Back to profitable growth for marketplace and platform businesses – through organizational transformation

Marketplaces and platform businesses have experienced significant growth and transformation in recent years, driven by shifts in consumer behavior, technological advancements, and increasing competition. The rise of these business models has reshaped several industries including e-commerce, travel, mobility, real estate, and delivery services.  

The shift toward online consumption, accelerated by the pandemic, has pushed many marketplaces to scale rapidly and expand into new products, services, and markets. However, this rapid growth has also introduced challenges in maintaining operational efficiency, ensuring agility, and balancing expansion with scaling an efficient, effective organization. Organizational transformation has therefore become essential for remaining competitive and driving profitable growth. 

Key challenges facing marketplace and platform businesses

Tech-based companies have shifted their focus from growth to profitability

Several platform and marketplace companies grew their workforce significantly during the pandemic to meet the surge in demand. However, as topline growth slowed in the aftermath, many began implementing efficiency programs. Tech teams were initially spared, but this trend has shifted in more recent waves of organizational transformation. For example, the number of tech layoffs in the US in 2023 was almost twice as high as the previous year (approximately 191,000 FTE in 2023 vs. 93,000 FTE in 2022).   

Amid challenging economic conditions, we observe continued demand in the platform and marketplace industry for organizational efficiency programs. Our experience highlights significant cost improvement to be realized, potentially a minimum of 10-15% in personnel-related cost, primarily in Product, Technology and Data teams. This can be achieved through measures such as rightsizing, reorganization, and critically assessing tech and product innovations to determine whether they contribute effectively to topline growth and effectiveness, or only add additional complexity.  

Sales and marketing teams can also be challenged on the effectiveness and efficiency of commercial activities such as campaigns. The same applies to corporate or support functions, which could exhibit a cost reduction potential of 10-20%. A well-executed cost reduction program can unlock financial benefits from workforce adjustments while preserving essential capabilities and supporting the organization's growth potential, tailored to the unique dynamics and requirements of platforms and marketplaces. 

Challenges and organizational models for profitable growth

Marketplaces and platform businesses operate as intermediaries, connecting buyers and sellers on a common platform. Operators provide not only the platform infrastructure, but often deliver several services across the value chain. From our perspective, the following key aspects should be considered when building a successful platform business:  

• Managing different product/service verticals: Platform businesses often serve diverse sub-sectors, each with different sellers and customers. These verticals create complexity for the organization by requiring tailored approaches for product development, operations, and commercial strategies. 
• Ensuring flexibility and scalability: During periods of high growth, platform and marketplace business models must remain flexible. Early organizational design considerations are essential so that teams can scale the business and handle increased workload without requiring additional resources for each function. 
• Balancing dedicated vs. central/shared resources: Instead of building separate verticals teams for all activities, the organizational design should include shared teams, where meaningful, to serve all or multiple verticals and benefit from capacity allocation flexibility and shared knowledge. 

The two predominant organizational models in marketplace businesses – the supply/demand model and the capability model – result in distinct organizational frameworks. The specific configuration of the product and technology teams within these structures determines the respective operating models.

A. Supply and demand model with a focus on “vertical” 

In this model, a “vertical” organization is designed around Product Supply and Customer Demand, with Corporate Functions spanning all verticals. Each vertical has dedicated Product, Tech and Data teams for seller- (supply) and customer- (demand) related activities. The CTO area acts as an enabler and provides central back-end activities across all verticals, related to, for example, the technical platforms, systems and data security. This model allows a strong product focus with proximity to sellers’ and customers’ needs in each vertical. Potential disadvantages lie in a lack of coordination and knowledge sharing between the different vertical teams. 

B. Capability-led model with a focus on “horizontal” 

In this model, Product, Tech and Data are organized as end-to-end functional teams. Each team has dedicated resources for each vertical, as well as shared resources across verticals. This approach focuses on creating a team with functional expertise in Product, Tech and Data that works closely under one leadership and drives strong collaboration. A potential drawback, however, can come from a lack of collaboration between Commercial, Marketing and Product/Tech/Data teams. 

Guiding questions to identify a fit-for-purpose organization

There is no single "right" organizational structure for marketplace businesses; instead, the optimal setup depends on the specific goals, challenges, and growth stage of the company. For larger platform and marketplace businesses with established structures, a hybrid model often proves most effective, combining elements from both vertical and horizontal approaches. 

In this hybrid model, dedicated vertical teams have a strong focus on sellers and customers, while there is a horizontal organization for Product, Tech and Data capabilities that provides tech and data expertise as well as enablement to the verticals. Each option has implications for the overall business operating model, such as how requirements are prioritized, how best practices are shared across teams, and how quickly decisions are made.  

To derive the right level of vertical or horizontal organizational set-up, we typically use guiding questions when assessing existing organizations and potential compromises between flexibility and scalability:

Conclusion: Striking the right balance 

Transforming platform and marketplace businesses requires a trade-off between vertical and horizontal structures. Achieving the right balance is essential to staying close to the needs of customers and sellers, and to creating effective teams with the necessary tech enablement to deliver a smooth customer and seller experience within a lean cost structure.