This paper brings together the recent literature on industry platforms and shows how it relates to managing innovation within and outside the firm as well as to dealing with technological and market disruptions and change over time. First, we identify distinct types of platforms. Our analysis of a wide range of industry examples suggests that there are two predominant types of platforms: internal or company-specific platforms, and external or industry-wide platforms. We define internal (company or product) platforms as a set of assets organized in a common structure from which a company can efficiently develop and produce a stream of derivative products. We define external (industry) platforms as products, services, or technologies that act as a foundation upon which external innovators, organized as an innovative business ecosystem, can develop their own complementary products, technologies, or services. Second, we summarize from the literature general propositions on the design, economics, and strategic management of platforms. Third, we review the case of Intel and other examples to illustrate the range of technological, strategic, and business challenges that platform leaders and their competitors face as markets and technologies evolve. Finally, we identify practices associated with effective platform leadership and avenues for future research to deepen our understanding of this important phenomenon and what firms can do to manage platform-related competition and innovation.
The emergence of industry platforms is a novel phenomenon impacting most industries today, from products to services. Industry platforms are building blocks (they can be products, technologies or services) that act as a foundation upon which an array of firms (sometimes called a business ecosystem) can develop complementary products, technologies or services. Platforms exist in a variety of industries, and they certainly exist in all high-tech industries. Google, Microsoft Windows, cellphone operating systems, fuel-cell automotive engines, but also some genomic technologies are all platforms. But while platforms are becoming more and more pervasive, and promising research has been under way (Bresnahan and Greenstein, 1999; Gawer and Cusumano, 2002 and 2008; West, 2003; Rochet and Tirole, 2003 and 2006; Iansiti and Levien, 2004; Eisenmann et al., 2006; Evans et al., 2006; Gawer and Henderson, 2007), important questions remain unanswered. In particular, we don?t yet understand the conditions under which industry platforms come to exist, and then to develop. We also don?t know much about how firms? capabilities should impact their platform strategies. The chapter aims to answer two research questions: (1) under which conditions can we expect industrial platform dynamics to emerge and unfold? And (2) in the context of platform industry dynamics, what kind of platform strategies should firms devise, depending on whether they are incumbents or new entrants?
Gawer A (2009) Platforms, Markets and Innovation, Edward Elgar Publishing
The emergence of platforms is a novel phenomenon impacting most industries, from products to services. Industry platforms such as Microsoft Windows or Google, embedded within industrial ecosystems, have redesigned our industrial landscapes, upset the balance of power between firms, fostered innovation and raised new questions on competition and innovation.
Annabelle Gawer presents cutting-edge contributions from 24 top international scholars from 19 universities across Europe, the USA and Asia, from the disciplines of strategy, economics, innovation, organization studies and knowledge management. The novel insights assembled in this volume constitute a fundamental step towards an empirically based, nuanced understanding of the nature of platforms and the implications they hold for the evolution of industrial innovation. The book provides an overview of platforms and discusses governance, management, design and knowledge issues.
The new CGE report, The Rise of the Platform Enterprise: A Global Survey, presents the results of a year-long research project in which leading scholars and experts from Africa, China, Europe, India and the U.S. collaborated to conduct the first comprehensive survey of major public and privately owned platform companies. Through highly efficient matching of different users and/or harnessing large ecosystems of complementary technologies products or services, companies with platform business models have grown dramatically in size and scale over the past decade. The research identified 176 platform companies worldwide with a market valuation of US$1 billion or more. Some platform companies have become household names, such as Amazon, Alibaba or Uber, but there are many others of significant size and scale that hail from different areas of the world that are less known.
This report analyses the answers to 8 open questions in the European Commission?s public consultation on platforms. Themes included the definition of platforms, platforms? treatment of suppliers and customers, constraints platforms face when expanding their business in the EU, and their handling of consumer data.
Gawer A, Cusumano M (2014) Platforms and Innovation, In: Dodgson M, Gann D, Phillips N (eds.), The Oxford Handbook of Innovation Management
Oxford University Press
This chapter analyses the role that platforms can play in innovation, and their implications for innovation management. It offers a definition of the term ?platform?, as well as a classification of different types of platforms (internal platforms, supply-chain platforms, and industry platforms). It highlights the fundamental economic and strategic concepts associated with platforms. The chapter clarifies the similarities and differences between the economic conception of platforms as double-sided markets subject to network effects and that of platforms that stimulate ?open? innovation by complementors within innovative ecosystems. It also clarifies the role of technological architecture and interfaces in platform innovation. It also examines major cases of platform leadership and innovation challenges that companies face as markets, technologies, and competition evolve. Finally, it reviews some of major remaining issues for future research on platforms and innovation management.
In this article, we explore some of the forms of institutional work that organizations perform as they participate externally in the processes that drive change in the institutional logic that characterizes their field, and as they respond internally to the shift as it occurs. More specifically, we present the results of an in-depth case study of Intel Corporation, a firm that was implicated in a fundamental shift in the institutional logic of its field in the late 1980s and 1990s as the field moved from a traditional supply chain logic dominated by computer assemblers to a new platform logic following very different organizing principles. Through the qualitative analysis of 72 interviews with Intel employees, complemented by extensive archival data from 1980 to 2000, we identify two forms of institutional work that Intel performed externally ? external practice work and legitimacy work ? and two forms of work that they carried out internally ? internal practice work and identity work ? as the organization worked to simultaneously influence the shift in logic that was occurring and to deal with the ramifications of the shift.
Over the past 20 years, the global economy has been reshaped by digital technologies. All over the world, individuals and organizations have adopted and increasingly rely upon digitally-enabled devices and technologies to help them conduct essential daily tasks. We are connected via the Internet and telecommunication networks that span the earth, through a global grid of close to 8 billion mobile connected devices (more than the human population). Individuals and organizations increasingly use these devices to continuously engage with digitally-enabled activities (which in turn generate digital traces). The concomitant consumption, usage, and generation of computer-mediated, computer-processed, and network-transmitted data have become an intrinsic feature of economic and social activity.
What factors and processes drive value appropriation and value creation in interdependent industry ecosystems? This paper explores this issue through a case study comparing the deployment of the i-mode mobile Internet service in two countries, seeking the reasons behind its contrasting fortunes: spectacular success in Japan vs failure in Europe. The comparison between network operators NTT Docomo in Japan and KPN in the Netherlands suggests that differences in the underlying industry architectures explain why similar platform strategies led to such different outcomes. The paper contributes to the literature on industry architecture by unpacking the interaction between evolutionary processes, industry architecture, and business strategies. It also contributes to the platforms literature, by positing that firms' ability to successfully pursue platform strategies depends on industry architecture.
A new and powerful way to compete has taken shape in our business landscape: Platform competition Whether we are talking about Google, Apple?s iPhone, iTunes and iPad, or Facebook, platforms seem to have taken our business landscape by storm. Firms that provide these platforms are able to orchestrate and take advantage of innovation coming from myriads of other firms that operate in coalitions sometimes called innovative business ecosystems. This article aims to present succinctly the essential ideas that managers need to understand about platforms, whether they are attempting to pursue a platform strategy or defending themselves against a platform attacker
An integrative framework is proposed to advance management research on technological platforms, bridging two theoretical perspectives: economics, which sees platforms as double-sided markets, and engineering design, which sees platforms as technological architectures. While the economic perspective informs our understanding of platform competition, the engineering design perspective informs our view of platform innovation. The article argues that platforms can be usefully conceptualized as evolving organizations or meta-organizations that: (1) federate and coordinate constitutive agents who can innovate and compete; (2) create value by generating and harnessing economies of scope in supply or/and in demand; and (3) entail a modular technological architecture composed of a core and a periphery. In support of this conceptualization, a classification system is presented, indicating that technological platforms appear in a variety of organizational forms: within firms, across supply chains, and across industry innovation ecosystems. As an illustration, the framework is then applied to derive a simple model highlighting patterns of interaction between platform innovation and competition, yielding hypotheses that could be tested empirically by future scholars.
You would think that a company like Intel, which in 2001 provided nearly 85% of the microprocessors for personal computers, would feel relatively secure. But companies holding the keys to popular technology don?t live in a vacuum. In many cases, they are dependent not only on economic forces in the wider world but also on the research-and-development activities of partners. David Johnson, one of the directors of the Intel Architecture Labs (IAL) in Hillsboro, Oregon, goes so far as to call that reality desperate. ?We are tied to innovations by others to make our innovation valuable. If we do innovation in the processor, and Microsoft or independent software parties don?t do a corresponding innovation, our innovation will be worthless. So it really is a desperate situation for us.?
This article provides insights on how to manage collective innovation in the digital economy, an innovation regime which is riddled with complex regulatory challenges and increasing litigation over intellectual property rights. Private collective organizations face two main challenges: (1) to promote collective innovation while preserving the private interests of the firms within the collective, and (2) to ensure that collective innovation does not weaken healthy competition. Through a case study of the Third Generation Partnership Project (3GPP), an exemplary private collective federation of organizations composed of standardization bodies, industry consortia and technology producers, we identify organizational solutions to these challenges. We find that a combination of specific IP rights instruments is key to manage these trade-offs. We also find that the combined policies of essential patenting, FRAND, and maximum royalty rate help overcome the specific challenges associated with collective innovation within competitive contexts. Finally we discuss the implications of our findings for managers and for policy. © 2014 Elsevier Ltd.
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.
Lopez-Berzosa David, Gawer Annabelle, Camarillo Gonzalo (2016) Navigating the Patent Minefield Through Consortia, MIT Sloan Management Review: MIT's journal of management research and ideas 57 (4) pp. 18-20
SLOAN MANAGEMENT REVIEW ASSOC, MIT SLOAN SCHOOL MANAGEMENT
Technology consortia play an increasingly important role in the way new technology products are being developed and brought to market. High technology companies increasingly face situations in which developing new products often involves navigating around dozens or even hundreds of different patents owned by several companies. As a result, innovation is frequently prone to litigation. In addition to making it more costly, the looming threat of lawsuits increases strategic complexity and market uncertainty.
Innovation in the cloud is challenging Europe's telecoms industry and its regulatory system. The shift from 'desktop to data centre' and the provision of computing in the form of a service means that cloud offerings are increasingly dependent on the quality of the underlying communications infrastructure. Critical parts of the infrastructure are regulated, and the role that regulation plays may limit services innovation and in turn may mean that communications infrastructure could become the 'weakest link' in a cloud offering. This article presents an argument that draws on law, economics, and business platforms strategy to expose the incentives and impediments to innovation in cloud computing. It assesses how European policy goals, the Lisbon Treaty and regulatory action interact, and proposes a change in the EU regulatory regime to reflect a duty to promote innovation as a stated goal. This change would encourage new business models to emerge, allowing the incumbent EU telecom network providers the opportunity to contribute to innovation in the cloud. Such innovation would help spur investment and wider competition across platforms which would help realise Europe's objective to drive growth and competitiveness.
As high-tech industries become increasingly modular and interconnected--and the ability to innovate becomes the purview of just about anyone--the most successful companies are those that orchestrate industrywide innovations to support not only their products, but also the systems or platforms in which their products work. To become a platform leader--a company that provides the technological foundation on which other products are built--is the Holy Grail of these high-tech industries. The quest is complex and risky, because the success of platform leaders depends largely on their ability to encourage other firms to develop complementary innovations. High-tech-strategy experts Annabelle Gawer and Michael A. Cusumano explain how the best in class, including Intel, Microsoft, and Cisco, establish and grow their dominant positions. Based on these in-depth case studies and on incisive analysis, the authors present a framework for designing and implementing a successful platform strategy. From how to plan internal product development to how best to encourage external innovation activities, this comprehensive book offers executives, strategists, and entrepreneurs a framework for achieving market leadership in platform environments.
The emergence of platforms, whether used inside firms, across supply chains, or as building blocks that act as engines of innovation and redefine industrial architectures, is a novel phenomenon affecting most industries today, from products to services. This book, the first of its kind dedicated to the emerging field of platform research, presents leading-edge contributions from top international scholars from strategy, economics, innovation, organizations and knowledge management. This book represents a milestone for the vibrant field of platform research. It is the outcome of an ambitious international collaboration, regrouping and making connections between the research work of 24 scholars, affiliated with 19 universities, in seven countries over four continents. The novel insights assembled in the 14 chapters of this volume constitute a fundamental step towards an empirically based, nuanced understanding of the nature of platforms and the implications they hold for the evolution of industrial innovation. But what exactly are platforms? Why should we care about them? And, why do we need a book about them?
Gawer A, Cusumano M (2015) Business Platforms, In: Wright J (eds.), International Encyclopedia of the Social & Behavioral Sciences pp. 37-42
This article reviews the literature on platforms and sheds light on the design principles, economics fundamentals, and business strategies associated with platforms. We divide the discussion into two main types: product platforms designed by individual companies or assemblers of closed supply chains to develop new products or services on the basis of common and reusable components and architectures, and industry platforms which act as a foundation for an ecosystem of firms to develop a set of interrelated products and services. Present in a variety of organizational contexts, platforms create value for innovative ecosystem participants by structuring the innovation process around core and complementary elements and by creating the network effects that accelerate the adoption and use of platforms. With increased globalization of innovation capabilities, we expect the phenomenon of platforms to become an important new form of industrial organization. We conclude with highlighting concerns associated with platform dominance.
This paper explores Intel's strategy with respect to complements. We find that, as the literature predicts, Intel's entry decisions are shaped by the belief that it does not have the capabilities to enter all possible markets, and thus that it must encourage widespread entry despite the fact that potential entrants (rationally) fear Intel's ability to ?squeeze? them ex post. We explore the ways in which Intel addresses this issue, highlighting in particular the firm's use of organizational structure and processes as commitment mechanisms. Our results have implications for our understanding of the dynamics of competition in complements and of the role of organizational form in shaping competition.
Bogers M, Zobel A, Afuah A, Almirall E, Brunswicker S, Dahlander L, Frederiksen L, Gawer A, Gruber M, Haefliger S, Hagedoorn J, Hilgers D, Laursen K, Magnusson M, Majchrzak A, McCarthy I, Moeslein K, Nambisan S, Piller F, Radziwon A, Rossi-Lamastra C, Sims J, ter Wal A (2017) The Open Innovation Research Landscape: Established Perspectives and Emerging Themes Across Different Levels of Analysis, Industry and Innovation: dynamics, strategies, policies 24 (1) pp. 8-40
Taylor & Francis
This paper provides an overview of the main perspectives and themes emerging in research on open innovation (OI). The paper is the result of a collaborative process among several OI scholars ? having a common basis in the recurrent Professional Development Workshop on ?Researching Open Innovation? at the Annual Meeting of the Academy of Management. In this paper, we present opportunities for future research on OI, organised at different levels of analysis. We discuss some of the contingencies at these different levels, and argue that future research needs to study OI ? originally an organisational-level phenomenon ? across multiple levels of analysis. While our integrative framework allows comparing, contrasting and integrating various perspectives at different levels of analysis, further theorising will be needed to advance OI research. On this basis, we propose some new research categories as well as questions for future research ? particularly those that span across research domains that have so far developed in isolation.
Advances in Strategic Management is dedicated to communicating innovative, new research that advances theory and practice in Strategic Management. The domain of the series encompasses, but is not limited to, corporate and business unit strategy, strategic organization and process, alliances and networks, and competitive dynamics.
The series is committed to expanding the scope of Strategic Management theory and analysis and enriching practice by:
Encouraging multitheoretical approaches that span multiple social science disciplines..
Welcoming papers using a diversity of innovative research methods..
Creating focused volumes that explore in depth promising new research directions, consolidate research streams, and address significant current theoretical and practical problems.
During the last three decades, innovation and entrepreneurship have been among the most dynamic topics within the field of strategic management. Sparked by the insights of Joseph Schumpeter, strategy scholars have devoted increasing effort to understanding innovation as an engine for firm performance, to understanding the drivers and success factors associated with entrepreneurship, and to understanding the role of each in value creation, value capture, and economic welfare....
This essay examines the relationship between technology and organizations in the context of technological industry platforms. Industry platforms are technological building blocks (that can be technologies, products, or services) that act as a foundation on top of which an array of firms, organized in a set of interdependent firms (sometimes called an industry ecosystem), develop a set of inter-related products, technologies and services (Gawer, 2009).The study of platforms highlights an intriguing hypothesis: that the internal organization of firms (such as platform leaders) and the external organization of firms (i.e., the organization of the sector or the ecosystem of firms) are interrelated, and mediated by the organization of the platform technology. In particular, the internal organization of firms, when coherent with the organization of the technology, may have an influence on these firms? ability to exert an influence on external firms.
The recent surge of interest in ?ecosystems? in strategy research and practice has mainly focused on what ecosystems are and how they operate. We complement this literature by considering when and why ecosystems emerge, and what makes them distinct from other governance forms. We argue that modularity enables ecosystem emergence, as it allows a set of distinct yet interdependent organizations to coordinate without full hierarchical fiat. We show how ecosystems address multilateral dependences based on various types of complementarities - supermodular or unique, unidirectional or bidirectional, which determine the ecosystem?s value-add. We argue that at the core of ecosystems lie non-generic complementarities, and the creation of sets of roles that face similar rules. We conclude with implications for mainstream strategy and suggestions for future research.
We study intergenerational platform-technology transitions as instances of potentially disruptive innovation at the ecosystem level. Examining the launch of 12 platform technologies in the U.S. videogame industry covering three console generations from 1993 until 2010, we show that incumbents introducing next-generation platform technologies with advanced capabilities increase the challenges of developing complements for the platform technology, steepening complementors? learning curves and disrupting the very same complementors that platform owners need to thrive in the next-generation competition. We find that, because of these struggles, platforms with advanced capabilities but high complement-development challenges show a pattern of defection of complementors toward rival, less challenging platforms. Our study extends mainstream disruptive-innovation theory to the context of platform-based ecosystems by offering a systemic view that accounts for disaffection on the part of technology complementors?rather than end users?as the main reason for disruption.
Within the management research community, the last few years have revealed a growing desire to focus explicitly on new discoveries and to challenge the very foundations of our discipline. This special issue addresses how innovation-management theories might enrich management science, helping to discover new phenomena and formulate research hypotheses with relevance for the entire discipline.
Platforms have become one of the most important business models of the 21st century. In our newly-published book, we divide all platforms into two types: Innovation platforms enable third-party firms to add complementary products and services to a core product or technology. Prominent examples include Google Android and Apple iPhone operating systems as well as Amazon Web Services. The other type, transaction platforms, enable the exchange of information, goods, or services. Examples include Amazon Marketplace, Airbnb, or Uber.
Five of the six most valuable firms in the world are built around these types of platforms. In our analysis of data going back 20 years, we also identified 43 publicly-listed platform companies in the Forbes Global 2000. These platforms generated the same level of annual revenues (about $4.5 billion) as their non-platform counterparts, but used half the number of employees. They also had twice the operating profits and much higher market values and growth rates.
However, creating a successful platform business is not so easy. What we call ?platformania? has resembled a land grab, where companies feel they have to be the first mover to secure a new territory, exploit network effects, and raise barriers to entry. Uber?s frenetic efforts to conquer every city in the world and Airbnb?s desire to enable room sharing on a global scale are the two most obvious recent examples.
The problem is that platforms fail at an alarming rate. By identifying the sources of failure, managers can avoid the obvious mistakes.
Managers and entrepreneurs in the digital era must learn to live in two worlds?the conventional economy and the platform economy. Platforms that operate for business purposes usually exist at the level of an industry or ecosystem, bringing together individuals and organizations so they can innovate and interact in ways not otherwise possible. Platforms create economic value far beyond what we see in conventional companies.
The Business of Platforms is an invaluable, in-depth look at platform strategy and digital innovation. Cusumano, Gawer, and Yoffie address how a small number of companies have come to exert extraordinary influence over every dimension of our personal, professional, and political lives. They explain how these new entities differ from the powerful corporations of the past. They also question whether there are limits to the market dominance and expansion of these digital juggernauts. Finally, they discuss the role governments should play in rethinking data privacy laws, antitrust, and other regulations that could reign in abuses from these powerful businesses.
Their goal is to help managers and entrepreneurs build platform businesses that can stand the test of time and win their share of battles with both digital and conventional competitors. As experts who have studied and worked with these firms for some thirty years, this book is the most authoritative and timely investigation yet of the powerful economic and technological forces that make platform businesses, from Amazon and Apple to Microsoft, Facebook, and Google?all dominant players in shaping the global economy, the future of work, and the political world we now face.
Organizations are simultaneously embedded in inter-organizational networks and ecosystems, yet research on networks and ecosystems developed in isolation. The aim of this partial integration is to bring new energy into maturing research on organizational networks and greater structure to the burgeoning research on ecosystems. In this article, we underlie similarities and differences between networks and ecosystems; bring the ecosystems? focus on modularity and complementarity at the forefront of inter-organizational research while enriching ecosystems scholarship with systematic applications of network analytic tools to map the patterns of component interdependencies.
Cusumano Michael A., Yoffie David B., Gawer Annabelle (2020) The Future of Platforms, Mit Sloan Management Review 61304
Massachusetts Institute of Technology
The world?s most valuable public companies and its first trillion-dollar businesses are built on digital platforms that bring together two or more market actors and grow through network effects. The top-ranked companies by market capitalization are Microsoft, Apple, Amazon, and Alphabet (Google?s parent company). Facebook, Alibaba, and Tencent are not far behind. As of November 2019, these seven companies represented more than $5.4 trillion in market value, and all of them are platform businesses.