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Newsletter
January, 2004, Vol.1
Number 1
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| Book Review |
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Platform Leadership: How
Intel, Microsoft, and Cisco Drive Industry Innovation
by Halime Inceler Sarihan
Michael Cusumano is Professor of Management at MIT's Sloan School of Management, and his former graduate student Annabelle Gawer, now at INSEAD have written a good book of explaining why Intel in particular dominated its industry in the 1990s. It is based on Gawer's dissertation research, which she completed in January 2000. This book consists of seven chapters and four chapters are devoted to Intel's platform leadership story, where the authors did extensive interviews, but only one chapter for Microsoft and Cisco combined. Authors don't have equal treatment and explanation of all three companies. They analyzed in another shorter chapter "wannabe" leaders like NTTDoCoMo, Palm Inc. and Linux. Anyway combining different companies gives to readers more broad perspective about platform leadership strategies.
The key themes are interdependency and complementary innovation, both of which involve players outside the traditional vertically integrated firm yet need to be managed. While high-tech is obviously characterized by two phenomena: increasing interdependency of products and more complementary innovation. The authors point out that more and more industries have this structure, in part because of the increasing software content outside computers.
According to authors platform leaders are firms that lead and drive innovation in their industry, by stimulating complementary innovations performed by other firms. There is important decision to become a platform leader. You should decide "what innovations do you develop internally? And what do you encourage other firms to do, based on your platform?" The authors feel that any company can become a platform leader if it can build an ecosystem of companies producing complementary products and services around its core products. The logic here seems to be that technology companies can drive others around their key offerings, making these products more valuable.
Authors
offer a framework - The Four Levers of Platform Leadership - for
companies to design and test a strategy, given the environment of the
industry and the competence of the organization.
1) Scope of the firm: This lever deals with what the firm does
inside and what it encourages others to do outside.
2) Product technology (architecture,modularity, interfaces, intellectual property):
This lever deals with decisions that platform leaders and wannabes need to
make with regard to the architecture of their product and the broader
platform, if the two are not the same. Modularity, openness of interfaces
are such decisions.
3) Relationships with external complementors: This lever centres on
determining how collaborative versus competitive should the relationship
be between the platform leader or wannabe and complementors.
4) Internal organization: This lever allows platform leaders and wannabes
to use their internal organizational structure to manage external and
internal conflicts of interest more effectively.
The strength of the book is forces managers to use system perspective and look their industry as a big system and create business strategies that consider an entire industry. It shows how the whole platform can be greater than the sum of its parts if firms work together and follow a leader.
As the experiences of Intel, Microsoft, Cisco, Palm, Linux, NTT DoCoMo and others demonstrate, platform leaders need to have a vision that extends beyond their current business operations and the technical specifications of one product or one component. It is very good book to understand high-tech industry dynamics.
I would like to recommend this book to scholars of technology management, strategy, technological innovation, and high-technology entrepreneurship.
Copyright ŠTechnology Management Newsletter, 2004
