Launchworks & Co has developed unique tools and frameworks to help innovative digital businesses scale up and reach critical mass while maximising the value they add to participating communities.

To be successful, digital platforms need strategies for attracting, matching, connecting and enabling transactions between communities.

In our upcoming article series, we’ll explore the five stages of the Launchworks “rocket model” in more detail. Each article covers foundational questions that guide each stage and introduces other important supporting concepts to allow you to use the rocket model as a guide for an actionable platform strategy. But first, let’s have a brief look at the rocket model as a whole.

 

What is a platform?

The term platform is used in many different contexts. We’re not going to talk about platform shoes (!) or oil platforms here. But even in a business context, the term can be used to mean ‘modular products’ (e.g. the jaguar X type and the ford mondo share the same platform), ‘technology stack’ (e.g. we need to move away from the Intel platform) or ‘shared assets’ (e.g. in the group we all use the same logistics platform). However when we look at what is unique about the companies that have been so successful over the past 20 years or so we find the answer in their business model. Instead of selling products and services, like traditional firms, platform businesses attract participants, match and connect them in order for them to transact. This is a powerful definition that explains why pure platforms have no stock and are able to scale globally at a fraction of the cost incurred by traditional firms.

 

How to launch a platform successfully

Launching a multisided platform requires a lot of energy, in the same way as launching a rocket into space does. You need to attract at least two sides of the market onto your platform, thanks to a carefully designed value proposition for each side. 

 

In a way, igniting a platform is a bit like launching two companies at the same time. You need to scale your user base in order to reach a critical mass on both sides of your platform, a challenging hurdle that doesn’t exist for traditional businesses. On the plus side, once the rocket has reached a critical mass, it requires less ‘power’ to propel itself. It has achieved ‘escape velocity’ and is subject to less ‘gravity’ thanks to network effects.

 

What is the rocket model?

As we worked with platforms, it became increasingly clear that the traditional management frameworks were not suitable. And that’s why we developed the rocket model: a high-level functional platform business model, based on the core activities of firms serving multisided markets. 

 

The rocket model comprises five stages/functions. In order to achieve lift-off, we find that digital platform businesses need to:

• attract – draw a critical mass of customers on each side of the market
• match – present participants with the optimal level of choice
• connect – allow supporting interactions between participants
• transact – enable core transactions between participants
• optimise – monitor for bottlenecks in the ecosystem 

 

We’ll cover these functions in further detail, but here’s a brief overview of the functional stages of the rocket model:

Attract

This building block encompasses the characteristics, features and processes by which a platform is able to attract producers and consumers. In management literature, it is also referred to as the ‘Magnet’[1] or the ‘Catalyst’[2]. At launch, the attract function is primarily focused on acquiring and hooking new customers but as the platform matures, retention starts to play a bigger part. 

 

Match

In order for both sides to interact, they need to be introduced first. For Airbnb, it’s about presenting guests with the right properties in the right locations at the right time. For Upwork, it’s matching companies with a specific assignment with available freelancers who have the right skillset. The quality of the matching is critical to the success of the platform. In a world of abundance, the ability to filter and present customers with the right choices creates value.  

 

Connect

Often, platform participants need to exchange additional information with their counterparty before moving on to the transaction stage. If you think about dating platforms, questions about tastes, interests, etc. are a key part of the process. It is the same with eBay when buyers ask specific questions to sellers before making an acquisition (e.g. has the car had any previous accidents?). This platform function also increases the trust of the parties and reduces the ‘asymmetry of information’[3] that may get in the way of the transaction.

 

Transact

The transaction stage is at the heart of the platform value proposition. It represents the interaction that creates the most value for participants. A transaction can take many forms depending on the market being served. It could be a physical product (eBay, Alibaba), a rental contract (Airbnb), a ride (Uber), a meeting (match.com), a photo or message post (Instagram, Facebook), etc. 

 

Optimise 

This last optimisation stage is an absolutely critical process for continuous enhancement of the platform and is central to the data-driven nature of many of these businesses. Given the dynamic nature of platform businesses, this data-driven function allows platform businesses to find the right balance between the two sides of the market and to optimise all the matching, connecting and transacting functions of the platform. Google’s search algorithm is constantly optimised with several A/B tests[4] a day to ensure the best relevant search results. The concept of “big data” is core to most online platforms and continuous monitoring of potential bottlenecks can unlock growth in near real time.

 

Platform enablers

Finally, a platform is supported by vertical enablers at each point of the rocket model. Here are a few that most platforms share:

• Governance framework that determines who is allowed on the platform, what they can and cannot do as well as the norms and behaviours that will be encouraged and rules that will be enforced. Since the platform co-creates value with its participants governance will also determine how value is shared across the ecosystem.
• Trust is what makes people believe that the participants they engage with are reliable, credible and honest. It’s a set of principles, rules, filters, processes and tools enabling participants to interact and transact in a safe environment. High trust encourages interactions and transactions.
• Brand is also a key enabler which works in tandem with trust. The brand building of platforms is a slightly trickier exercise than for other business models since much of the experience of platform participants is directly influenced by other platform participants. Platforms, therefore, need to internalise the needs and wants of their communities and capture this in key brand attributes.

• User experience. It can be online-only for some platforms (Facebook) or a mix of online and offline for others (Airbnb). Online, the user experience is made of user journeys and touch points with the platform and participants. But unlike linear businesses which have control of the user experience end-to-end, a big part of the platform user experience, online and/or offline, is in fact delivered by participants themselves. Platforms have therefore limited control but can nonetheless influence positive outcomes over negative ones. Anyone can list their home on Airbnb, but Airbnb has the capacity to prioritise hosts with the highest feedback in search results to improve the overall user experience.

• Infrastructure is key to the success of the platform and should be scalable and adaptable across life stages. Platforms can use off the shelf software packages, SAAS (or PAAS) solutions, open source technology bricks, internal developments or a mix of these options to develop a unique technical infrastructure that will support the platform business.

• Payments are often key to the platform function and a critical step to enabling the transaction. A frictionless payment experience is therefore critical to the overall success of many platform businesses.

Together these enabling activities play a critical role in the success of the platform.

 

Check out the step by step guide to the key stages of the Rocket Model: Attract, Match, Connect, Transact and Optimise.

Order your copy of Platform Strategy: How to unlock the power of communities and networks to grow your business for more in depth insights.

Article originally published on Oct 10, 2015. Last update on Dec 19, 2022.

 

Footnotes

[1] Sangeet Choudary, Platform Power, 2013, http://platformed.info

[2] Evans David Evans and Richard Schmalensee, The Catalyst Code, May 2007

[3] One side, the seller, knows everything about their products while the buyer knows little. For the transaction to occur the platform needs to facilitate this exchange of information by enabling both parties to communicate. Reputation systems like eBay’s star system have been designed to increase the trust of potential buyers by enhancing the information to the buyer (previous buyer reviews).

[4] A/B testing is jargon for a randomised experiment with two variants, A and B, which are the control and treatment in the controlled experiment. An example is sending two slightly different promotion emails while tracking responses in order to quickly select the best of the two before iterating further. See Kohavi, Ron; Longbotham, Roger (2015). “Online Controlled Experiments and A/B Tests” for a discussion on best practices.