The Business of Platforms: Strategy in the Age of Digital Competition, Innovation, and Power

Michael A. Cusumano; Annabelle  Gawer; David B. Yoffie

Book | 2019

The Business of Platforms: Strategy in the Age of Digital Competition, Innovation, and Power

by Michael A. Cusumano, Annabelle Gawer and David B. Yoffie

Abstract

The Business of Platforms explores the strategic, economic, and technology management challenges of digital platform businesses. We have five major themes in the book: 1) The world’s most valuable companies are all platforms, in part because platforms have network effects, with the potential for a winner-take-all or winner-take-most outcome. 2) Platforms come in 3 flavors: innovation platforms, transaction platforms, and hybrid platforms. We suggest that the world is moving towards more and more hybrids, and we identify the key steps in building a successful platform. 3) Failure is more likely than winner-take-all: mispricing, mistrust, mistiming, and hubris lead to hundreds of failures. 4) Old “dogs” can learn new tricks: conventional companies can adapt to a platform world with a buy, build, or belong strategy. And 5) Platforms are a double-edge sword: abuse of power, bullying poor labor practices, and bad actors can undermine even the most successful platforms. The book concludes with an exploration of platform battles of the future, including voice wars (Alexa vs. Hey Google vs. Siri), ridesharing and autonomous car platforms, quantum computing, and CRISPR.

Keywords: strategy; technology; platform; Online Technology; Management; Competitive Strategy;

Format: Print

Purchase

Citation:

Cusumano, Michael A., Annabelle Gawer, and David B. Yoffie. The Business of Platforms: Strategy in the Age of Digital Competition, Innovation, and Power. HarperBusiness, 2019.

Mark Zuckerberg founded Facebook based on the idea that connecting people was a fundamentally good thing—and a way to turn a handsome profit. But from the beginning, Facebook received criticism both for how it handled user privacy and how it curated user-generated content. These two issues coalesced in the aftermath of the 2016 United States presidential election, after Facebook’s role in the spread of political misinformation and the leak of Facebook user data to political consulting firms began to receive significant media coverage. In 2019, Facebook announced it was shifting to a “digital living room” model that would focus more on private, encrypted conversations and less on sharing viral content. Several important questions remained. Would the digital living room ease users’ privacy concerns? Would Facebook still be able to effectively curate content? Would its advertising model still work? Or were financial success and good governance mutually exclusive? This case explores the parameters of governing an internet-based platform.

In March 2016, Donna Dubinsky (co-founder and CEO) and Jeff Hawkins (co-founder) were struggling with a key question: Could Numenta be successful in both creating fundamental technology and building a commercial business? Located in Redwood City, CA, Numenta was founded in 2005 to expand Hawkins' research on the human brain, with the goal of "reverse engineering the neocortex" and then creating machines based on biological principals. Ultimately, Hawkins believed that Numenta could be a catalyst in creating intelligent machines that would lay the foundation for the next generation of computing with potentially broad ranging commercial opportunities.

This case is set in mid-2019, when Qualcomm was struggling with unwanted take-over battles, fights with Apple and the Chinese government, and internal dissension on the board of directors. Ten years earlier Qualcomm was hailed as a monopoly on CDMA technologies and its derivatives, it appeared to be positioned to become the next dominant technology company in the tradition of Microsoft and Intel. But as the industry changed, Qualcomm’s competitive position seriously weakened. The purpose of the case is to explore central questions in strategy formulation: 1. how to build a long-term sustainable position based on technology; 2. how to design an IP strategy to lock-in customers for the long-run; 3. how to build a global standard and appropriate returns on that standard; and 4. how to respond when your historical business model starts to crumble.

Faculty & Research

The Business of Platforms: Strategy in the Age of Digital Competition, Innovation, and Power

Abstract

Citation:

About the Author

More from the Author