Competitive advantage and partnerships : business model innovation within multi-sided platform firms

Abstract

Business model design and innovation has been identified as a powerful tool for creating competitive advantage, yet empirical studies which identify the mechanisms for creating this competitive advantage are largely absent in the literature. Coupled with this, innovative multi-sided platform firms that depend on the resources of partners have grown to be some of the most valuable firms in the world, disrupting entire industries in the process. However, there is a dearth of empirical studies on business model design strategies that confer competitive advantage on multi-sided platforms. This study explores the business model design and innovation strategies used by owner-managers of multi-sided platforms to create competitive advantage. Data was collected through 13 in-depth, semi-structured interviews with the owner-managers of South African multi-sided platforms. This study found that partners and customers play an important role in co-creating value and influencing the design of multi-sided platforms. In order to create competitive advantage with their business models, the owner-managers in the study used four broad, non-exclusive business model design and innovation strategies. These comprised: design differentiation strategies, value creating innovation strategies, building network effects and locking in customers and partners through relationship management strategies. This study contributes to the literature by identifying business model design strategies that are utilised to create competitive advantage. The study also highlighted the importance of “ecosystemic” thinking in creating multi-sided platforms. A framework is presented that can aid managers in creating multi-sided platform business models that confer competitive advantage.