What is a Multi-Sided Platform (MSP)?

A multi-sided platform is basically a product or a service that connects two or more participants,
working as an intermediary. The value proposition of MSP is that it makes the connection hassle-free
and easy for parties to connect. Most of the MSPs connect two groups. Examples of MSPs are Uber
(drivers and passengers), Housing.com (seller and buyer, owner and renter), Swiggy (seller and
buyer), etc.

What are the capabilities needed by MSP to successfully change with the changing needs of
service providers, customers, and partners?

MSPs are different than traditional companies. The boundaries under which MSPs operate are
different than the traditional companies. Thus it is necessary to access MSPs from a different
perspective. Below are some of the capabilities required by MSPs to keep up with the changes in the
market.

1. Network Expansion
Since MSPs are totally dependent on the service/product providers and takers, MSPs must
strategize to keep increasing their network to grow organically. As the needs of service
providers, customers and partners keep changing; it is necessary not only for the company
to reach out to more customers but also to provide the right proposition to both sides of the
platform.

2. Maintaining good relations with supplier

MSPs provide a lucrative offer in terms of cheaper services to the buyers as compared to
traditional companies. At the same time, it is essential to maintain a healthy relationship
with the suppliers. With many platforms available for the supplier to offer their service,
providing unique benefits to suppliers becomes crucial so that they do not change the
platform.

3. Maintaining Quality
One of the keys to a successful MSP is quality. Most of the MSPs have low-quality control
over the product/service their suppliers offer. MSPs should be able to standardize the
product/service so that parties on both sides of the platform are clear on what to offer and
what is offered. This may cause an increase in the perceived quality of offering from MSP
and increase trust in the company.

How can the MSP model become sustainable?

Traditional businesses have already been affected by the growth of MSPs. This effect has forced the
competition to make changes in their strategies in many industries worldwide. But if MSPs need to
compete in the ever-changing market, they need to be sustainable in their growth. Some ways in
which MSPs can be more sustainable are discussed below.

1. Managing price due to market fluctuation through a hybrid model

Since MSPs rely on the consumer market, there could be frequent fluctuations in price due
to changing needs of consumers. MSPs can consider converting to a hybrid model to
 overcome this, offering extra services apart from the primary service. For example, Uber
introduced - User for business, where Uber provides trips, meals, and local deliveries for a
company of any size, at a subsidized rate. Swiggy introducing ‘Genie’ for pickup and drop off
of several items from customers.

2. Acknowledging participants engagement

Acknowledging engagement by participants is as important as keeping them engaged with
the platform. MSPs invest a lot of money in expanding their network. It thus becomes
essential for the platforms to retain both old and new participants. If not, the expansion
would not have any positive effects. Most MSPs offer a section for rating and reviews. If the
platform work on the suggestions provided by the participants, they can create a positive
engagement with participants and have more chances of retaining them.

3. Quality of Service
MSPs should continuously work on maintaining the quality of their offerings. They should
not be underestimating the role of risk mitigation and providing quality service to the
customers. MSPs should create a minimum standard to maintain the quality and frequently
review ratings given by the customers.

4. The flexibility of the business model

It is essential to have a business model which is flexible to adjust to the changes, to be able
to sustain in the market. These changes could be due to government regulations, consumer
behaviors, or anything else. With the changing environment, MSPs could look into adding
new services to their model. For example, Uber for Business, Swiggy ‘Genie’.

Why are some shared economy MSP more competitive than others?

Shared economic MSPs not only compete with other MSPs but also with traditional companies. The
ability of MSPs to grow very quickly and use economies of scale reduces the entry barriers in the
market compared to traditional entrants.

Since shared economy MSPs operate on a big scale, there are generally various regional markets
involved. The number of suppliers can vary from a few (co-working space) to a vast number (Airbnb).
The number of customers is usually also huge, making the market a polyploy. Sharing economic
MSPs have increased the competition significantly in the market they operate in. In most cases, the
market they enter is undisrupted for a long time, and thus, they introduce competition. For example,
taxis in India were regulated with very few players in the market. As soon as Uber and Ola entered
the market, it got disrupted, and the competition increased. Unlike traditional companies, when
MSP enters an already competitive market, the competition still increases with their entry.

The main reason for this increase in competition is that MSPs do not follow regular frameworks and
regulations like the traditional market. They believe that the traditional regulations do not apply to
them because they see suppliers as individuals and not companies (Uber’s model).

The reason MSP does not follow the regulations as per traditional market is that they would
threaten the very existence of the shared economic model. For example, if the regulations applied
on hotels regarding fire safety, labor laws, etc., are applied on a business model like Airbnb, it would
never work.

In some cases, the framework and regulations of the traditional market do apply to the sharing
economic MSPs—for example, the healthcare sector. Let’s say someone is looking for a home care
nurse. That nurse has to be trained in the same college/hospital as nurses in hospitals. This sector is
regulated similar to the traditional market and thus not very competitive. Therefore markets without
regulated frameworks and regulations for shared economic MSP compared to traditional markets
are more competitive than MSPs with regulated frameworks as traditional markets.