Ecosystem governance: Ensuring fairness and fostering trust

How do we ensure fair governance in managing ecosystem relationships?

This article is part of the Digital Platforms hub

Digital platform firms need to establish fair governance, particularly in managing their relationships with partners in the ecosystem. Towards this, the platform firm should

adequately convey the rules of play – the factors that lead to partner success on the platform. It should also invest in educating partners on ecosystem governance, both through incorporating feedback into the workflow as well as through off-platform partner management initiatives.

Platform firms must also ensure that they avoid conflicts of interest with ecosystem partners. In particular, when the platform firm also acts as a producer on the platform partners may fear (1) the possibility of a bait and switch, where the platform firm may change governance and policies to favor its own business, (2) and the possibility of channel control, where the platform may limit exposure (and, hence, business upside) for partners in the ecosystem. Since the platform has superior data insight into partner use cases that perform well, partners may fear that the platform could absorb or capture those use cases itself to capture higher margin and remove the respective partner from the platform.

For instance, Amazon is both a retailer and runs a marketplace for third-party sellers. Through the marketplace, Amazon gathers data on product sales. Research published in Strategic Management Review in 2018 studied 164 000 products sold by merchants on Amazon’s platform. As of June 2013, Amazon didn’t sell these products. However, a study of the same set 10 months later revealed that Amazon had started directly selling more than 5 000 of these products. In a statement to Congress, Amazon has also publicly acknowledged that it uses aggregated third-party data to inform its private label brands.