What Managers Need to Know about Platforms

July 20, 2011 • Editors' Pick, Emerging Ideas, Global Business, INNOVATION, LEADERSHIP, Strategic Spotlight, STRATEGY & MANAGEMENT

By Annabelle Gawer

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.

What are platforms?

Microsoft Windows operating system, Linux operating system, Intel microprocessors, Apple’s iPod, iPhone and iPad together with iTunes, Google the Internet search engine, the Internet itself, social networking sites such as Facebook, operating systems in cellular telephony, video games consoles, but also payment cards, fuel cell automotive technologies, and some genomic technologies are all industry platforms. Industry platforms are products, services or technologies that are developed by one or several firms, and serve as foundations upon which other firms can build complementary products, services or technologies. Building on these platforms, a large number of firms, loosely assembled in what are sometimes called innovative business ecosystems, develop complementary technologies, products, or services.

What is different about platform competition?

Platform competition is different from competition as we know it, because instead of firms competing directly with each other, there are coalitions of firms competing between each other. These coalitions comprise a loosely grouped range of firms that develop products, technologies or services that are complementary to the platform. They may not be part of the same company, nor even the same supply chain, but their destinies are linked together.

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