experience

Not every idea is a new idea and similarly not every platform is unique. In the podcast “Masters of Scale” Airbnb founder Brian Chesky describes how they used to think about what would be a 5 star experience for their guests….and went on imagine how to exceed expectations to a 13 stars experience where the guest would be welcomed by their favorite rock star and was picked up at the airport with a Ferrari, (or something of the like).

Exceeding customer expectations is one way to get word of mouth going and create loyal customers.

This strategy is increasingly used for competing against large platforms and there are many case studies. Instagram did it to Facebook, appealing to a younger audience, and Twitch and Vimeo did it to Youtube, specializing on music and gaming video viewers. Having a vertical and narrow focus can beat breadth offering. I am a big fan of the below diagram that shows how challengers are going after Craigslist in many areas:

It’s also interesting to see how the Craigslist website does not offer a great experience from a design point of view, leaving them vulnerable.

Curation is also a strong differentiator. A smaller but well-curated/higher quality supply can be very well received by your audience, even if competing platforms are already out there. In particular, this can be interesting for attracting connoisseurs, which often tend to be early adopters and influencers…so not a bad place to start.

One sided markets

One-sided markets are different from single-player mode in that there are transactions going on between different players, but those players may at different times play different roles. A good example may be Whatsapp where all users are at times the producers of content and other times the consumers of content.

Ebay started by targeting niche collectors as they buy and sell their collectibles of choice. This is a perfect case study as it’s the quintessential example of how digital platforms can connect niches: on eBay people who collected stoned to sharpen knives can easily trade those stones (that group includes a friend of mine who has over 200 stones).

At a smaller scale, when launching Treasurehouse.com, (a platform to trade kids clothing), we decided to give it a strong sustainability angle in order to attract people who would be interested in buying and selling clothes through us, rather than going after sellers and buyers separately.

This strategy when well executed can half the acquisition costs for new customers.

Enterprise

Often we tend to think of platforms as start-up businesses made by small teams or solo entrepreneurs. This doesn’t have to be the case. While agility favors smaller teams, enterprises have other key assets they can leverage: their large customer base.

Complementary services

There is little doubt that a solution like Waze, the traffic prediction app that helps driver pick the quickest route, would’ve been easier to launch for a firm like Volkswagen rather than having to start from scratch. It could’ve been implemented in all cars adding value to its drivers and then potentially sold as a mobile app to drivers of other cars.

Complementary markets

The competitive landscape today is so hard to read because the big 4, or GAFA, (Google, Apple, Facebook, Amazon), have learned this extremely well. They move from market to market leveraging their large consumer base and deep pockets. Other enterprises, however, could follow this strategy.

For example a large bank today will tend to offer insurance products, like home insurance. It is not hard to imagine how a company like that could offer a discounted policy in exchange for the application of a smart device in the home. Such a smart device will then collect the data that will inform future policy prices. Through such a device and the data it collects it would be able to offer a brokerage service for home utilities…and that could just be the starting point. (Of course, this requires incorporating some new capabilities).

PR

(In this section, I have included anything that goes from word of mouth to PR, to virality.)

Marquee strategy

This entails getting on board some high visibility players and it suits a fragmented but heterogeneous market, like the music industry for example. While there are plenty of musicians out there and the music industry is certainly made up of a very long tail (Spotify adds one million new songs a month), there are still some blockbusters that everybody knows. In this case artists like Lady Gaga, Bruno Mars and Coldplay.

Having these big hitters on board will create substantial buzz on the demand side, (as many people want to listen to their music), and it validates the offering on the supply side: e.g. if Madonna is producing on that platform it can’t be such a bad idea.

This tactic creates visibility and validation simultaneously.

Exclusivity

This is arguably the oldest trick in the book: it’s about artificially creating scarcity. Demand will inevitably go up. Any club that is exclusive is where people want to be and just because there is a sense of exclusivity we feel that much better about being part of it. That means we will probably talk about it.

When planning the launch of business banking app Tide, (which operates as a platform for numerous B2B players), the team decided to have a purposely limited referral scheme, just to create a sense of exclusivity. Ideally, such exclusivity is fictional so that everyone feels special when joining, but growth is not limited. On certain cases however real filtering for quality can be a successful strategy e.g. a platform for doctors or lawyers.

OTHERS

There are two remaining tactics that are worth mentioning.

Nesting

Most major platforms today cautiously scan their ecosystem to find a pattern of value creation and then decide how to cater from them. If such value is generated at scale by a third party, the platform may decide to own that space and offer that solution themselves cannibalizing the existing player. This, however, doesn’t always happen and it doesn’t always succeed.

Facebook decided to stop the growth of Zynga within its platform, but eBay ended up buying Paypal (only after trying and failing to copy the solution). Booking.com is an interesting example: their whole website was built to advertise on Google, so while their nesting had a cost, they became the most efficient player in what is certainly the biggest distribution channel in the world for hotel rooms and that allowed them to grow to huge scale.

While this strategy can be risky, it can also deliver meteoritic growth. When possible it’s one of the strongest launch strategies possible and that is why so many people today are looking with interest at nascent platforms like Blockchain, VR, wearables and home devices.

Focus on comms

A new product is never great, especially if it’s a new platform. If you can keep the expectations of your customers low, potentially by engaging early adopters, you may be able to start with a relatively weak P/C ratio, (poor liquidity). As always, if you can do one thing exceptionally well, that single thing may offset a poor experience in all other areas.

Whatever the case, it’s always wise to manage customer expectations carefully: ultimately they make the platform.

Conclusions

Launching a successful platform is never easy, but don’t be discouraged and follow the three following steps:

Carefully plan the design of the platform Set a P/C ratio target that leads to the delivery of positive experiences Work on achieving that ratio using one or more of the tactics above (and for each one of those there are many ways of implementation)

Finally, and this is where experience helps, the key challenge is managing the relationship between speed and quality. While speed always helps, none of the tactics above will work if implemented poorly, so take your time for the correct implementation, (or you’ll get false negatives) — simultaneously keep an open mind. If you are not getting traction perhaps it’s time to go back to the drawing board and find other ways to generate value within the ecosystem. Building a platform solution isn’t about imposing a service to an ecosystem but facilitating an existing one: this shift in mind frame is critical in creating a valuable solution.