Most groundbreaking innovations do not occur in a vacuum. They require participation in an ecosystem made up of multiple companies or vendors, or they require an existing platform foundation for which to build upon.
An ecosystem is a platform in which multiple companies, vendors, or developers participate in and are equally dependent on one another for success. If one part of the ecosystem fails or is slow to innovate, then the other players are also impacted. Intel and Microsoft have had this interdependency for many years in the PC industry. If one of them slows down with innovation, then it impacts the other (Cusumano and Gawyer, 2002). This dependency is also clear in the stock prices for Microsoft and Intel over the past 15 years, which have followed each other very closely. Both Microsoft and Intel have struggled to create leadership positions in the mobile transition of the past seven years, which has been led by Apple with the introduction of the iPhone in 2007.
Another example of a thriving ecosystem is 3D printing. The 3D printing industry is made up of many different companies and vendors, from hardware developers, to software developers, to online services, and to scanners. The success of the 3D printing industry depends largely on the success of each of the players in the ecosystem. If scanners are not good enough, then the printed model will be sub-par. If the hardware is not reliable and breaks often, then the success of the software generating the content will be limited. As a nascent industry, each of the participants depends on one another for success.
Unlike an ecosystem, a platform is largely controlled by a single company, or in some cases, a consortium of companies. A platform can either be hardware or software. For example, the games console Xbox is a hardware platform for which game developers and content providers can distribute their content to. The Xbox Kinect hardware is an “add-on” to the platform that allows for 3D motion interactivity with the user. With Xbox and Kinect, Microsoft offers a compelling platform for developers that differentiates them from competitors, such as Sony with the Playstation.
Platforms can either be open or closed. An open platform is one in which it is extensible by third parties through the availability of APIs (Application Programming Interfaces). One example of an open platform is Amazon’s Service-Orientated Architecture (Open Platform, 2014). The Amazon website is built up of connections to thousands of different company stores from around the world. The platform that Amazon provides gives its customers “one stop shopping” to an extensible range products and services that would simply not be possible for Amazon to provide on its own. One disadvantage of this approach is Amazon does not control the user experience for its customers. If there is a problem with one of the Amazon stores, the Amazon brand may be impacted by this. For this reason Amazon invests significant time and energy in its customer service operations.
One example of a closed software platform is Apple’s iOS operating system. Users only have access to applications that have been approved by Apple and that have met strict guidelines (Forbes, 2012). Apple would argue that the advantage to users is higher quality, cleaner and safer content, and a higher level of security. The real advantage to Apple is that it makes a 30% cut of every piece of application content that is installed on the iOS system. Apple’s closed platform has not been popular with many in the industry. Vic Gundotra, VP at Google, likens Apple to the “Big Brother” that they famously fought against in the 1984 Apple Macintosh ad, claiming that Apple is now doing exactly what it was against in 1984 (Oliver 2010).
Apple utilizes the four levers of platform leadership (Cusumano and Gawyer, 2002):
2) Product Technology
3) Relationship with external complements
4) Internal organization
Scope: Apple has owns all aspects of the iOS platform from the hardware, the operating system, to the services, and the applications that are allowed to run on the devices.
Product Technology: Apple arguably builds the best products in the world through an excellence in engineering and design.
Relationship with external complements: The partnerships with the music industry, the film industry, and the application developer ecosystem are mostly love-hate relationships. These industries cannot live without Apple, and Apple cannot live without them
Internal organization: Apple is organized in a virtual circle around the CEO. This allows for large-scale platforms and strategies to be build across the company without having to deal with competing priorities with the organization (Dediu, 2013)
Whether the industry, the developer ecosystem, or its customers like Apple’s closed platform or not, no one can disagree that it has had tremendous success with platform strategy. Although Apple’s success has been tremendous, one has to question how their closed approach will impact the possibility of partnerships well into the future.
Companies that have the resources to build platform strategies clearly have a distinct competitive advantage of those who do not. If a company is not large enough to provide a platform for others to build upon, then carving out a niche within an existing or upcoming open-platform or ecosystem is a possible alternative.
Cusumano and Gawyer, 2002, The Elements of Platform Leadershiphttp://sloanreview.mit.edu/article/the-elements-of-platform-leadership/
Forbes, 2012, The Problem With Apple’s Closed Apps Universe, http://www.forbes.com/sites/timworstall/2012/08/31/the-problem-with-apples-closed-apps-universe/
Oliver Sam, 2010, Google compares Apple to ‘Big Brother’ from iconic 1984 ad, http://appleinsider.com/articles/10/05/21/google_compares_apple_to_big_brother_from_iconic_1984_ad
Open platform, 2014, Innovation in the crowd, http://www.innovationinthecrowd.com/open-platform/
Jobs Steve, 2010, D8 Interview with Steve Jobs, http://www.engadget.com/2010/06/02/steve-jobs-d8-interview-the-video-highlights/