Companies launching two-sided platforms—businesses that connect two groups of users, as credit-card companies do—have often subsidized one group to get it to use the platform. This is a risky approach, because it requires a big upfront investment.

A staged approach is safer: it establishes the platform in two distinct steps. Some of the Internet’s biggest success stories have been launched this way, including Google and Amazon.

The staged approach addresses a catch-22 faced by any company hoping to capitalize on a two-sided platform: prospective users on each side will avoid the platform until they are confident that the other side will have enough users to make it worth their while. Who’s going to sign up for a new type of credit card if no merchants accept it? And what merchant will accept the card if no customers carry it?

A company using a staged strategy begins by selling products or services to customers on just one side of a potential two-sided platform—products or services whose value to that side does not depend on the existence of the other. Once the company has built a big base of customers on the first side, it can target the second side for development.

Google used this strategy: it originally launched as a vendor of Web-search services, operating Google.com and licensing its search engine to Yahoo and other portals. Initially Google.com carried no advertising; its sole (and modest) source of revenue was licensing fees.

But after amassing end users, Google added advertisements and became extraordinarily profitable by serving searchers on one side and advertisers on the other. It brought new functionality to existing services as a means of transitioning to a two-sided platform.

An alternative approach is to provide more of the same—to broaden a firm’s existing product line by hosting third parties that market similar goods and services, as Amazon did. Charles Schwab deftly managed such a transition years ago by adding third-party mutual funds and independent financial advisers to its in-house offerings.

Staged strategies reduce investment risk but can be tricky to implement. Companies must earn the trust of new platform users. Third-party suppliers, for example, may worry about ceding control of their customer relationships to platform providers, who can favor their own products. Likewise, close communication is essential to maintaining the confidence of existing customers, suppliers, employees and investors, who may be confused or alienated when a firm fundamentally changes its value proposition.

Although Google successfully transitioned into a platform through improvisation rather than a careful plan, the road is littered with the casualties of poorly executed platform strategies. Think of eight-track cassettes, RCA’s VideoDisk and IBM’s OS/2. By studying platform strategies that have worked, companies can hedge their bets.

(Andrei Hagiu and Thomas Eisenmann are professors at Harvard Business School in Boston. The research reported here is described in detail in “Staging Two-Sided Platforms,” available at www.harvardbusinessonline.org.)

Give your team a challenge they can’t resist

It’s not easy pulling a group of diverse individuals together to work as a team. Barriers abound in the form of fierce territoriality, incentive systems that reward individual rather than collective achievement, and mistrust spawned by an acquisition, merger or major internal restructuring.

Improve your return on returns

Competitive pressures have forced many retailers and manufacturers to liberalize their returns policies in recent years and gladly accept for a refund just about anything customers regret having bought.

A staged solution to the catch-22

Companies launching two-sided platforms—businesses that connect two groups of users, as credit-card companies do—have often subsidized one group to get it to use the platform. This is a risky approach, because it requires a big upfront investment.

Ship shape

For an employee, a company-sponsored overseas trip could mean mostly fun, with, of course, some work in between. For a chief executive of a company, however, it would be the opposite, and most of the time the fun part takes place in between working or not at all.

Winning: Stay the course…especially if it’s a new one

Q: Sometimes companies need to change even when there is not a crisis forcing the issue. In such cases, how do you keep your people excited about a change initiative after its newness has worn off? Trevor Smith, Singapore

A: You have to stay excited yourself. And not just excited, but obsessed.

If I had a hammer

HASHIM squinted before pulling the trigger. Although the 19-year-old is used to holding Soviet-made AK-47 assault rifles in the deep jungles of Mindanao three years back, this particularly weapon was new to him.

Big failure, little dreams

CASTELLANA, Negros Occidental—It is already past noon and yet Edelyn Pineda is still lazing around Sitio Odiong here along with her little friends.

The Morning Meeting: Best-practice communication for executive teams

Does your company’s executive team struggle with chronic communication problems and a lack of shared accountability? Many times when my colleagues and I are called in to help out an organization, we find that these two core issues underlie their problems.

Lessons from the leaders of retail loss prevention

Preventing theft, damage and errors such as food spoilage has long been an unyielding and poorly understood problem for retailers. But a few companies stand out in their ability to limit losses, and if every retailer were as successful as they are, the sector could save billions of dollars annually—as much as $27 billion in the United States alone.

The Jock Correlation in business

WITH many sports headlines today trumpeting organizational and solvency issues with various teams and sports associations across the world, there is often an almost missionary zeal to bring to sports a more “business approach.”

Winning: Developing a successful succession plan

Q: What companies would you hold up as examples of succession planning done right? Robert Handfield, Raleigh, North Carolina 

A: It’s sad to say, but your question would be a heck of a lot easier to answer if you had asked for examples of succession planning done wrong. That trend is gaining such ground these days it’s alarming.

Accounting can be fun

People quick to dismiss accountants as the ultimate bean counters have definitely not run into the likes of Roberto Manabat and Emmanuel Bonoan, the dynamic duo that has redefined the business of accounting in the Philippines. Currently sitting at the helm of KPMG Manabat Sanagustin & Co., the Philippine affiliate of KPMG International, the pair has ably guided Philippine companies through the accounting labyrinth without getting in the way of their business activities.

‘I’ll stop exposés if they stop doing wrong’

Sen. Ping Lacson tells the Quijano de Manila forum why investigation is an essential Senate role 

(Excerpts from discussions of journalists with Sen. Panfilo Lacson at the Quijano de Manila Symposium, October 24, 2007, Cherry Blossoms Hotel, Manila. At the panel were Butch del Castillo and Inday Varona of Philippine Graphic magazine, Amado Macasaet of Malaya, Jimmy Gil of dzBB, columnist Lito Banayo and BusinessMirror Senate reporter Butch Fernandez.)

Idiot Box No More

WHERE life is tangled in knots and snarls in the marooned mountainous areas in Mindanao, 12-year-old Mel Velyn Escobar of Midsayap, a town in North Cotabato, finds hope in Knowledge Channel to pursue her education.

Coaching your team’s performance to the next level

Teams are the workhorses of today’s businesses, but they’re workhorses prone to many ailments, from open bickering and sabotage to resolute conflict avoidance. And even teams that generally plow ahead productively can be improved.

Break the paper jam in B2B payments

Electronic invoice and payment systems have been slow to catch on, even though they offer enormous promise for cost savings, speed and transparency in business-to-business transactions.