Platform Leadership as Innovation Driver

4 Jun

Industry platforms are the  building blocks that act as engines of innovation and redefine industrial architectures, is a novel phenomenon affecting most industries today, from products to services. (Gawer, 2009). Moreover Evans et al (2006) argues platforms are at the center of the tectonic industrial change now business arena is facing. Industry platforms are found at the industry level and its configuration has been widely used especially in high technology industries. Gawer (2009) described industry platforms as building blocks (they can be products, technologies or services) that act as a foundation upon which an array of firms can develop complementary products, technologies or services. Gawer and Cusumano (2002) mentioned that industry platforms provides a common foundation or core technology that a firm can reuse in different product variations, an industry platform provides this function as part of a technology “system” whose components are likely to come from different companies which are called “complementors.”

Within industry platforms we find key players who lead innovation, Gawer and Cusumano, (2002) presented the example of how Intel drove innovation across the PC industry platform when the platform was fragmented and the platform was constraining the development of Intel’s microprocessors. Intel sponsored innovation, stimulated external innovations on components and coordinated industrial innovation across boundaries to influence industry innovation and drive platform evolution. However Intel’s negotiation capabilities were strongly supported by its bargaining power and brand recognition.

Platform leadership nature resides in the fact that a platform leader has a strong bargaining power over the rest of the participants and therefore can influence the innovation path of the industry platform. Platform leaders’ bargaining power is enhanced in closed platforms where the leader often has erected a wall of property rights. Therefore the platform owner effectively controls a ‘bottleneck’ essential to other players (Rochet and Tirole, 2004; Jacobides et al., 2006). According to Boudreau and Hagiu (2009) platform regulators may also have access to a wider menu of regulatory instruments to implement desired actions. Apart from licensing, property rights assignment and other traditional contractual and legal instruments, platform technologies and design are themselves understood as a means of virtually imposing laws (Lessig, 1999) and design rules (Baldwin and Clark, 2000) by the platform

Another problem for platform leadership is that the boundary between platform and complementary solutions are not well defined, and platform owners constantly absorb innovative features of complementary applications into the platform (Gawer and Henderson
2007). In doing this platform leaders may discourage innovation among complementors. Coordination under the umbrella of platform leadership it may become a long and expensive process. This was the case for Intel where it took five years and billions of dollars for the company to convince complementors to increase its capabilities in order to match Intel’s microprocessor full potential (Gawer and Cusumano, 2002).

In terms of innovation this approach presents a strong deficiency: the direction of the innovation path might respond to the platform leader needs and its expectations of the technology not of the whole platform. As Lansiti and Levien (2004) mentioned, keystone firms do not promote the health of others for altruistic reasons but because it is beneficial for their own strategy.

Jesus Mascareno


2 Responses to “Platform Leadership as Innovation Driver”

  1. ED June 6, 2012 at 5:03 am #

    to see if I understood correctly?, high-profile companies should encourage smaller companies to increase their efficiency to increase their own? The efficiency of other companies can improve my productivity?

    • Jesus Mascareno June 6, 2012 at 5:04 pm #

      That is correct, specially in industry platforms where the final outcome is a combination of several companies inputs. For example Apple attracts app developers and give all the tools and guidance in order to launch succesful apps. In other words Succesfull apps = more sales of the industry platform (iphone).

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