Dethroning an Established Platform
What can you do when a competitor has already established a leading platform? Learn from Apple’s iPhone, Google’s Gmail and Facebook — and how they overtook earlier market leaders.
Facebook, which overtook incumbent social networks MySpace and Friendster, initially aimed at Harvard University students. Facebook’s early expansion took advantage of close links at specific colleges as the social network became available to students at an increasingly long list of schools.
Image courtesy of Flickr user insiderimages.
The newest era of the Information Age could very well be called the Age of Platforms, given the explosion of markets defined by platform competition. Increasing numbers of companies big and small, whether providing hardware devices, traditional software or software in the cloud, are attempting to become platform masters by releasing application programming interfaces that allow others to build software and hardware products or complementary services on top of their technology offerings. Platform competition is expanding into many markets and can be found today in a variety of industries and on different scales: from the nearly universal platforms of the Internet, credit cards and the telephone to newer Internet-enabled platforms such as Facebook, Skype, Google Maps and PayPal.
During the last decade, several key elements that constitute a “platform theory” have emerged.1 These are now being taught in business schools and discussed by technology managers across the globe. But the existing theory does not fully explain the rise of some key players, such as Apple’s iPhone, that have entered their industries relatively late and have succeeded in dethroning powerful incumbent platforms. The experiences of these “platform dethroners” offer several important lessons for companies entering or competing in platform markets. (See “About the Research.”)
References (13)
1. See, for instance, K. Boudreau, “Open Platform Strategies and Innovation: Granting Access vs. Devolving Control,” Management Science 56, no. 10 (October 2010): 1849-1872; T.R. Eisenmann, “Managing Proprietary and Shared Platforms,” California Management Review 50, no. 4 (Summer 2008): 31-53; M. Cusumano and A. Gawer, “The Elements of Platform Leadership,” MIT Sloan Management Review 43, no. 3 (spring 2002): 51-58; N. Economides and E. Katsamakas, “Two-Sided Competition of Proprietary vs. Open Source Technology Platforms and the Implications for the Software Industry,” Management Science 52, no. 7 (July 2006): 1057-1071; and A. Gawer, ed., “Platform, Markets and Innovation” (Cheltenham, U.K. and Northampton, Massachusetts: Edward Elgar Publishing, 2010).
2. Network externalities are also known as “network effects.” See Eisenmann, “Managing Proprietary and Shared Platforms.”
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Ravikiran Annaswamy
indysen@alum.mit.edu