Written
by Clint Benjamin for the IEEE Engineering Management Society
By Michael A. Cusumano and Annabelle Gawer
EMR Issue:
Volume 31 number 1, First Quarter 2003, pp.
8-15
Reprinted
from: MIT Sloan Management Review, Spring
2002
Abstract:
Companies that possess keys to popular technology cannot afford to live in a vacuum. Companies that fail to innovate or have others innovate will quickly find them themselves outmoded and obsolete.
Keywords:
Platform leaders, wannabes, complementors, ecological control
Executive
Summary:
The Desperation of Being on Top:
Leader Companies realize that business is too interdependent for complacency. To keep organizations competitive, managers need to coordinate internals units that can be platform leaders and complementors and interact effectively with outside organizations playing those roles. Platform leaders face three problems. First, Platform leaders must maintain the integrity of the platform in regards to future technological innovation and the independent product strategies of other companies. Another problem is how to permit platforms evolve technologically while maintaining compatibility with older components. A third problem is how to maintain platform leadership.
Leaders Need Followers:
Most platform leaders do not possess the capacity to generate complete systems by creating all the complements themselves. Consequently, they need to collaborate. These combined efforts of platform leaders and complementors enhance the market for everyone. Platform leaders actively solicit innovation on complementary products. However, this is a complex process, and sometimes costly standards battles do occur.
The Levers of Platform Leadership:
The authors analyzed a variety of organizations (Intel, Microsoft, Cisco, for example) and discovered four distinct but related levers of platform leadership. These levers can help managers in both strategic formulation and implementation.
Lever One: Scope
Deciding the scope of the company is the most important decision. The scope, of course, includes which complements to make in-house and what to leave to outsiders. Companies that desire to become platform leaders need to determine how dependent they are on complements. Platform producers should avoid developing their own complements if they lack financial or technical capacity to compete in the relevant markets. Obviously, there is no simple formula to make complements in-house, but platforms do require complements. As a rule, Platform producers should have sort of in-house capability, not only for complement production, but to serve as competition for outsiders.
Lever Two: Product Technology
Product architecture can have a large impact on the structure of an industry and the types of follow-on innovation. Product architecture determines who does what kind of innovation and how much investment in complementary products will occur outside the platform-leader organization. Needless to say, a decision about product technology is crucial to platform leadership. Leading companies guard their core technology but utilize such tools as modular architectures and disclosure of interfaces to secure complementary products. Devoting resources to design issues such as platform architecture can assist platform producers control their environment.
Level Three: External Relationships
For long-term effectiveness, platform leaders must follow two goals simultaneously. First, they must search for consensus among complementors about technical standards and how they interface with products. Second, they must sway partner decisions about how everything will work through new products. Pursuing consensus at the same time, of course, can be risky, as companies fear being ordered around. Consensus needs to be forged by one company driving the process. Of course, management processes can assist a platform leader achieve consensus and maintain control at the same time. For example, Intel demonstrates the need for collaboration and competition that recognizes mutual dependency. Platform leaders should be industry enablers. They should help others innovate in even better ways around the platform. Platform leaders should strive to avoid stepping out of their product boundaries into that of their complementors. Platform leaders can reduce external tensions with a low-key approach and by acting on behalf of the entire industry. This balancing act is difficult. One way to address this is through internal organization.
Level Four: Internal
Organization
A platform producer must generate an internal organization that enables it to manage complementor relationships with ease. Therein lies the challenge, as sometimes groups within a firm compete with complementors. It is crucial to communicate the multiple goals to the whole firm and generate a process that helps resolve conflicts. For example, it may benefit the company to keep competing groups separate so that outsider companies are more willing to entrust personnel with information. Generally speaking, platform leaders can appear neutral if they establish an internal “poker face” with different groups maintaining different roles. Industry executives realize that design usually isn’t enough. They also rely on executives to arbitrate when conflicts arise among company units and to ensure that the organizational culture encourages debate.
Managers with Vision:
Is it quite possible to be excessively platform-centric. There are various other ways to compete. It’s impossible for every company to be the platform leader. Occasionally, platform leaders can become so entrenched with certain technologies that it is difficult to evolve their platforms. Therefore, platform leaders will eventually struggle with platform evolution. For example, for some Intel groups, the platform is becoming the Internet and new devices that run Internet software rather than use x86 chips or use Windows. Platform leaders are required to possess a vision that runs beyond their current business operations. Complementors need to comprehend the vision of the platform leader in the industry and must gauge what that vision means for their own future. However, it is the platform leaders that have the greatest influence over the degree of innovations that complementary producers generate.
In closing, many innovations do not happen in a vacuum, it takes a well designed system, delicate balance of the business ecosystem and Managers with vision to make innovation happen.