Mastercard’s lesson: You need partners
When you want to enter new markets, partnerships are vital. BlaBlaCar formed a partnership with an insurance company. Mastercard introduced its Smart Cities initiative to leverage contactless payments around the world. Thus it promoted its use for public transport: the company would focus on the digital back end, ensuring stability, while the local partners provided the local payment hardware.
Networking effects
Another hardship is experienced when a winner-takes-all dynamic kicks in. This occurs when one or two big players have a vast customer base, while others are competing only for the tiny crumbs. This often applies to digital business models.
If there is a digital player in a country which already enjoys network effects (the more people who use a product, the more valuable it is), it is difficult for a newcomer to compete on that country’s market. It is much easier for companies selling physical products. In manufacturing, economies of scale can be achieved even if you are not yet the biggest player.
Two conditions
How come some digital products spread relatively easy across the globe and others don't? There are two conditions which play a role.
- The product needs to address a sufficiently common need that does not vary across national cultures – such as free SMS provided by WhatsApp.
- The product needs to be available on a partner’s platform.
Only rarely do new products satisfy both these criteria.
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