Hemant K. Bhargava, Daewon Sun, and Byung Cho Kim, Production and Operations Management 22.6 (2013), pp. 1374-1388
Platforms can be highly profitable businesses, but launching them can be tricky. Multi-sided platforms depend on cross-side network effects, hence at the start---when each side of the platform lacks critical mass---it is hard to attract participants to either side, and harder when there is also a need to monetize and show profits. This paper examines the role of product line versioning in addressing this launch challenge. It provides insights regarding the timing of product line expansion, weighing multiple factors such as cost or complexity of an expanded product line, the platforms' ability to attract developers, level of uncertainty regarding its success, and industry position of the firm as a start-up vs. an established player. We demonstrate that network effects amplify the value of product versioning. High fixed costs of product line expansion imply a now or never choice for established firms that are confident about developer participation, but a "wait and see" approach for startups that are uncertain about developer participation.
Hemant K. Bhargava, Daewon Sun, and Byung Cho Kim, “Commercialization of Platform Technologies: Launch Timing and Versioning Strategy”, Production and Operations Management 22.6 (2013), pp. 1374–1388.