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Entrepreneurs must understand not only the dynamics of the platform, but also how that platform can eventually secure profits. Profit, of course, is essential to all businesses. But in a multisided business, profitability is a tricky achievement. Several challenges make a steady focus on profitability critical for planning and managing a new catalyst business--and thus a crucial element of the Catalyst Framework™.
Task (1). Study the History of the Industry to Learn Why Catalysts Succeeded or Failed in this Arena in the Past History can tell the catalyst much about what's worked, what hasn't, what's failed, and why. Catalysts Discussed: Nintendo, Sony, Microsoft
Task (2). Use History and Experience to Forecast the Evolution of Profits under Alternative Scenarios Catalysts must have forecasts of the growth of each side of their businesses. Catalysts Discussed: American Express, Discover Card
Task (3). Anticipate Multisided Strategies from Incumbent Catalysts and New Entrants In addition to anticipating and responding to competitors as single-sided businesses, catalysts also face several competitive issues that traditional firms don't encounter. Catalysts Discussed: Diners Club, Munsey Magazines
Task (4). Align Interests Internally and Externally So that All Members of the Community Have a Stake in the Long-Term Profitability of the Catalyst Having effective teams whose interests are aligned is critical to success in most businesses. Catalysts Discussed: Microsoft, Sony, Google
Even the best-executed catalyst strategy for entry does not guarantee financial rewards. But with a plan for profitability in place catalysts can quickly move from an unprofitable to a profitable path as a result of scale and positive feedback effects. For more on focusing on profitability, visit Step 4 of the Framework™
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Chapter 6: Focus on Profitability 