Under the right circumstances, companies of any size can grow to become platform leaders. And particular business and technology decisions can help platform-leader wannabes achieve their goals.
In recent years, many high-technology industries, ranging from “smart” cell phones to social networking Web sites 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.
Our previous research focused on understanding the levers or strategic mechanisms that existing platform leaders use to maintain their positions. (See “About the Research,”) This article focuses on the special problems of companies that want to become platform leaders — “platform-leader wannabes.” Many companies do not succeed in becoming platform leaders because their strategies fail to tackle adequately both the technology and business aspects of platform leadership. The technological challenges involve designing the right architecture, designing the right interfaces/connectors and disclosing intellectual property selectively, in order to facilitate third-parties’ provision of complements. The business challenges include either making key complements or introducing incentives for third-party companies to create the complementary innovations necessary to build market momentum and defeat competing platforms.
About the Research
Over the past decade, we 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 we studied in the first phase of our research included Intel, Microsoft, Cisco, Palm, and NTT DoCoMo, the Tokyo-based mobile communications company. We interviewed hundreds of managers and engineers and complemented the interviews with 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 inMIT Sloan Management Review in 2002, as well as in our bookPlatform Leadership (HBS Press, 2002).
The focus of our initial work was on how Intel, Microsoft, Cisco and other companies had been able to drive industry innovation and sustain positions of platform leadership.