How Digital Platforms Compete Against Diverse Rivals
Kalina Staykova, Jan Damsgaard
This study analyzes the competitive strategies of digital platforms by examining the case of MobilePay, a major digital payment platform in Denmark. The authors develop the Digital Platform Competition Grid, a framework outlining four competitive approaches platform owners can use against rivals with varying characteristics. The research details how platforms can mix and match offensive and defensive actions across different competitive fronts.
Problem
Digital platforms operate in a highly dynamic and unpredictable environment, often competing simultaneously against diverse rivals across multiple markets or 'battlefronts'. This hypercompetitive landscape requires a flexible and adaptive strategic approach, as traditional long-term strategies are often ineffective. The study addresses the critical need for a structured framework to help platform owners understand and counter competitors with different origins and technological focuses.
Outcome
- The study introduces the 'Digital Platform Competition Grid', a framework to guide competitive strategy against diverse rivals based on two dimensions: the rival's industry origin (native vs. non-native) and their IT innovation focus (streamlined vs. complex). - It identifies four distinct competitive approaches: 'Seize the Middle' (against native, streamlined rivals), 'Two-Front War' (native, complex), 'Fool's Mate' (non-native, complex), and 'Armageddon Game' (non-native, streamlined). - The paper offers a 'playbook' of specific offensive and defensive actions, such as preemptive market entry, platform functionality releases, and interoperability tactics, for each competitive scenario. - Key recommendations include leveraging existing IT for speed-to-market initially but later building robust, independent systems, and strategically identifying which user group (e.g., consumers vs. merchants) will ultimately determine market dominance.
Host: Welcome to A.I.S. Insights — powered by Living Knowledge. In today's hyper-connected world, digital platforms are the new titans of industry. But how do they fight and win when their competitors can be anyone from a tiny startup to a global tech giant?
Host: We're diving into a fascinating study called "How Digital Platforms Compete Against Diverse Rivals." It analyzes the strategies of a major digital payment platform to create a practical playbook for business leaders. Here to break it down for us is our analyst, Alex Ian Sutherland. Welcome, Alex.
Expert: Great to be here, Anna.
Host: Alex, let's start with the big picture. What is the core problem that platform businesses face that this study addresses?
Expert: The core problem is that digital platforms operate in a hypercompetitive and unpredictable world. They often have to compete on several fronts at once, what the study calls 'battlefronts'. Think of Uber starting with ride-sharing, then suddenly competing with Grubhub in food delivery.
Expert: Or Apple, a tech company, launching Apple Pay and instantly becoming a rival to established financial players like Visa and MasterCard. Traditional long-term strategies just don't work when your next major competitor can come from a completely different industry.
Host: So it’s about needing a more dynamic way to think about strategy. How did the researchers go about building a solution for this?
Expert: They took a very practical approach. They did an in-depth case study on a successful Danish payment platform called MobilePay, tracking its journey from its launch in 2012 all the way to 2020. They analyzed 32 specific competitive actions MobilePay took to fend off a whole range of different rivals.
Host: So by watching a real-world battle unfold, they could extract a framework. What were the key findings?
Expert: The central finding is a brilliant tool called the 'Digital Platform Competition Grid'. It’s essentially a strategic map that helps a platform owner decide how to compete. It classifies rivals along two key dimensions.
Host: And what are those dimensions?
Expert: First is 'industry indigeneity'—basically, is your rival 'native' to your industry, like another bank in MobilePay's case? Or are they 'non-native', like a big tech firm? The second dimension is their 'IT innovation focus'—do they have a 'streamlined' focus on user experience, or a 'complex' one, trying to build a technologically superior system from the ground up?
Host: So depending on where a competitor lands on that grid, you use a different playbook.
Expert: Exactly. The study outlines four distinct competitive approaches. For example, against a 'native' rival with a similar 'streamlined' focus, the strategy is 'Seize the Middle'—you encircle them by entering all the key markets first. But against a 'non-native' tech giant like Apple Pay, it’s an 'Armageddon Game' where you concentrate your forces and collaborate with others to fortify your position.
Host: This is the critical part for our audience, Alex. What are the practical, actionable takeaways for a business leader running a platform today?
Expert: There are two that really stand out. First, you need a two-stage approach to technology. Initially, the study recommends leveraging your existing IT systems to get to market as fast as possible. Speed is everything to build those early network effects.
Host: But that can create dependencies and inefficiencies down the line.
Expert: Precisely. So, stage two is crucial: once you've established a foothold, you must invest in building more robust, independent systems. MobilePay had to do this to untangle itself from a partner that later became a competitor. You use synergies to get started, but you have to plan to abandon them to truly own your territory.
Host: That’s a powerful lesson. What was the second key takeaway?
Expert: It’s about identifying who really holds the power in your ecosystem. MobilePay’s rivals, like a bank consortium called Swipp, focused heavily on winning over commercial users—the merchants. They believed merchants would bring the private users.
Expert: But the study showed this was a mistake. It was the private, everyday users who were the ultimate 'kingmakers'. Because MobilePay had won them over first with a simple, easy-to-use app, the merchants eventually had to follow. So the takeaway is: you must correctly identify and prioritize the user group that will ultimately decide the winner of the competitive battle.
Host: Let's do a quick recap. Digital platforms need a flexible playbook, not a fixed long-term plan. The Digital Platform Competition Grid provides a framework to tailor your strategy based on your rival’s characteristics.
Host: And the key lessons for business are to prioritize speed-to-market first by leveraging existing tech, but then build resilient, independent systems later. And most importantly, figure out which user group is the true center of gravity and win them over first.
Host: Alex Ian Sutherland, thank you for making this complex topic so clear and actionable.
Expert: It was my pleasure, Anna.
Host: And a big thank you to our audience for listening to A.I.S. Insights. We'll see you next time.
digital platforms, platform competition, competitive strategy, MobilePay, FinTech, network effects, Digital Platform Competition Grid
