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Platform Strategy

How platforms are pivoting during the pandemic


With dramatic fluctuations in supply and demand, the pandemic has also been a stress test for the power of platforms. Outcomes have varied by sector, Geoffrey Parker, a visiting scholar at the MIT Initiative on the Digital Economy, said at the July 8 MIT Platform Strategy Summit.

Information technology, communication services, and discretionary consumer companies — including platform companies like Amazon, Facebook, Apple, and Netflix — had seen market cap gains in the range of $401 billion as of June 18, said Parker, who presented research conducted with fellow platform strategy summit co-chairs Peter Evans and Marshall Van Alstyne.

In the finance and energy sector, market cap losses had been in the range of up to $130 billion — 18 of the top 25 market cap losses were in the financial or energy sectors, with a drop in oil demand. In other areas, ride-share platforms also saw dramatic drops.

Still other companies had pivoted to meet changed demand, Parker said. Here’s a closer look at the three archetypical ways platform companies have responded to the pandemic and why the platform model might be uniquely situated to survive disruptions. 

Ride the wave

Companies that saw increases in demand are riding the wave, Parker said. Explosions in demand “can be every bit as disruptive as the demand falling, because you’re trying to scale rapidly,” he said.

Companies that saw these shocks included Instacart, which went on a hiring spree to meet demand during the first few months of the pandemic, and the online communication tool Zoom, which topped weekly download charts for weeks on end.

Weather the storm

Companies that saw demand drop suddenly, like Uber, Lyft, or oil companies, and don’t have the ability to serve other markets had to hunker down and weather the storm, and go quickly into resource conservation mode, like furloughing employees, Parker said.

Rapid pivots

Some companies have done a rapid pivot, in which they take their assets and supply other markets.

Parker pointed to two notable pivots:

Pivot 1: Best Food Trucks

Before the pandemic, food trucks were ubiquitous around college campus and in business districts, doing most of their business during the lunch hours. With schools and business closed, demand evaporated. Best Food Trucks, an online food truck booking and ordering platform, pivoted to serving a new clientele: people in the suburbs. There are some shifts in strategy, with demand centered around dinner time, for example. Best Food Trucks changed its strategy slightly but continued to aggregated demand information and match it to food trucks, allowing the food trucks and passengers to exchange value — a classic platform scenario.

Pivot 2: Bandsintown

Another company that pivoted for the pandemic is Bandsintown, a website and app service with 58 million users that notifies users when their favorite bands are in town and offers ticket sales. The website also connects performers with their fans.

When the pandemic hit, live shows ended almost completely. So the website pivoted to create a new digital experience — connecting fans with favorite artists who were performing livestream shows. The company was able to do this because it already had the users and connection tools in place.

“The Bandsintown platform is able to observe user demand patterns and make the direct linkages which would be difficult for music fans to do by themselves,” Parker said.

Why platforms are primed to pivot

Parker and his co-researchers in a World Economic Forum report found that firms that make end-to-end digital connections are able to sense rapidly changing customer needs and demands and reconfigure quickly in response. According to initial interviews, these companies are faring much better during the pandemic, Parker said.

This led the researchers to think about the relationship between business models, or the way companies make revenue, and operating models — the way companies deliver value.

“It really matters that you get the match right,” Parker said.

In general, platform business and operating models are different from traditional businesses, which often operate as pipelines where value accumulates from stage to stage. Platforms tend to operate marketplaces, Parker said, where they take fees for percentage transaction cuts, or they facilitate and get paid for access from one user type to another. In those scenarios, value occurs outside the firm.

With platforms, “you aggregate data across a wider variety of participants to facilitate matching, to sense new demand patterns, and to encourage interactions that might not previously have taken place,” Parker said.

The platform business model and operating models together are considerably more resilient and flexible, Parker said. Fluid demand and supply arrangements, where you can plug in new partners and serve new demand, allow for the ability to pivot, Parker said.  

And the ability to aggregate data across markets allows platforms to see what’s happening on the supply side better than competitors, who often operate in vertically siloed data environments.

“None of that can compensate for a complete change in demand, but it may give firms some run room as they wait for emergence and recovery to some sort of steady state and a new normal,” Parker said.

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For more info Sara Brown Senior News Editor and Writer