{"id":9043,"date":"2021-04-19T06:59:40","date_gmt":"2021-04-19T11:59:40","guid":{"rendered":"https:\/\/flevy.com\/blog\/?p=9043"},"modified":"2021-04-16T10:03:24","modified_gmt":"2021-04-16T15:03:24","slug":"2x2-matrix-for-platform-scaling-strategy","status":"publish","type":"post","link":"https:\/\/flevy.com\/blog\/2x2-matrix-for-platform-scaling-strategy\/","title":{"rendered":"2×2 Matrix for Platform Scaling Strategy"},"content":{"rendered":"

\"\"The phenomenal success of tech innovators using Platforms has spurred a desire in companies, from a greater variety of sectors and markets, to gain advantage of Product to Platform Transformation<\/a>.<\/p>\n

This Transformation is based on the need to model businesses on a Customer-Centric Design approach.<\/a>\u00a0 The need has arisen because the concept of Economies of Scale has become archaic and has been taken over by Economies of Unscale<\/a>.\u00a0 Each customer is now being offered customized products and solutions.<\/p>\n

The phenomenal success, by the trailblazing tech innovators, was achieved partly by deploying Platform Scaling that enabled Business Transformation<\/a> and monopolization of the market. \u00a0Though, this monopolization and questionable use of the Platform, especially data generated therefrom, saw attempts to regulate these tech companies\u2014making the decision to scale a complex one.\u00a0 Understanding the intricacies of Platform Scaling is thus critical to the development and deployment of any Platform Strategy<\/a>.<\/p>\n

When considering Platform Scaling Strategy<\/a>, there are 2 key aspects that are of utmost significance:<\/p>\n

Regulatory Complexity <\/strong><\/p>\n

Regulatory Complexity means present level of legal and regulatory impediments that govern Platform entry and operation in a sector.\u00a0<\/strong><\/p>\n

Regulatory Risk<\/strong><\/p>\n

Regulatory Risk refers to the probability of an upsurge in Legal and Regulatory Costs and Complexity in the future.<\/p>\n

Some equitable and measurable metrics for calculating Regulatory Risks do exist but generally it is extremely challenging to predict policy outcomes or even ascribe odds to various outcomes.<\/p>\n

A straightforward approach for Platform owners and operators to understand and evaluate the prospective combinations of Regulatory Complexity and Risk is to create a 2\u00d72 matrix of high vs. low for the 2 factors.<\/p>\n

\"\"<\/a><\/p>\n

Regulatory Complexity and Risk are turning out to be the determining factors in the strategic decision between Fast and Slow Scaling.<\/p>\n

Fast Scaling, which has also been referred to as Blitzscaling, requires choosing speed over efficiency.\u00a0 Fast Scaling has the strategic objective of growing briskly, experimenting swiftly to tweak product-market fit, and taking advantage of robust network effects to achieve and maintain a leading market share.<\/p>\n

Fast Scaling is required to activate 3 interconnected positive feedback loops:<\/p>\n

    \n
  1. Network Loop<\/li>\n
  2. Data Loop<\/li>\n
  3. Capital Loop.<\/li>\n<\/ol>\n

    Slow Scaling is the most sensible strategy in areas with both High Regulatory Complexity and High Regulatory Risk.\u00a0 Slow Scaling does not disregard the quest for network effects, which are a requirement for success of platform businesses, but it gives preference to analysis, constant growth, and risk curtailment instead of speed.<\/p>\n

    Platform businesses functioning in High-Risk, High Complexity situations may evade pitfalls by employing 4 key components of Slow-Scaling strategy:<\/p>\n

      \n
    1. Analysis of the Macro Environment<\/li>\n
    2. Careful Risk Management<\/li>\n
    3. Investment in Stakeholder Trust<\/li>\n
    4. Incremental Geographic Expansion.<\/li>\n<\/ol>\n

      Let us now delve a little deeper into the various permutations of Regulatory Complexity and Risk, quadrant-wise, in the matrix.<\/p>\n

      QUADRANT 1<\/strong><\/h2>\n

      Regulatory<\/strong> Risk<\/strong>\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Regulatory<\/strong> Complexity<\/strong><\/p>\n

      Low\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Low<\/p>\n

      Compliance costs are comparatively low in such situations and there are no serious deliberations among regulators and policy makers concerning restrictions on business models or operations.<\/p>\n

      The Strategy in this case is to Scale Fast.<\/p>\n

      QUADRANT 2<\/strong><\/h2>\n

      Regulatory Risk\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0Regulatory Complexity<\/strong><\/p>\n

      Low\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 High<\/p>\n

      Sectors in such scenarios are highly regulated e.g., financial services sector.\u00a0 Significant workforce is employed in governance, risk management, and compliance activities.\u00a0 Entering such markets necessitates careful consideration of Regulatory Complexity.<\/p>\n

      The strategy in such scenarios is to Scale Fast.<\/p>\n

      QUADRANT 3<\/strong><\/h2>\n

      Regulatory Risk\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0Regulatory Complexity<\/strong><\/p>\n

      High\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Low<\/p>\n

      Operations are generally in a Regulatory void\u2014i.e., no established and powerful regulatory authority, tight net of rules, or strict barriers to entry.\u00a0 There is a great degree of ambiguity regarding how regulators may react.\u00a0 Environment in such markets makes it difficult for businesses to mature discrete policy scenarios, allocate probabilities, and make strong assumptions on timing.<\/p>\n

      Strategy is to Scale Fast in such environments.<\/p>\n

      QUADRANT 4<\/strong><\/h2>\n

      Regulatory Risk\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0Regulatory Complexity<\/strong><\/p>\n

      High\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 High<\/p>\n

      There is high Regulatory Complexity, such as unclear approach by various regulators in the various markets.\u00a0 There are strong chances of sudden change in regulator and policy maker\u2019s approach due to a particular incident.\u00a0 Precipitous increase in entire sector\u2019s Regulatory Risk triggered by events is highly likely.<\/p>\n

      The most sensible strategy in such cases is to Scale Slow.<\/p>\n

      Interested in learning more about the permutations of these 2 Scaling Strategies, areas of strategic focus, and the 4 components of Slow Scaling Strategy?\u00a0 You\u00a0can download\u00a0an editable PowerPoint on Platform Scaling Strategy<\/strong> here\u00a0<\/a>on the\u00a0Flevy documents marketplace<\/a>.<\/p>\n

      Do You Find Value in This Framework?<\/h2>\n

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      \u201cMy FlevyPro subscription provides me with the most popular frameworks and decks in demand in today\u2019s market.\u00a0 They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions.\u00a0 I strongly recommend FlevyPro to any consultant serious about success.\u201d<\/p>\n

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      \u201cAs a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power.\u00a0 For us, it is an invaluable resource to increase our impact and value.\u201d<\/p>\n

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      \u201cFlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over!\u00a0 The quality of the decks available allows me to punch way above my weight \u2013 it\u2019s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.\u201d<\/p>\n

      \u2013 Roderick Cameron, Founding Partner at SGFE Ltd<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

      The phenomenal success of tech innovators using Platforms has spurred a desire in companies, from a greater variety of sectors and markets, to gain advantage of Product to Platform Transformation. This Transformation is based on the need to model businesses on a Customer-Centric Design approach.\u00a0 The need has arisen because the concept of Economies of… 2×2 Matrix for Platform Scaling Strategy<\/span><\/a><\/p>\n","protected":false},"author":110,"featured_media":9050,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"neve_meta_sidebar":"","neve_meta_container":"","neve_meta_enable_content_width":"","neve_meta_content_width":0,"neve_meta_title_alignment":"","neve_meta_author_avatar":"","neve_post_elements_order":"","neve_meta_disable_header":"","neve_meta_disable_footer":"","neve_meta_disable_title":"","footnotes":""},"categories":[82,81],"tags":[1535,2491,1683,2490,2492,2489,2484,2485,2488,2486,2487,2493],"class_list":["post-9043","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-operations","category-strategy","tag-business-transformation","tag-capital-loop","tag-customer-centric-design","tag-data-loop","tag-fast-scaling","tag-network-loop","tag-platform-scaling","tag-platform-scaling-strategy","tag-product-to-platform-transformation","tag-regulatory-complexity","tag-regulatory-risk","tag-slow-scaling"],"_links":{"self":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/9043","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/users\/110"}],"replies":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/comments?post=9043"}],"version-history":[{"count":12,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/9043\/revisions"}],"predecessor-version":[{"id":9057,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/9043\/revisions\/9057"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media\/9050"}],"wp:attachment":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media?parent=9043"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/categories?post=9043"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/tags?post=9043"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}