• 05 Aug 2002
  • What Do You Think?

Is Platform Leadership Old Hat or the Wave of the Future?

 
by James Heskett

Summing Up

Platform leadership, the process by which base technologies are developed and on which innovations created by many entrepreneurs can be based, may be characteristic of the knowledge economy. But it isn't new, at least to respondents to this column.

Questions raised by respondents are, however, as interesting as the phenomenon described by Annabelle Gawer and Michael Cusumano in their book, Platform Leadership. They include: Did platform leaders set out to create vehicles by which they might control the direction and pace of the development of new ideas for others (Jeffery Seow)? To what extent does platform leadership help or hinder the development of such ideas? Do our anti-trust laws adequately address the issue of platform leaders and their behaviors?

Platform leadership requires ingenuity, a strong customer franchise, a vision of the future, and substantial resources.
—James Heskett

C. J. Cullinane adds to this list of questions: Are "open" platforms, such as that for the IBM PC, more supportive of innovation than "closed" platforms, such as Apple's Mac? And does the "intent" of the platform leader have to be established in order to determine whether the practice results in "collusion and monopoly?"

In fact, does platform leadership have to be confined to those firms developing technology? Can it just as well be established by marketers who serve as traffic cops for the various new products marketed under the same brand? In one recent case, Procter & Gamble purchased a company producing a low-cost, mass-produced disposable electric rotary toothbrush to be marketed under its famous Crest brand umbrella. As it turns out, its founders developed the product and company with the target at the outset of an eventual sale to Procter & Gamble.

Platform leadership requires ingenuity, a strong customer franchise, a vision of the future, and substantial resources. It is not for everyone. But is it a goal that more and more organizations should strive for? Is it a phenomenon that increasingly large numbers of entrepreneurs can exploit through the development of products and services specifically for inclusion in platforms, whether they are technological or marketing in nature? And do increasingly powerful platforms represent opportunities or threats to competition? What do you think?

Original Article

In their new book, Platform Leadership, Annabelle Gawer and Michael Cusumano offer an interesting exploration of ways in which high-tech firms such as Microsoft, Cisco, and Intel have established commanding positions in software, Internet switching, and chip-based technologies, respectively. They have developed and manage so-called "platforms" on which many innovations created by many entrepreneurs can be based. By successfully facing issues such as scope (the degree to which a "platform leader" creates and develops product complements internally vs. the degree to which it encourages others to do it), modularity and openness (determining the ease with which outside complementors can "hitch their wagons" to the platform), balance (between competition and collaboration with producers of complementary products), and organization (to manage internal and external conflicts of interest most effectively), these organizations have taken different paths to build competitive positions that are hard for others to attack.

They can force suppliers, consumers, competitors, and complementors to bend to their will in the hope of obtaining profit or value.
— James Heskett

Of course, one can argue that this is what the highway system of the U.S. (or any country, for that matter) is all about. Or at a more micro level, it is what General Motors, Ford, and others created when they built a system of complementors based on the platform of the internal combustion engine. They decided what they would create and produce themselves and what they would encourage others to develop. This then determined the extent to which they had to disclose confidential specifications describing their platforms and design the platforms with sufficient modularity to allow makers of component parts to design complementary products that fitted together.

Successful platform leaders exert a great deal of influence. At times, they must build trust among those that choose to utilize the platform as partners. At other times, they may choose to compete with the very partners they may have courted earlier, but at the risk of destroying future trust in search of immediate "in-house" profit. They can force suppliers, consumers, competitors, and complementors to bend to their will in the hope of obtaining profit or value. In doing this, they walk a fine line which, if crossed, can land them in the courts, as Microsoft learned.

The concept of platform leadership raises a variety of questions. First, is it really new or has it just taken on increasing complexity and importance in the high-tech era? Second, how broadly can platform leadership principles be applied? For example, is a comprehensive brand a platform? Or are high-tech platforms of a more pervasive order, essentially influencing the way millions of people do business and lead their personal lives on a global basis? If so, what is the likely process (free market, regulation, or other) by which authority and limits will be imposed on leaders of global platforms who mismanage relationships with complementors and competitors? What do you think?