Summary: Platform Leadership

Review and Analysis of Gawer and Cusumano's Book

BusinessNews Publishing

• Editorial: Must Read Summaries
• Año: 2016
• ISBN:
  9782511016268
• Categoría: Business
• Categoría: Business Development

The must-read summary of Annabelle Gawer and Michael Cusumano's book: `Platform Leadership: How Intel, Microsoft and Cisco Drive Industry Innovation`.

This complete summary of the ideas from Annabelle Gawer and Michael Cusumano's book `Platform Leadership` shows that the key to success in the high tech field is to succeed in moulding your product into a platform. Platform leaders use a business strategy which entails four key levers of platform leadership. In their book, the authors explain each of these levers and include case studies to demonstrate their uses and the advantages they can bring. This summary is a must-read for any entrepreneur who wants to create exceptional revenue for years to come by following in the footsteps of platform leaders.

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To learn more, read `Platform Leadership` and find out how you can develop your products and services into a platform.

Summary of Platform Leadership (Annabelle Gawer and Michael Cusumano)

Overview: The Four Levers Approach To Achieving Platform Leadership

Main Idea

Technology platforms arise whenever a firm’s own products has limited value when used alone but much greater value when used along with complementary products. To establish and expand a technology platform, four key strategic levers must be handled well:

1. Scope – what to do inside the firm and what to let other companies do.
2. Technology – how the system will function, interface and who owns the intellectual property.
3. Relationships – whether the relationship with those developing complementary products is collaborative or competitive.
4. Organization – how the firm will be structured internally to support the other three levers.

Supporting Ideas

The fundamental challenge for high-tech firms is they must innovate internally to succeed and yet success in the marketplace depends on a number of other firms making corresponding advances in their own complementary technologies as well. Every participant in the marketplace is both vulnerable to and dependent on the actions of its partners and competitors simultaneously. In these situations – which are going to arise in a greater number of industries in the future – the balance of power and greater profitability flows to the platform leaders – those companies that provide the technology foundation on which other products, services and systems are built.

The key to developing and growing a successful platform is for the platform leader to use the four key strategy levers in a coordinated and consistent fashion rather than making ad-hoc or spur-of-the-moment decisions. What’s most vital is that the firm acts consistently both internally and externally in its dealings with the marketplace as a whole.

So how do platforms emerge? While some details will change, the most common path is:

• At the birth of an industry, one or just a handful of firms develop virtually all of the components required to make their product.
• Over time, the product gets broken down into modules so enhancements can be made independent of advances in other areas.
• Specialized firms gradually emerge to develop certain components or modules better than the generalist can achieve. These modules are interchangeable with those developed by the industry leader.
• At this point, the industry leader no longer attempts to do everything themselves. Instead, they start acting as the platform leader – making their products the foundation on which other companies are developing their products or services. Now, the more firms that are developing complements, the better, since that will increase the value of the platform by drawing an increasing number of customers to it. The greater the innovations which are developed by others, the higher the value of the platform grows, starting a virtuous cycle that is self perpetuating.

The four strategy levers platform leaders use are:

While all four are important, deciding what to make internally and what to leave to external firms is probably the most critical in that it needs to be looked at continually. This decision will trigger many flow-on effects from deciding the level of investment in venture capital activities to evolving the platform by making acquisitions through to how to provide incentives for further developments. Platform leaders maintain a delicate balancing act between competing and collaborating with the third parties producing complementary products.

Key Thoughts

“We are tied to innovations by others to make our innovation valuable. If we do an innovation in the processor, and Microsoft or independent software parties don’t do a corresponding innovation, our innovation will be worthless. So, it really is a desperate situation for us.”

– David Johnson, director, Intel Architecture Lab

“Today, in an increasing number of industries, the interdependence of various products and the widespread ability for many actors to innovate require that every company, no matter how big or how small, make its fundamental decisions while taking into account what every other company active in the network of interlocking parts is doing. This obviously applies in the computer, telecommunications, electronic appliances and automotive industries. However, we believe that our ideas are relevant for the increasing number of industries that make complex products of varying types. What are complex products? We are surrounded by them: bicycles, cars, refrigerators, radios, computers. All consist of different interrelated components that have to fit together.”

– Annabelle Gawer and Michael Cusumano

“So what is the essence of platform leadership? It is recognizing that certain kinds of products have little value by themselves but can be extremely valuable as the center of a network of complem...