Page - 90 - in Digital Entrepreneurship - Impact on Business and Society

platformentrepreneurneeds to runexperiments forboth sides.To illustrate this,we have split the discussed venture pyramid to allowentrepreneurs to test the different market sides separately in the early phases of idea and concept validation (Fig. 3). The demand for a solution is primarily tested on the level of problem–solutionfit, e.g., via smoke tests or qualitative interviews. To reach the level of problem– solutionfit, platform entrepreneurs can run smoke tests or conduct interviewswith thedifferent sidesof aplatform.Thesedevelopments shouldbebuilt on avalidated market attractiveness and customer problem fit for each side to avoid premature scaling. Both assumptions on the size of the target group and the relevance of the problemneed to be true for the different sides of the platform. The separation into the two sides indicates that the existence of a customers’problemanddemand can be tested in isolation for both sides.This again is essential to reduce theprobability of premature scaling of the company. At the level of platformmarket fit, digital entrepreneurs’ objective is to achieve not only onetime activation but ongoing usage, revenue, andwordofmouth.This is thefirstmomentwhenboth sidesof the platformneed tobe considered together. Thus,wedescribe aplatformmarketfit as a situation where a platform continuously attracts and satisfies the demand from both sides. This platformmarketfit can be induced by the aforementioned actions of platform manipulation, market interaction, and ecosystem governance. We suggest experimentingwith different alternatives, e.g., changing structures or rules, on the way to identify platform market fit. For an innovation platform (e.g., AppStore), this entails, for example, the decisions on the openness of interfaces or the design of the review/acceptance process (Tiwana 2014). The partial split of the venture pyramid illustrates that a platform market fit can be built on a product marketfitwhereonlyonesideof theplatformisvalidated.Anexampleof this is the validation of the Zappos platform business model by leveraging a Wizard of OZ MVP (Göcke and Weninger 2020). In its early days, Zappos creates an e-commerceWebsite tobuyshoesonline.When launching theWebsite, thesupply side was purely handpicked shoes without any direct connection to the shoe manufacturer (Ries 2011). It was an early experiment on the demand side of the platform,without testing the intentionof shoecompanies toconnect to theplatform. In businesses with a network effect, utility and demand are dependent on the number of users on the platform.As discussed before, network effects can take the form of same-side or cross-side network effects. For the success of the platform, digital entrepreneurs need to validate the critical assumptions on the existence of networkeffects to ignitegrowth for thebusiness.SeeTable 2 for anoutlineof these assumptions. We see the level of problem–solution fit as an initial stage to validate risky assumptionson thenetwork effects in thebusiness.User attraction in anearly stage can be best evaluated through direct feedback in qualitative interviews ormetrics like the conversion rate or customer acquisition cost in landing page tests. Early split tests with prototypes or landing pages can help to validate/invalidate the strength of same- or cross-side network effects. In these experiments, a user canbe confronted with different signals on the number of users on a platform. The gen- erated informationguides thedesignof aminimumviableproduct and the startups’ 94 L. Göcke and P.Meier