Platform ROI: How to determine the investment horizon on your digital platform investment

How do we drive alignment on the investment horizon for the platform?

This article is part of the Digital Platforms hub

Most platform businesses require significant upfront investment to mobilize the ecosystem. This investment often comes with a longer time horizon as the business validates initial use cases, executes to get to critical mass, scales through network effects, and captures value. While some platforms capture value right from the start, others may require significant ecosystem mobilization before revenue models can be scaled out.

Accordingly, platform execution requires senior leadership alignment on the investment horizon. One of the most common barriers to gaining executive support is a misalignment on the investment horizon.

Through the late 2010s and the early 2020s, easy access to capital drove platform valuations higher even as the timeline to positive cash flows kept extending. Venture capital investors working across a portfolio of bets can work with longer horizons. However, long-term investment horizons may not suit senior leadership investment appetite at incumbent firms, particularly for leaders who are looking to deliver short-term shareholder value.