11 Jul 2007Working Paper Summaries

Managing Proprietary and Shared Platforms: A Life-Cycle View

by Thomas R. Eisenmann

The challenges facing platform managers vary systematically depending on (1) whether the platform is proprietary or shared and (2) the stage of platform development. This article summarizes the results of a multiyear research project on platform strategies, including interviews with 30 companies. It describes 3 stages of the platform life cycle—platform design, network mobilization, and platform maturity—and reviews in depth the strategic decisions and management issues for each stage. Key concepts include:

As proprietary platforms mature, broad forces at work often open them up to new partners.
Once network mobilization winds down, sponsors of a proprietary platform frequently license additional providers to serve market segments with diverse needs. These new providers will seek a say in the platform's direction.
As shared platforms mature, their renewal may hinge on partners ceding power to a central authority that can set priorities and settle disputes over who will provide next-generation technologies.
Over time, forces will tend to push both proprietary and shared platforms toward hybrid licensing forms, typified by central control over platform technology and shared responsibility for serving users.

Author Abstract

In a platform-mediated network, users rely on a common platform, provided by one or more intermediaries, that encompasses infrastructure and rules required by users to transact with each other. A fundamental design decision for firms that aspire to develop platform-mediated networks is whether to preserve proprietary control or share their platform with rivals. A proprietary platform has a single provider that solely controls its technology, for example, Federal Express, Apple Macintosh, or Google. With a shared platform, such as Visa, DVD, or Linux, multiple firms collaborate in developing the platform's technology then compete in offering users different but compatible versions of the platform. This article examines factors that favor proprietary versus shared models when designing new platforms then explains how management challenges differ for proprietary and shared platform during subsequent life-cycle stages: network mobilization and platform maturity.