3 Obstacles to Globalizing Digital Platforms

As technology continues to advance, it has become easier for digital platform companies to reach consumers around the world. This ease of access can make scaling easier – after all, virtual marketplaces are boundless in nature, and so it can be tempting for these businesses to look at the entire world as their target market from the start. . In reality, however, distinct challenges remain when it comes to growing a platform business beyond its home base.

We ran a series Quantitative And ability Studies to explore these challenges, including analyzes of mobile app data from app stores in more than 50 countries, regulatory filings, and investment records, as well as 100 hours with executives from platform firms such as Xiaomi, Dropbox, and ByteDance More interviews than .

Through this research, we identified three key areas that platform firms should consider when pursuing international growth: user acquisition strategy, organizational structure, and business environment.

User acquisition strategy

Platform business models typically rely heavily on network effects to grow their user bases. unfortunately, Our research have shown that network effects are reduced when borders are crossed. For example, Chinese users on the streaming site Bilibili may attract other Chinese users—but they are unlikely to attract many foreign users, making the platform beyond China. Growth potential is limited. To expand beyond the existing network of customers, a more integrated customer acquisition strategy is necessary.

In particular, we found several common pitfalls that can hinder a platform’s ability to attract local customers. First, while many platforms rely heavily on algorithms designed to automate user acquisition, this is not a problem you can solve with AI alone. These AI algorithms can help platforms target content to consumers in their home countries, but more traditional initiatives, such as market research or online experiences, are often critical when entering new markets that have Platforms therefore potentially have less relevant data.

For example, although Alibaba subsidiary Lazada had access to advanced AI-powered search recommendations, it was left behind in much smaller markets in many global markets. Shopee, which relies more on local management insights rather than imported technological solutions. Similarly, while platforms like TikTok and Twitch are known for their powerful algorithmic content targeting, they have used these systems to source local content such as music, news, recipes, jokes, fitness tips, and the like. Complete with investment has attracted customers from all over the world. Medical advice tailored to the unique needs and interests of different customer segments.

In addition, platform businesses should prioritize acquiring not only end users, but also the content creators, streamers, and sellers — or “complementors” — who will populate their platforms. While mature platforms easily attract complementors, new platforms may need to invest substantial resources in recruiting these partners. YoutubeFor example, has been quite successful in attracting both consumers and suppliers organically in all countries. Tick ​​tock It has developed its platform with paid content creators in several international markets. Other platforms, e.g Clash, starting by paying all their complementors. Platforms also want to consider the offer. Plenty of support to their suppliers in exchange for exclusive content in their country’s top market categories, as these alliances can help create the distinctive market positioning necessary to attract and retain customers.

Finally, many platform businesses seek to lead global expansion with similar leadership teams recruited from their home countries. These leaders often have limited familiarity with foreign markets, which hinders international growth efforts. As war Between Lazada and Shopee, it is important to empower local managers who are better equipped to understand and adapt to country-specific needs. For example, Shopee’s local managers used tactics such as introducing “gamified” shopping experiences that appealed to specific customer bases, designing campaigns around holidays like Eid, and local events like Blackpink. Partnering with trendsetting personalities. In fact, even purely digital platforms such as Dropbox and Salesforce (which require no physical infrastructure in their international markets) have begun to set up offices around the world – and local talent to those offices. Empowering to lead—to help them stay on par with local consumers. ‘ Evolving needs

Organizational structure

Because so much of the platform’s value is created by its complementors, many of these firms are able to grow very quickly while remaining relatively intact. Flat organizational structure. But as platform businesses expand across multiple countries, these flat structures may be insufficient to manage the idiosyncrasies of each market. To address diverse and rapidly changing local demands, firms may introduce different functionalities, different interfaces, and even completely separate platforms for different markets (in some cases, this may be through internal development). may, while in others, a firm may acquire a local competitor).

For example, Dutch food delivery platform Just Eat Takeaway operates different platforms with unique features and brands in different international markets, including Grubhub, SkipTheDishes, Just Eat, and others. Likewise, ByteDance keeps Douyin and TikTok completely separate, with independent management teams for each brand. Integrating such a dynamic portfolio of platforms with multiple stakeholders in many different countries typically requires a more sophisticated organizational structure than is required to manage single market businesses.

To navigate this complexity and stay ahead of local competitors while avoiding destructive internal competition and duplication, some platform firms have begun to adopt a modular structure. It refers to an architecture that centralizes common product components (eg, search recommendations, payment systems, algorithms, etc.) and operational capabilities (eg, user acquisition, marketing, monetization, customer insights, etc.) into specialized units. is, allowing global teams. To customize and extend these functions for your specific needs.

Alibaba’s “Middle platformThe concept exemplifies this approach. Initially, Alibaba followed a traditional, two-tier organizational structure, in which individual teams dealt directly with customers and developed operational capabilities on their own, while headquarters assigned resources to each team. And help was allocated. But as the firm began developing different versions of its platform to meet the needs of users in multiple countries, it introduced a third tier: the middle platform. This centralized platform manages a pool of shared components and capabilities, ensuring that teams across the business can access the components they need while leveraging these shared resources to meet the diverse needs of customers. Retains flexibility to adapt to meet. For example, in markets where digital payments are not popular, product teams can use the existing payment infrastructure available on the middle platform, but customize it to make “Cash on Delivery” the default option. can ByteDance has adopted a similar architecture, with its “shared-services platform” enabling global teams and business units to share insights, operational resources and key assets without compromising their flexibility.

Business environment

Without the need for expensive physical infrastructure, digital businesses are often able to enter foreign markets much faster than traditional firms. However, this can be both a blessing and a curse. Launching so quickly can mean that these firms circumvent local regulations and avoid scrutiny from local stakeholders (whether intentional or otherwise), disrupt established industries and attract regulators, officials, and more. Incite pushback from owners and other stakeholders. As Uber continues to struggle. Europe And parts of Asia illustrate that it is difficult to sustain commercial success when local stakeholders do not cooperate.

From consumer and data protection concerns to geopolitical issues, tax policies and old-fashioned competition, there are a number of ways in which a platform can make a foreign business environment feel unfriendly—especially if it “Excuse me, not allowed” expansion approach. Some of these barriers may take the form of what we call “hard legal” challenges: that is, laws and regulations that directly limit firms’ market access or make their existing business models untenable. , neutralize any first-mover advantage. For example, legal restrictions on short-term rentals have greatly hindered Airbnb’s growth in some cities, and even closed it off entirely from others. In other cases, platforms may face “soft legality” challenges: although there is no immediate legal threat, concerns about privacy protection, workers’ rights, environmental and social impacts, etc., can affect the platform’s appeal. can dilute, and force customers to push to a competitor. Platforms and increased likelihood of future regulatory action.

To address these threats, platforms must begin by understanding local concerns. While common Playbook Digital platform expansion typically focuses on prioritizing technical expertise, ensuring first-mover advantage, and aggressively acquiring customers, an approach to a complex international landscape. Can backfire while approaching. When expanding globally, platform firms should consider borrowing from a few moves. Traditional multinationalsSuch as recruiting knowledgeable local staff, building relationships with decision makers, providing public services, enhancing local value added, and building alliances with local players in industries.

For example, Singapore’s ride-hailing platform Grab used a combination of these strategies to maximize acceptance (and ultimately formal legitimacy) of its business model in Thailand. In addition to lobbying lawmakers before the general election, the company publicly emphasized its role in providing much-needed transportation services to small towns, contributing tax revenue to government coffers, and creating jobs for drivers. Grab also expanded its service offering to add more value to local customers, and established win-win partnerships with local insurance and banking firms. These strategies had dual benefits: they both increased the platform’s appeal in the market and helped the company build a network of local advocates and spokespeople with a strong interest in protecting the platform’s continued operations.

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To be sure, network effects will always be a key driver for platform firms to globalize—but our research suggests that they are not enough to automatically guarantee growth beyond a company’s home base. are To reap the benefits of a digital platform business model in a global setting and avoid being overtaken by local competitors, firms must adapt their customer acquisition strategies, develop effective organizational collaboration, and local business environments. I should take a sensible approach to navigation.

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