Product details

By continuing to use our site you consent to the use of cookies as described in our privacy policy unless you have disabled them.
You can change your cookie settings at any time but parts of our site will not function correctly without them.
Management article
-
Reference no. SMR49201
Published by: MIT Sloan School of Management
Published in: "MIT Sloan Management Review", 2007
Length: 10 pages
Data source: Field research

Abstract

In recent years, many high-technology industries, ranging from ''smart'' cell phones to social networking websites such as Facebook Inc and MySpace.com, have become platform battlegrounds. These markets require distinctive competitive strategies because the products are parts of systems that combine core components made by one company with complements usually made by a variety of companies. If a platform leader emerges and works with the companies supplying complementary products and services, they can together form an ''ecosystem'' of innovation that can greatly increase the value of their innovations as more users adopt the platform and its complements. However, companies often fail to turn their products into industry platforms. Over the past decade, the authors have investigated dozens of companies that have attempted to formulate and implement platform strategies. These companies operated in a variety of industries including computing, telecommunications, electronic appliances, semiconductors, enterprise software, data storage, automobiles, web portals and electronic payment systems. The major companies studied in the first phase of the research included Intel, Microsoft, Cisco, Palm, and NTT DoCoMo, the Tokyo-based mobile communications company. Hundreds of managers and engineers were interviewed and to complement the interviews are analysis of companies'' archival records and company and industry data. This first research stage aimed at uncovering the drivers of success at established platform leaders. The results of that work were published in the MIT Sloan Management Review in 2002, as well as in the book Platform Leadership (HBS Press, 2002). The focus of the initial work was on how Intel, Microsoft, Cisco and other companies had been able to drive industry innovation and sustain positions of platform leadership. Four ''levers'' or mechanisms were identified through which successful platform leaders were able to ‘architect’ or influence external innovation. The first lever was company scope: the choice of what activities to perform in-house versus what to leave to other companies - in particular, whether the platform leader should make at least some of its own complements in-house. The second lever was technology design and intellectual property: what functionality or features to include in the platform, whether the platform should be modular and to what degree the platform interfaces should be open to outside complementors and at what price. The third lever covered external relationships with complementors: the process by which the platform leader manages complementors and encourages them to contribute to a vibrant ecosystem. The fourth lever was internal organization: how and to what extent platform leaders should use their organizational structure and internal processes to give assurances to external complementors that they are genuinely working for the overall good of the ecosystem. Taken together, the four levers offer a template for sustaining a position of platform leadership. This article presents findings from the second stage of our research, which draws heavily on public information. It has been inspired primarily by several consulting engagements (such as with Nokia, EMC, Tokyo-based information technology company NTT Data and e frontier, the 3D computer graphics developer based in Santa Cruz, California), contacts with managers at organizations using our original framework (such as enterprise resource planning software provider SAP, the Internet Home Alliance and Siemens Automation) and numerous MIT master''s theses and PhD dissertations, as well as class projects.

About

Abstract

In recent years, many high-technology industries, ranging from ''smart'' cell phones to social networking websites such as Facebook Inc and MySpace.com, have become platform battlegrounds. These markets require distinctive competitive strategies because the products are parts of systems that combine core components made by one company with complements usually made by a variety of companies. If a platform leader emerges and works with the companies supplying complementary products and services, they can together form an ''ecosystem'' of innovation that can greatly increase the value of their innovations as more users adopt the platform and its complements. However, companies often fail to turn their products into industry platforms. Over the past decade, the authors have investigated dozens of companies that have attempted to formulate and implement platform strategies. These companies operated in a variety of industries including computing, telecommunications, electronic appliances, semiconductors, enterprise software, data storage, automobiles, web portals and electronic payment systems. The major companies studied in the first phase of the research included Intel, Microsoft, Cisco, Palm, and NTT DoCoMo, the Tokyo-based mobile communications company. Hundreds of managers and engineers were interviewed and to complement the interviews are analysis of companies'' archival records and company and industry data. This first research stage aimed at uncovering the drivers of success at established platform leaders. The results of that work were published in the MIT Sloan Management Review in 2002, as well as in the book Platform Leadership (HBS Press, 2002). The focus of the initial work was on how Intel, Microsoft, Cisco and other companies had been able to drive industry innovation and sustain positions of platform leadership. Four ''levers'' or mechanisms were identified through which successful platform leaders were able to ‘architect’ or influence external innovation. The first lever was company scope: the choice of what activities to perform in-house versus what to leave to other companies - in particular, whether the platform leader should make at least some of its own complements in-house. The second lever was technology design and intellectual property: what functionality or features to include in the platform, whether the platform should be modular and to what degree the platform interfaces should be open to outside complementors and at what price. The third lever covered external relationships with complementors: the process by which the platform leader manages complementors and encourages them to contribute to a vibrant ecosystem. The fourth lever was internal organization: how and to what extent platform leaders should use their organizational structure and internal processes to give assurances to external complementors that they are genuinely working for the overall good of the ecosystem. Taken together, the four levers offer a template for sustaining a position of platform leadership. This article presents findings from the second stage of our research, which draws heavily on public information. It has been inspired primarily by several consulting engagements (such as with Nokia, EMC, Tokyo-based information technology company NTT Data and e frontier, the 3D computer graphics developer based in Santa Cruz, California), contacts with managers at organizations using our original framework (such as enterprise resource planning software provider SAP, the Internet Home Alliance and Siemens Automation) and numerous MIT master''s theses and PhD dissertations, as well as class projects.

Related