technology strategy and Management the evolution of platform thinking
How platform adoption can be an important determinant of product and technological success.
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my prior publications, including my Communications columns on Microsoft, Apple, and Google, I have argued that companies in the information technology business are often most successful when their products become industrywide platforms. The term “platform,” though, is used in many different contexts and can be difficult to understand. I am currently finishing a book on best-practice ideas in strategy and innovation, and include a chapter ...view middle of the document...
One of my doctoral students, Annabelle Gawer, took on this challenge for her MIT dissertation in the late 1990s, which became the basis for our 2002 book, Platform Lead-
ership: How Intel, Microsoft, and Cisco Drive Industry Innovation. In this book and subsequent articles we tried to clarify the characteristics of a product versus an industry platform.4 Gawer and I argued that an industry platform has two essential differences. One is that, while it provides a common foundation or core technology that a firm can reuse in different product variations, similar to an inhouse product platform, an industry platform provides this function as part of a technology “system” whose components are likely to come from different companies (or maybe different departments of the same firm), which we called “complementors.” Second, the industry platform has relatively little value to users without these complementary products or services. So, for example, the Windows-Intel personal computer or a smartphone are just boxes with relatively little or no value without software development tools and applications or wireless telephony
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ers in the ecosystem that create or use complementary innovations, the more valuable the platform (and the complements) become. This dynamic, driven by direct or indirect network effects or both, encourages more users to adopt the platform, more complementors to enter the ecosystem, more users to adopt the platform and the complements, almost ad infinitum.
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and Internet services. The company that makes the platform is unlikely to have the resources or capabilities to provide all the useful applications and services that make platforms such as the PC or the smartphone so compelling for users. Hence, to allow their technology to become an industrywide platform, companies generally must have a strategy to open their technology to complementors and create economic incentives (such as free or low licensing fees, or financial subsidies) for other firms to join the same “ecosystem” and adopt the platform technology as their own. A second key point is that, as various authors have noted, the critical distinguishing feature of an industry platform and ecosystem is the creation of “network effects.” These are positive feedback loops that can grow at geometrically increasing rates as adoption of the platform and the complements rise. The network effects can be very powerful, especially when they are “di-
rect,” such as in the form of a technical compatibility or interface standard— which exists between the WindowsIntel PC and Windows-based applications or between VHS or DVD players and media recorded according to those formats. The network effects can also be “indirect,” and sometimes these are very powerful as well—such as when an overwhelming number of application developers, content producers, buyers and sellers, or advertisers adopt a particular platform...