MBA Buzz: Gaining Competitive Advantages with Platform Strategy

Steven Neo discusses how Richmedia Ltd., a promising internet services company, is using platform strategy to gain competitive advantages.

Facebook, Amazon, Red Bull, Google, Cookpad, Nike and GLOBIS: All of these companies are great examples of successful implementers of the platform strategy. But how does the strategy work, and how can it be leveraged to gain competitive advantages? I recently have the opportunity to meet Mr. Sakamoto Kozo from Richmedia Ltd. and discuss how the company is utilizing the strategy to build the company into Asia's number 1 internet services company.

Traditionally, internet service companies have focused on serving the needs of companies engaged in business-to-consumer (B2C) activities. However, with increased market competition, profit margins are dwindling and companies are either shutting down or diversifying into other products and services. Richmedia Ltd. revitalizes the traditional business model by utilizing the platform strategy as follows:

1. Build its primary customer group by focusing on companies engaged in business-to-business (B2B) activities which offer higher profit margins.

2. Leverage on its primary customer group to build a secondary customer group based on B2C companies that wishes to engage its B2B base.

This model has the following characteristics:

a. Mutual network effect.
As the B2B customer group grows, the B2C customer group will grow accordingly, thus helping to build a rich database of information that can be analyzed to benefit both customer groups.

b. External network effect.
As the customer groups grow, the attractiveness of the company's platform increases which serves to attract more customers to the platform.

c. Retention effect.
As customers experience satisfaction and convenience in using the platform, it helps to “stick” the customers to the platform, thus increasing the platform's customer retention rate.

With a successful platform strategy, a company will be able to yield three main advantages:
- Hedge its operating risks amongst the customer groups.
- Create a shared knowledge base that can be utilized for both customer groups.
- Develop and grow its employees via exposure to a variety of projects and clients from the different customer groups.

The success of this platform strategy can be seen in the successful launch of its Kawaii Beauty Japan Facebook page that attempts to leverage its B2B group of Japanese cosmetics companies to establish B2C clients in the Indonesian market. Within 1.5 months of operation, the Facebook page has managed to gather 300,000 unique Facebook fans which provide an attractive platform to channel Japanese cosmetics into the lucrative Indonesian consumer market.

Despite the simplicity of the platform strategy, the successful implementation of this strategy is highly dependent on the leadership capabilities of the company. Mr. Sakamoto Kozo is a visionary leader that believes in building the dreams and passion of its employees to enrich the world and their customers. He has created a rich corporate philosophy and the “Richmedia Way” in an attempt to build a conducive environment to bred entrepreneurs. He firmly believes that everyone has the entrepreneurial spirit, and he hopes to provide opportunities for individuals to exhibit that spirit.

What do you think of Richmedia Ltd. and its platform strategy? Do share with us your thoughts and experiences!

 

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