Transcript Document

SB Program
PLATFORM LEADERSHIP
How Intel, Microsoft and Cisco Drive Industry Innovation
Authors: Annabelle Gawer & Michael A.Cusumano
Software Business Program 26.02.2003
Presentation prepared by:
Yumin Dong, Lulu Zhang, Arto Ojala & Mark Dagnall
University of Jyväskylä
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Presentation Outline
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


General Introduction to Platform Leadership
Case Study: Intel
Case Study: Microsoft & Cisco
Case Study: Palm & NTT DoCoMo
Case Study: Linux (Open Source Platforms)
Conclusions
Views of the book and topic area
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What is a Platform Leader?


A Platform Leader is an organisation which has an
objective to develop a network of complementor’s which
can add value to one of its own products by developing
innovative ‘add on’s’ which add value to the core product.
For a simple example think of a bakery, the core product
may be a cake but to add value to it an external firm may
supply chocolate or fruits to add value to the initial
product. The bakery would be the Platform Leader as
they are the ones driving the partners to provide added
value products.
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Platform Leadership: An Overview
Complementors
Complementors
Complementors
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Consumers
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Platform Leader Example: Microsoft –
IBM / Sun - Microsoft

Microsoft’s MS-Dos was facilitated by IBM co-operation. By shipping
Ms-Dos with IBM compatible pc’s Microsoft entered the market in a
big way but continued to develop their platform to ensure they were
always too far ahead for competitors to catch up. This initial strategy
has lead to Microsoft’s sustained leadership with nearly all software
products being compatible with Windows.

Sun’s Star office complies with Microsoft file extensions to ensure it
is viable in the market because with no support for the platform
leader i.e. Microsoft Office formats, Sun know they have no chance
to gain any market share.
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Platform Leadership Framework

The framework consists of four levers
1.
2.
3.
4.
Scope
Product Technology
External Relationships
Internal organisation

The levers are designed to enable managers to make an effective
strategy for platform leadership or to enable a re-evaluation of an
existing framework.

The framework is designed to take into account the circumstances
of individual industries and the specific skills of an organisation.
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Platform Leadership Framework: Lever 1
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Lever 1: Scope of the firm
Deals with what the firm does internally, and what it
encourages others to do externally.
Is it better to concentrate efforts to internally develop
complementary products or alternatively to rely on the
market to produce them?
Can a balance be easily be achieved and what is the
best approach?
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Platform Leadership Framework: Lever 2
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Lever 2: Product Technology (architecture,
interfaces, intellectual property)
Handles decision making of platform leaders and
wannabes concerning the architecture of the product.
Decisions should be made as to the degree of modularity
and the degree of openness the product will have as
potential complementor’s can also easily become
competitors.
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Platform Leadership Framework: Lever 3

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Lever 3: Relationships with External Competitors
Concerned with defining the balance of collaboration in a
relationship, i.e. how will the relationship be balanced,
towards competition or collaboration?
Resolution of potential conflict should also be considered
with this stage e.g. moving into a complementors core
markets.
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Platform Leadership Framework: Lever 4


Lever 4: Internal Organisation
This lever allows platform leaders and wannabes to use
internal structures for resolution of conflict.
– Organisation of teams with similar goals into related groups
regulated by one body.
– Separate groups into distinct bodies in order to address potential
conflict.

Effective communication is seen as an important
facilitator of this lever.
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Presentation Outline
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





General Introduction to Platform Leadership
>>Case Study: Intel<<
Case Study: Microsoft & Cisco
Case Study: Palm & NTT DoCoMo
Case Study: Linux (Open Source Platforms)
Conclusions
Views of the book and topic area
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Intel Case
Key Points
Intel’s Rise to Platform Leadership
The story
Intel’s Strategic Principles for Platform Leadership
The Four Levers
Platform Leaders and Complementors
How Intel Manages Conflicts of Interest
Discussing
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Key Points
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Intel’s position and situation in the PC industry:
Intel is in the business of providing the engine for the PC…. That
engine is doubling in capacity every 18 to 24 months, according to
Moore’s law….What Intel really want is to ensure that the rest of
platform goes with it…, everything around the microprocessor to be
keeping pace and improving and scaling, so that the microprocessor
can deliver its potential.
The strength of growing:
Intel grows by growing the entire pie, growing by getting new
applications, by finding new users for the PC. Vividly:
“That use or application is important to me, and to do that well, I
need to buy a new processor”
The key strategy issue:
How to encourage and direct the vast array of interrelated
innovations that will make the PC system work better?
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Key Points(cont.)
The characteristics and huge benefits of being a leader in the industry:

In some terms, industry leadership is often concreted by the industry
standards and intellectual property

You can determine, or at least heavily influence the evolution of the
industry.

Act as the first-mover in the markets, obtain the advantages of speed
and timing
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Key Points(cont.)
To achieve the leadership of platform, there are some strategic
requirements of the company which we can get through the case of
Intel:
A: Events and circumstances, as well as a keen understanding of what
the firm can do, allow managers to develop a vision that they then try
to make real by taking strategic actions.
Constant awareness about industry environment
B: Strategy development is an iterative, even messy process. This
understanding preserves a role for visionary leaders circumscribe the
nature and the impact of their actions in an environment where
strategy is emerging from the interaction between the firm’s external
and internal opportunities and actions to influence their environment.
Mediation and adjustment are vital regarding dynamic environment

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Key Points(cont.)
Ecosystem, orchestrate, complementor, competition,
collaboration, balanced strategy
Capability stack of PC industry:
Pull
End-user awareness
Content
Application
Network
Add-in
Operating Sytem
Base Platform (Hardware----microprocessor)
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Push
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Intel’s Rise to Platform Leader
Intel’s problems: ( in the early 1990)
It was becoming increasingly difficult to grow demand for PCs.
At least two root causes to this problem: (background)
 An increasingly obsolete PC architecture
ISA bus was very slow, which prevented other components of PC to
deliver their potential, especially microprocessor, which was the key
product of Intel.
 The lack of industry leadership to advance the PC system (hardware
and software)

The bus struggle between IBM and Compaq delayed the progress of
developing the PC platform
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Intel’s Rise to Platform Leader
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Many companies had a stake in the PC design. No single supplier
could evolve the overall system by itself, let alone overthrow overall
system.

Intel’s primary business of developing microprocessor was a big
growth industry.

A solution to the problem of the PC architecture was required to
accommodate Intel’s future vision.

At that time, as the No.1 microprocessor maker, Intel had strength to
do some changes of PC system that benefiting itself as well as the
PC industry.
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Intel’s Rise to Platform Leader
The Creation of IAL---Intel Architecture Lab
Goal: Architecture for the open computer industry
In detail:
 Success depends on cooperation among key industry players.
 Common understanding: PC industry needs to create new uses and
thus new users for the PC.
 Modular architectures with open interfaces between computers make
it possible for many companies to participate in the innovation
process.
 Look at what people would want to do with the PC if it was as good
as it could be; what was preventing the industry from delivering on
that goal; not what Intel was doing, but what the industry limitations
were.
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Intel’s Rise to Platform Leader
A lesson and warning from the huge success of Compaq
 In 1987, Intel tried to move the industry in a direction favorable to
one of its new products: 80386 chip, with 32-bit flat address space.
 IBM and Microsoft were unwilling to adopt it by their own reasons.
 Compaq first commercialized the 386 chip with its Compaq 386
 Consumers came to believe that 386 was a Compaq brand
Conclusion:
Intel could not be insensitive to the dynamics of the industry. 80386
chip case was a good example of the motivations of possible
adopters, OEMs, and complementors of the Intel chip.
Intel’s response:
Launched its famous “Intel Inside” marketing campaign to gain some
recognition of consumers and thus increase its own bargaining
power in its ecosystem.
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Intel’s Rise to Platform Leader
PCI bus was a vital event in Intel’s transformation into a platform leader
 In 1991, IAL’s first project: By sponsoring a change in the bus
structure (PCI-peripheral component inter-connector) and providing a
chip set that implemented these architectural changes in an actual
product, Intel achieved its great transformation---platform leader
 Process of this event was full of risks, indecisive, iterative and
complex
 Three factors guaranteed the success:
– The technology of PCI is beneficial to the majority of PC industry
– The coalition of IBM
– The strong back by chip set and motherboard

Solving a common problem in a manner that will facilitate the
realization of one’s future plan is a key part to platform leadership
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Intel’s Strategic Principles For Platform Leadership

After the success of PCI bus project, Intel strengthened its platform
leadership by careful strategic implementation, including three main
roles:
– Sponsor of systemic architectural innovation
– Stimulator of external innovation on complements
– Coordinator of industrial innovation that spanned across many firm’s
boundaries
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All these roles involved inevitably with four levers, which are:
–
–
–
–

Scope of the firm
Product technology
Relationship with external complementors
Internal organisation
These four levers are intertwined, they can’t be separated
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Intel’s Strategic Principles For Platform Leadership
Outline:
 Driving Systemic Architecture Innovation:
Intel’s system mindset
Building momentum around interface
Relinquishing royalties on IP
Using public forums to generate momentum and refine standards
Compliance workshops
Creating and distributing enabling tools
 Stimulating Innovation on Complementary products
organisational structure and evolution
 Coordinating Role
 Conclusion
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Intel’s Strategic Principles For Platform Leadership
Driving systemic architectural innovation
 In the late 1990s, Intel sponsored several new initiatives, including
AGP, FireWire, and USB. All these innovations benefited the PC
performance, which manifested the progress of microprocessor, the
key product of Intel
 USB has a broader meaning to PCs, and eventually to Intel
– The USB was a new interface linking a PC to external devices such as
the keyboard, scanner, printer, and any new external device, which can
stimulate new experience of PC, thus create new users of PC

All innovations lead to a modular architecture with open interfaces,
which make it possible for many companies to participate in the
innovation process
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Intel’s Strategic Principles For Platform Leadership
Intel’s System Mindset:
How to improve the system performance and growth prospects for PC?
Sponsor interface standards
 These interfaces became the technological mechanism for
channeling external innovation, ensuring platform integrity through
compatibility of complementary products, and creating an industrial
consensus on platform technological evolution
 A company can innovate in one layer and not worry about what is
going on in other layers because we have interfaces on either side of
them, thus break down the cost of innovation
 Enable small companies, innovative companies make smaller
investments and yet potentially win a large market share in a
segment they can own. The most important issue is, the more of
these companies that participate, the broader innovation we get.
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Intel’s Strategic Principles For Platform Leadership
The benefit:
 If Intel played a key role in designing those interfaces, Intel could
help this ecosystem flourish, and position itself more firmly and
perhaps permanently at its center
 Raise the barriers to entry for any company that might want to
compete directly with the Intel-sponsored, industry-backed
architecture, for example by trying to introduce a new microprocessor
standard that use different technical interfaces.
The challenges:
 Vision about the evolution of the PC platform
 Sense of the business opportunities for potential complementors
 Involved difficult technical choices, the right place for being enough
robust and lasting for a fairly longer time
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Intel’s Strategic Principles For Platform Leadership
To achieve this goal, Intel adopted several ways, including:
 Building Momentum around Interfaces
Lever 3: managing relationship with external companies
 Relinquishing Royalties on Intellectual Property
Lever 2: product technology
 Using Public Forums to Generate Momentum and Refine Standards
Lever 2 and Lever 3
 Compliance Workshops: The PlugFests
Lever 2 and Lever 3
 Creating and Distributing Enabling Tools
Lever 2 and Lever 3
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Intel’s Strategic Principles For Platform Leadership
Building Momentum around Interfaces
Establishing strategic interest groups and gradually building momentum
 Getting outside firms to support new standards requires time,
patience and planning.
 In early phase, Intel initiated relationships with a small group of
outside firms and brought them together in strategic interest groups
(SIG)
– For PCI, there were five companies: Intel, DEC, Compaq, IBM, and NCR
– For USB, there were seven companies: Intel, DEC, Compaq, Microsoft,
IBM, Northern Telecom, and NEC Technologies

SIG Selection Rules:
– Software: Microsoft
– Hardware: IBM, HP, Compaq
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Intel’s Strategic Principles For Platform Leadership

Reasons:
1. Have a long-term commitment to the new technology, lend
credibility to SIG, and attract other firms to the new technology
2. Small group made fast decisions

In collaboration with SIG members, Intel designed the
first features of the new standard

Even influential firms like Microsoft and Compaq tend to
back Intel’s proposals because they had a chance to
participate early in the design process and to influence
the evolution of the standard
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Intel’s Strategic Principles For Platform Leadership
Relinquishing Royalties on Intellectual Property
 Intel did not require potential adopters of the interface specifications
to pay any fees for use of that technology.
 But Intel usually required companies to agree to reciprocal licensing,
which created a zone of free IPs that covered technological areas in
which several companies were involved.
 Reason: Buses are enabling technologies
– Interfaces exist to entice other firms to use them to build products that
conform to the defined standards and thus work efficiently with the
platform.
– Enabling technologies channel and facilitate complementary innovation,
reinforcing the architectural leadership of the firm that sponsored them
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Intel’s Strategic Principles For Platform Leadership
Using Public Forums to Generate Momentum and Refine Standards
 The goal was to create momentum in the industry for whatever
standard Intel was trying to promote
 Open up the discussions to larger public gatherings, including
Development Forums and Implementors Forums. Through these
forums, Intel brought together thousands of ISVs and IHVs, as well
as the press and analysts. In some terms, the latter have a
tremendous impacts on momentum.
 Set up web sites that were used to the exchange of questions and
answers about the standards Intel promoted.
 The same thing done by Cisco, IBM, Microsoft, Sun, Linux, …..All
industrial leaders----to GENERATE MOMENTUM
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Intel’s Strategic Principles For Platform Leadership
Compliance workshops
 Another type of forum that Intel relied on to refine a new standard
and help companies develop prototypes was compliance workshops,
“PlugFests”
 The importance of compliance workshops:
“PlugFests” are lifeblood in trying to create these standards

Successful compliance workshops helped create legitimacy and
popularity for a new standard because they demonstrated that
companies were already committed to designing compatible
products. They are key part of the process through which a new
technology supported by one or a small group of firms gradually
becomes a standard.
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Intel’s Strategic Principles For Platform Leadership
Creating and distributing enabling tools
 Another step for IAL to generate momentum and refine a new
standard, with the cooperation of other Intel groups, was to create
and disseminate technical tools that enabled companies to use the
new technologies in product development.
 Intel usually distributed tools like SDKs and DDKs (device
development kits) by its Implementors Forums and Developers
Forums, and trained people to use them.
 The development and diffusion of these tools is costly. That has a
similar economic logic like innovation on interfaces: by facilitating
and channeling complementary innovation, these enabling tools
reinforce the architecture leadership of the sponsored company.
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Intel’s Strategic Principles For Platform Leadership
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


Driving Systemic Architecture Innovation:
Intel’s system mindset
Building momentum around interface
Relinquishing royalties on IP
Using public forums to generate momentum and refine standards
Compliance workshops
Creating and distributing enabling tools
Stimulating Innovation on Complementary products
organisational structure and evolution
Coordinating role
Conclusion
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Intel’s Strategic Principles For Platform Leadership
Stimulating Innovation On Complementary Products
Three main activities:
 To facilitate complementary innovation, typically discloses private
information about the design of its products as well as computers
containing prototypes of Intel’s upcoming chips

Send skilled engineers and savvy marketers to transfer technical
expertise and share knowledge about the market

Make equity investment in third parties
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Intel’s Strategic Principles For Platform Leadership
Organisation structure and organisational Evolution
 Intel Architecture lab (IAL)
– Worked as a catalyst, to be whatever it takes so that new applications
emerge or new uses of applications emerge taking all of the CPU power
Intel can produce

Content Group, including Developer Relationship Group (DRG)
– Strive to establish good working relationships with external software
developers

Microprocessor Product Group (MPG)
– Not only defines what the microprocessors are, but also defines the
market needs that Intel must address, and coordinates the collaterals for
each new microprocessor launch

Intel management makes modifications to its internal organisation
structure almost yearly regarding the changes
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Intel’s Strategic Principles For Platform Leadership
Coordinating role:
To deliver some PC capabilities to the end user required coordination
among different actors in the industry.

Since PC industry is an ecosystem, the nature of innovations
required the cooperation of many companies in the PC industry. This
required Intel, more precisely IAL, to take on the key role of
coordinator and mediator among external companies.

This required time and patience. It typically required three to five
years for Intel to fully establish a capability in the marketplace.
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Intel’s Strategic Principles For Platform Leadership
Conclusion:
 Throughout the review, for being a platform leader, the company
needs to think about and implement four levers in a coordinated
fashion. Some external constraints or strategic choices on some of
the levers create specific options for the other levers. It is the internal
consistency of the four levers taken together that can ensure a
successful platform leadership strategy.
 The decisions Intel executives made regarding to how to allocate
internal resources to back up the platform leadership strategy belong
to lever 4, but they are interdependent with other levers. Like Content
Group and Intel Capital, they are also related to lever 1 and lever 3.
 For example, in the case of USB Intel had to make decision about
lever1 ---”what” to do within the company, and also about lever 4---”organisation support” -internal support structure
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Platform Leaders and Complementors
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How Intel Manages Conflicts of Interest?
– Through the exploration one can say that the difficulties Intel faced are
common obstacles on the path of any company attempting to pursue
platform leadership.
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Key factors: Trust and Tensions
The ability to convey a long-term commitment to cooperative
relationship is essential for Intel to act effectively as a platform leader.
The important role of IAL: IAL has acquired a reputation as a
trustworthy and relatively impartial broker of information between Intel
and third parties. IAL is looking out for the good of the overall industry.
The role of IAL allows Intel to rally consensus among industry players
while has a voice regarding how specific PC technologies and
standards evolve.
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Platform Leaders and Complementors
External tensions:
 Intel managers want other companies to innovate, but they also want
to preserve their abilities to diversify and potentially compete in
complementary markets themselves. Especially, when Intel start to
compete with current and former partners, suppliers, customers.
Internal tensions:
 Job 1 refers to all activities aimed at strengthening Intel’s position as
the leading chip maker. IAL is always doing Job 1.
 Job 2 refers to activities aimed at building successful business in
processor related technologies. Product Group often does Job 2 or
explores new businesses, unrelated to processor, that might evolve
to become new core business for Intel in the future.
 These two Jobs often cause conflicts within Intel
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Platform Leaders and Complementors
External conflicts:
 Platform leader and outside companies have different objectives
– Risk is too big or time horizons clash
– Platform leaders lead on complementors
– Platform leaders compete with complementors

The sources of conflicts: Friends or Foes?
– Multiple roles, acting as the complementor, consumer and competitor at
the same time is the reason of conflicts

What to do about conflicts?
–
–
–
–
Build a reputation for trustworthiness
Exert some restraints over scope of activities
Take a gradual, low-key approach
Keep implementation specifications “open” though not “free”
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Platform Leaders and Complementors
Internal conflicts:
 Related to differing strategies or time horizons among the
various groups within the company
 Assisting complementors conflicts with internal-product
group
– The conflicts between IAL and Product Group

New investments detract from the platform business
– Intel Capital do Job 1 or Job 2?

What to do with conflicts ?
– Acknowledge conflicts
– Manage conflicts
– Create a culture that encourage debates
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Platform Leaders and Complementors
Economic Analysis of the Job 1 and Job 2 Trade-Off
 Any company, platform leader or not, needs to be on the lookout for
potential new business opportunities because demand may diminish
in its own market
 Counting on external firms to produce all necessary complements is
not always feasible
 Platform leader needs to be concerned about maintaining enough
bargaining power with complementors

An issue is distribution of overall industry profits that is linked to the
issue of bargaining power between the firm and its complementors.
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Platform Leaders and Complementors
Strategy setting through confrontation and debate
 Strategic long-range planning meetings
 Product line business plan meetings
 Cooperate communications
 Internal organisation:separate group pursuing Job 1 AND Job 2
– keeping the IAL’s agenda separate from the product group’s agenda has
worked internally as well as externally

Keep internal tensions alive: keep Job 1 and Job 2
Conclusion: platform leaders need to balance multiple roles
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Discussing……
An addition to the book:
 In the late 1980s, Intel consolidated its Intellectual Property position
in microprocessor by terminating cross-licensing agreements with
other companies and, more importantly, began extending its firstmover advantage over rivals by accelerating the rate of new products
introduction. With 1994 sales of $9.85 billion, 1 billion more than the
second largest producer, NEC. (“Sources of Industrial Leadership” by
Mowery &Nelson)
 Bundling sales: in 1999, Intel paid a fine of one anti-trust lawsuit
proposed by U.S. Trade Commission; in 2001, EU Anti-Trust
organisation conducted an investigation about Intel’s “Intel inside”
campaign and ceased in 2002.
 During the decrease of the desktop market and IT industry recession,
Intel has entered the laptop and mobile technologies markets.
– Centrino” is the first brand that bundled several products of Intel and will
be introduced to the market in March 2003.
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Discussing……(cont.)



“Centrino” included a new type of microprocessor called ”Bania”,
which can longer the time of battery; one Intel’s chip set and several
specific chips for wireless communications. The laptop manufacturer
who adopts the whole Intel's hardware package can use the brand
“centrino” and get large amount of agio, those only adopt
microprocessor must use the brand of “Pentium M”. HP and Dell
sued this unfair proposal but, accepted the whole hardware package
“Centrino” is Intel’s first kind of product excluding microprocessor, it
has adopted the same business model as “Intel Inside” did
One PC manufacturer complained: “ we can get some better
unbundled components….Intel is trying to enter system design
further and further, and from the perspective of product design and
create value for customer, Intel narrowed the free space of
innovation.”
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Discussing……(cont.)

Behind the brand campaign “Intel Inside” and the coming “Centrino”,
is the thinking: standards and technologies would change and shift,
but brand awareness would not.

Behind the collaboration and coalition in the industry is the ambition
to try to provide a total solution and make the company transparent
in order to provide seamless high-quality service to customer

By homogenizing the innovations by open standards and strategic
coalitions as well as skillful complementors and partner management
Intel aims at strengthen its own competitive capabilities and weaken
the comparative strengths of the rivals
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Discussing……
New challenge Intel has to face: The aligning of IBM and AMD
……..Better for customer, interesting for industry evolution……
Conclusion:
Industry perspective
company perspective
management
Products &Services
technologies
Products&
services
organisations
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markets
technologies
SB Program
Presentation Outline







General Introduction to Platform Leadership
Case Study: Intel
>>Case Study: Microsoft & Cisco<<
Case Study: Palm & NTT DoCoMo
Case Study: Linux (Open Source Platforms)
Conclusions
Views of the book and topic area
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Outline

Microsoft & Cisco Introduction
Intel vs. Microsoft vs. Cisco in Four Lever Strategy

Microsoft

–
–
–
–
–
–
–
Microsoft Strategy
Platform Evolution
Representative Conflicts
Leverage of Platform
Microsoft’s Application Business
New Platform Strategy
Future Prospects--- Risks & Endeavors
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Microsoft & Cisco




Microsoft is the platform leader in PC operating systems and
related technologies.
Cisco is the platform leader in Internet-based networking
technology.
Like Intel, Microsoft and Cisco have many similar strategies in
building their platform leadership, such as proposing new
interface standards or join with other firms and try to create
standards.
Unlike Intel, Microsoft and Cisco have the different strategy in
their manipulation to the four levers of platform leadership.
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Intel .Vs. Microsoft .Vs. Cisco
in Four Lever Strategy
Intel
Microsoft
1.scope of firm
Relied mainly
on outside firms
Self-produced &
partnered with
other firms
2. product
technology
Relied on open PC Depending on
interface
proprietary
technology
Cisco
Partnered with
other firms &
acquire potential
ones
Relied on open
Internet or other
industry standards
3. relationship with Establishing
TRUST is a key
external
complementors means to preserve
the good
relationship
Competed with
competitors and
ward off its
technology by all
means.
Cooperate with
complementors
and acquire the
potential ones
meanwhile.
4. internal
organisation.
Integrated
different groups
Make separation
of many groups
University of Jyväskylä
Separated all the
groups clearly
SB Program
Microsoft Strategy

Make your own complements
– No one company could easily change any of the hardware or
software standards that made up the PC in order to satisfy the
“backward compatibility”.
– In order to be compatible with the existing software and
applications, Windows OS updated little by little.
– Unlike Intel, Microsoft early on in its history moved aggressively
into producing its own complements, applications, such as Excel,
Word and SQL database system.
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Microsoft Strategy (cont.)



Microsoft dominated a key part of PC platform (OS) with a
mainly proprietary technology (MS-DOS and Windows).
Microsoft worked hard to evolve its operating system and
shared the interface specifications openly with potential
complementors.
Microsoft used the monopoly policy to bundle the IE with
Windows 95, which finally resulted the Antitrust case in 1998.
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Platform Evolution




1975, Bill Gates founded Microsoft holding the business idea
to sell the programming languages only.
1980, IBM asked Microsoft to develop an OS for its new PC.
DOS was born and this event made Microsoft emerge as the
PC software platform leader.
After 1990, Windows series was introduced by Microsoft to the
market and quickly Microsoft dominated the market.
In 2001, Windows XP came out. It was the first stage of
Microsoft to dominate the mass-market OS bundled with
various Internet-related technologies within the new OS.
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Representative Conflicts:
Event
Microsoft
Sun
Microsoft
Kodak
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Result
1997, Sun sued Microsoft as
Microsoft violated Sun’s
licensing terms.
The final settlement
reached in 2001,
Microsoft lost the
case, paid Sun $20
million and broke off
with Sun.
Microsoft worked with Kodak for
its printing technology used in
XP and then adopted this
technology as its default
standards and discard Kodak
totally.
Microsoft relented and
changed the feature in
a later version of XP.
SB Program
Leverage of Platform

”Open but Not Open” Platform Interface
–
–
–
–

Compatibility
Technical ”lock-in”
Open standard
Microsoft controls the DOS and later the Windows design and future
evolution
To Competitors:
– Quickly incremental updating
– Quickly release the new products

To Users:
– ”Force” users to upgrade their applications
– ”Force” users to upgrade their machines
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Microsoft’s Application Business

Early and aggressive movement from OS into
Applications
DOS core (bought in 1980)
Incrementally innovated to Windows
First application for PC, Flight Simulator (bought in 1980)
Incrementally innovated to other applications
Office, spreadsheet and word application (copied from others)
Incrementally innovated to Word and Excel.

Bundling
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Microsoft’s Application Business (cont.)

Close integration of application and system groups
– Know each other inside Microsoft
– Avoid competition with competitors

Enabling tools and technologies
– Promote standards
– Provide enabling technologies to application developers
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New Platform Strategy


In mid-2000, Microsoft announced a five-year plan to
merge Windows, applications and Internet into
Microsoft.Net.
New product and tools portfolio (three core components)
– .Net software platform infrastructure and tool set for building
applications
– .Net services for users
– .Net services or Web-based applications that Microsoft expected
partner companies to provide
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Future Prospects--- Risks & Endeavors

Risks
– There is no guarantee that the 4.5 million Windows developers and
users around the world would follow Microsoft’s lead.
– Many kinds of other alternative technologies could do what
Microsoft promised to do using .NET technology.
– Microsoft has no reputation to ensure that its complementors have
successful business.

Endeavors
– Restructured and shuffled the executives in 2000.
– Set the plan to take a huge investments (around $20 billion solely
on .NET development work).
– Try to make .NET framework relatively easy for developers and
customers to convert in order to gain followers.
– Cooperate with Intel to provide the necessary service for .NET
technology.
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Cisco
Outline:










Cisco Introduction
Strategy Evolution
Four Elements in Cisco’s Strategy
Cisco’s strategy for platform leadership
Cisco’s Acquisitions in 2000
Incremental Platform Evolution
Partnership with Complementors and Competitors
Cisco’s Internal organisation
Future Prospect for Cisco’s Strategy
Conclusion
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Cisco Introduction





Cisco is platform leader as it provides infrastructure
hardware and software behind the Internet.
Cisco was created in 1984. Originally, it was only a router
provider.
Later, it became the Internet communication equipment
(router, switch, etc.) and the combined software provider.
Cisco calls its basic software IOS for “Internetworking
Operating System”.
Cisco has many competitors, such as Lucent, Nortel,
Juniper, etc.
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Strategy Evolution


Cisco’s founding principle is “customer-oriented”.
In early 1990s, Cisco began to acquire complementary
technologies to enrich its insufficient resources of developing
full network technology.
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Four Elements in Cisco’s Strategy
Provide the complete technology for customers
Form the alliance with the firms that has the needed technology
Consider to acquire the firm if the technology has the potential market value
Define and drive the industry standards for networking protocols.
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Cisco’s strategy for platform leadership
--- Enclosure movement





In 1993, Cisco acquired Crescendo and entered the switch
market successfully.
“Acquisition Teams” in Cisco are in charge of evaluating the
target acquisition through a set of criteria.
After 1996, Cisco shifted focus to cable boxes, modems and
even wireless LANs in 2000 through acquisition.
Between 1993 and 2000, Cisco acquired more than 71
companies spending more than $20 billion.
Each acquisition usually makes a new product line in Cisco.
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Cisco’s Acquitions in 2000
Company
Month
Price
(in millions of dollars)
Technology
ArrowPoint
Communication
May
$5700
Content networking
SightPath
March
$800
Software management of
web content
Qeyton
Systems
May
$800
Optical networking
software
Altiga
Networks
Jan
$567
Consulting service,
virtual private networks
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Incremental Platform Evolution
--- IOS Software as ”Glue”

IOS benefits
– IOS glues different networking technologies together
– IOS is the de facto Cisco platform rather than the Internet router
– IOS software could seamlessly link heterogeneous media and
devices across the broadest set of protocols

IOS limitations
– IOS is the hodgepodge of code from different products and
networking protocols
– IOS is “open but not open” platform technology
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Partnership with Complementors and
Competitors






In 1990s, Cisco allied with manufacturers of Hub devices, such
as DEC.
In 1994, Cisco allied with HP of the ATM products.
In 1998, Cisco allied with Compaq to devise standards for
allowing network administrators to use any Web browser to
manage different networks.
In 1999, Cisco allied with Motorola to develop wireless Internet
access.
In 2000, Cisco allied with Oracle to develop e-business
infrastructure.
…
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Cisco’s Internal organisation




1994, Cisco was decentralized into five different units
according to the main product line.
1996, Cisco reorganized around three lines of business:
enterprise, small/medium businesses and service providers.
In 2001, Cisco reorganized again into eleven new groups
based on key technologies, led by Internet switching, optical
networking and wireless products.
…
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Future Prospect for Cisco’s Strategy





Problem 1: vast number of acquisitions had not been enough to
keep the company at the leading edge of key networking
technology.
Problem 2: how far could Cisco continue to push its acquisitions
strategy?
Problem 3: internal tension may baffle its acquisition or
partnership strategy.
Problem 4: too many segments of products may decrease its
influence as the platform leader in market.
Problem 5: IOS technology
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Postscript (Cisco’s acquisition in 2003)


In Jan. 2003, Cisco spent $154 million to acquire Okena
company, entering the network security market.
In Jan. 2003, Cisco Asian area spokesman announced
Cisco will provide wireless LAN solution this year through
allying with the partners.
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Conclusion



From Intel, Microsoft and Cisco examples we know that there
is no one formula for platform leadership to follow.
Intel relied on the complementors for its microprocessor
platform leadership, Microsoft relied on proprietary technology
for its software platform, whereas Cisco relied much on
acquisition and partnership on its networking technology
platform leadership.
But, it is true that every industry and technology has its own
characteristics, we will see again in the following cases
companies that what those platform wannabes do to learn
from them.
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Presentation Outline








General Introduction to Platform Leadership
Outline of the book structure and contents
Case Study: Intel
Case Study: Microsoft & Cisco
>>Case Study: Palm & NTT DoCoMo<<
Case Study: Linux (Open Source Platforms)
Conclusions
Views of the book and topic area
University of Jyväskylä
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The Palm
Outline:






The Palm Strategy
Establishing a market for the Palm Pilot
Emerges in the PDA segment
Palm’s response
Facilitating external innovations
Future prospects for Palm’s platform strategy
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The Palm Strategy




12 million handhelds sold 2001, expected to grow to near
34 million by 2004.
Palm had more than 70 % of global share for its
hardware services.
The PDA device and its operating system Palm OS made
up the platform.
The platform needs the following complements:
– Software applications
– Wireless services
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The Palm Strategy (Cont.)

Palm executives pursued two related activities:
– Facilitate complementary innovations at outside firms by providing:
• Interface information
• Technical assistance
• Financial assistance
• Goal was to help thousands of external software developers write
applications that enhance the value of Palm’s hardware and
operating system software.
– Increase the market for devices running Palm OS.
• Licensing the operating system to competitors as well as partners.
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Establishing a market for the Palm Pilot

Founded by Jeff Hawkin & Donna Dubinsky 1992.
Goal: Develop software applications for the fledgling
handheld device market.

Handheld market had started with resounding flop:

– In 1993 Apple failed in its attempt to sell its own handheld, the
Newton.
– In the same year Palm introduced a product called the Zoomer,
which was built in collaboration with Casio, GeoWorks and Tandy.
– The Zoomer sold only 15 000 units, but Palm learned much from
that experience.
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Establishing a market for the Palm Pilot
(Cont.)

The essentials of the PDA platform
–
–
–
–


Simpler features
Lower price
Better handwriting recognition
Connection with the PC through a one-button synchronization
Palm made its brilliant “second debut” in 1996 with the
launch of the Palm Pilot 1000 and Palm Pilot 5000.
In the end of 1996 the Palm owned 51 percent of the
nascent PDA market
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Establishing a market for the Palm Pilot
(Cont.)

The Palm Pilot certainly was not a substitute for the PC.
– This position allowed Palm to avoid attracting too much of Microsoft’s
attention in the handheld space.




The philosophy was to keep a low profile so that Microsoft would not
see Palm as a dangerous competitor.
Palm managers did not advertise capabilities of their product before
a PDA mass market emerged.
But Palm engineers must have viewed their operating system as a
potential platform from the beginning and expected outside
developers and partners to help it evolve.
The Palm Pilot sold some million units in 1996 and 1997.
– The PDA mass market was a reality
– Potentially large profits in this business
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Emerges in the PDA segment






Profitable businesses attract attention and real competition entered
the PDA arena.
Microsoft noticed Palm’s success and renewed their efforts to
improve the cut-down version of Windows.
Microsoft developed relationships with various hardware makers, like
HP and Compaq.
Pocket PC operating system ran a version of Windows and therefore
could use modified Windows application as well as offer the familiar
Windows user interface.
Application developers could use many of same user interface code
and programming techniques as they did for Windows applications.
Pocket PC also included many popular applications, like media
player and games.
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Emerges in the PDA segment (Cont.)

Handspring’s Visor
– A low priced version of the Palm Pilot that used Palm OS.
– Included:
• Digital camera, radio, data synchronize via a USB connection
(Palm Pilot used a serial port)


Palm cut prices on its products, suggesting that
Handspring had taken the lead in defining price points for
PDAs as well as hardware design.
Platform leadership is weakened if external innovations
do not reinforce demand for the product or if the product
loses its edge over a competing product.
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Emerges in the PDA segment (Cont.)

Symbian from UK was trying to make Psion’s operating
system (EPOC) a platform for Web-surfing handheld
computers and cell phones.

Symbian members licensed EPOC from Psion.

More than any other PDA operating system, EPOC
seems well
positioned to be the operating system of choice for
the converging worlds of handhelds and wireless phones.

– Major investors are Nokia, Motorola, Ericsson and Matsushita.
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Palm’s response

Palm reacted to Microsoft’s new entry by not reacting.
– Executives continued to act as if they would sustain their position
as the industry leader.
– Set the agenda and drive the industry.

How can the Palm do that ?
– Large market share
– Successful product:
• Architecture
• Features
• Technology
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Palm’s response (Cont.)









Palm’s leaders understood that attractive software applications would
augment the value of the Palm Pilot.
Palm began to provide developers with software tools useful in
creating complementary software applications that ran on Palm OS.
Palm published the source code for the bundled applications with the
SDK (released in 1996).
An open architecture that allows external, complementary innovation.
Relationships with external developers to stimulate these
innovations.
Mobilize complementors and to suggest new users for its platforms.
Palm.net
Wireless Internet connections available.
Getting functionally closer to wireless phones.
– At the same time wireless phones were evolving to resemble PDA’s.
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Facilitating external innovations





Palm provided a full set of software development tools to
outside companies to help them build applications.
Goal was to provide a programming interface (API) for
the key technologies in Palm OS.
Applications would work with PC as well as Macintosh.
Palm created formal and informal mechanisms to
stabilize its interface standards and facilitate technical
exchanges and business dealings.
”Community of users”
– Where developers and end users exchanged information.
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Facilitating external innovations (Cont.)

Outside companies do most of innovations.
– In 2001 Palm had:
• 145 000 external software developers.
• A dozen of e-reading programs.
• Thousands of e-books.
• Programs that can read and edit Microsoft Word and Excel files.
• Database programs
• Hundreds of games
• Financial management programs.
• Tools that allow users to customize their own Palm OS programs.
• and so on..
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Facilitating external innovations (Cont.)
– Over 500 hardware developers.
• Keyboards
• Voice recorders
• Digital cameras
• Global positioning programs (GPS)
• Wireless connection systems.


Palm’s goal was to convince outside companies to invest their skills,
talents and energy into creating products optimized to the Palm OS
platform.
Palm sought out agreements with potential complementors and
made alliance with:
– Nokia, Sony, Motorola, IBM
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Future prospects for Palm’s platform
strategy
1. How to maximize chances of success:
– Be patient, don’t try to be a platform leader before your product has
gained mass-market acceptance.
– Effort and public relations to attract:
• License, Support, Subsidize partners and Complementors
– Maintain a low profile in the early days of market development and focus
on designing a product that people want to buy.
– It takes time to earn the trust of applications developers.
– A platform strategy is not substitute for a product strategy.
– For a platform strategy to work, the mass market has to adopt the
product in large numbers.
– Depends on having features and prices suitable for the mass market.
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Future prospects for Palm’s platform
strategy (Cont.)
2. It is possible to evolve from leadership in hardware or
product design to leadership in software.
– Palm decided to license its operating system to competitors in
the hardware space such as Handspring and Sony.
– Palm could make more money from software and services,
rather than from hardware.
– Palm did not yet have such a strong position with its operating
system.
• Microsoft’s Pocket PC and Symbian’s EPOC remained
viable competitors, particularly because the market for PDAs
was still in an early stage.
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Future prospects for Palm’s platform
strategy (Cont.)
3. A platform leader should maintain architectural control
over its platform.
– Handspring seemed to be the leader in hardware architecture.
– Despite aggressive policy of licensing Palm OS even to
competitors, Palm might not have created enough barriers to
entry in its own core business.
– Challenges were coming both from within Palm’s ecosystem and
from other software platform producers:
• Competing devices (Handspring and Sony)
• Operating systems and hardware (Microsoft and Symbian)
• Nokia and other cell-phone giants were also entering the
PDA battlefield with hybrid cell phones.
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Future prospects for Palm’s platform
strategy (Cont.)
4. Managers need to prepare for multiple scenarios and develop an
aggressive strategy to promote the outcome they favor.

Three possible scenarios:
1. A convergent device would win out over a single-purpose device.
• The operating system that best handled Web phones functionality
would probably become the dominant software platform.
• Symbian EPOC software seemed to have a technical and strategy
edge here, given the support it had from cell-phone giants such as
Nokia and Motorola.
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Future prospects for Palm’s platform
strategy (Cont.)
2. Users would prefer handheld devices that substitute for their
PCs and performed other functions, such as wireless telephony
and PDA-Tasks.
• Microsoft’s Pocket PC, the software acts like a small PC.
3. Users would prefer specialized devices.
• Continue to carry separate cell phones, PDA’s and small
PCs.
• Multiple platform leaders.
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The NTT DoCoMo
Outline:
 The NTT DoCoMo Strategy
 The i-mode Technology platform
 i-mode Structure
 Standards battles in Wireless Transmission Technologies
 The i-mode Business Model
 The i-mode Content and Delivery Process
 Attracting Third-Party Complementors
 DoCoMo’s Globalization Strategy
 Future Prospects for DoCoMo’s Platform Strategy
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The NTT DoCoMo Strategy

In 2001, DoCoMo was:
– The world’s largest provider of internet-based mobile wireless services .
– Japan’s largest company in terms of market capitalization.
– And they have 21 million users and another 300,000 new users signing
up each week.

NTT DoCoMo became a market leader in Japan by focusing on three
areas:
– The technology platform
– A new business model
– Unique content

DoCoMo was a platform leader in Japan and platform leader
wannabe in the rest of the world.
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The NTT DoCoMo Strategy (Cont.)

i-mode Internet service:
– An instantly accessible
– Always-on

Japanese used their i-mode phones to:
– Surf Websites
– Exchange e-mails or photographs (now also video files)
– Download their horoscopes
– Play popular Japanese cartoon characters
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The i-mode Technology platform

Consisted of two standards for creating content and for
transmitting data wirelessly:
– An application programming language for small-screen Web
device (c-HTML).
– A data transmission standard (PDC – PHS – W-CDMA).

c-HTML ”compact HTML”:
– Content providers had to use c-HTML.
– Similarly to HTML, it is easy for developers to write applications.
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The i-mode Technology platform (Cont.)

Data transmission standard:
– PDC/PHS –packet-switching technology, sends data 9.6 kilobytes
per second.
• W-CDMA (3G) data transmission standard – 2 megabytes per
second (will be the future standard).

Packet-based transmission allowed to offer:
– 24 hours online a day
– Paid only for each packet of data what user sent or received.

GSM phones required a dedicated-line connection or circuit each
time a user wanted to access to a service.
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i-mode Structure
http://www.nttdocomo.co.jp/english/p_s/imode/
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Standards battles in Wireless Transmission
Technologies


The late 1990s and early 2000s was ”battle of the standards”
The standard that emerged would be global.
– Operators want their customers to be able to use their phones around
the world.
– Equipment and content vendors had to choose one standard or set up to
handle multiple standards.
– Which standard would win, was by no means clear in 2001.

Three optional modes:
• W-CDMA
• cdma2000
• TDMA
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The i-mode Business Model

Business model began with the company’s strategy for content.
– DoCoMo maintained a complete control over which devices imode subscribers could use.
– Developers designed applications only for one, rather than for the
larger number of screen forms possible with WAP devices.
– WAP developers had to support the lowest common dominator
among screen form factors because they were never sure which
device a customer might be using.
– i-mode content developers followed one standard, which offered
a relatively rich user experience.
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The i-mode Business Model (Cont.)

DoCoMo encouraged third parties to create complements for its
platform.
– Application partnerships with some 800 companies that had official Web
sites.
– DoCoMo also made it simple for third parties to set up unofficial sites.
– More interesting content would draw more users.
– In total, i-mode network contained nearly 40,000 Web sites.

DoCoMo also offered an attractive pricing model for its partners. The
revenues came from:
–
–
–
–
Subscriptions
Data packets
E-commerce
Collecting commission on transaction
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The i-mode Content and Delivery Process


Internet penetration in Japan remained lower than in the USA or
Europe, which made i-mode a cheap way to get onto the Internet.
DoCoMo did not offer a general Internet-access:
–


Users could only view Web sites specially designed to be compatible
with the i-mode service.
i-mode attracted both users and content providers.
Quality of content was a major factor in DoCoMo success.
–
–
–
–
Content should be fresh.
Content should be ”deep”.
Content should encourage repeat visits.
User should be able to see the benefits.
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Attracting Third-Party Complementors

”Total package” of content and services that management thought
would be valuable to consumers.

Good content attracts users, which in turn attract more content.
– Positive feedback loop essential to platform leadership:
• Good content -> subscribers -> more content
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DoCoMo’s Globalization Strategy

DoCoMo would like its platform to become the global platform:
– Enable its customers and its partners’ customers to access the same
services anywhere in the world.
– Gain even more economies of scale of its operations.

A majority of service providers around the world had to:
– Adopt a compatible configuration of technologies for data and voice
transmission and for an access to Web content.

Forming partnerships and making investments in overseas service
providers.
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Future Prospects for DoCoMo’s Platform
Strategy
1. Problem of profitability throughout the value chain.
– Content providers in Japan were making little or any profit.
– Third-party providers need adequate incentives to innovate and
continue participating in the network of suppliers.
– Increase usage of system would lead to higher revenues and more
profits for content providers.
– Share more revenues or raise prices.

Overseas, DoCoMo needed to make sure that the business model
worked for complementors as well as for itself.
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Future Prospects for DoCoMo’s Platform
Strategy (Cont.)
2. Could DoCoMo duplicate its success with i-mode outside Japan?
– The USA in particular was a much different and more competitive
market.
– When i-mode initially appeared, the penetration of the Internet in Japan
was low, thus i-mode was the first introduction to the Internet for many
Japanese
– The price of telephone communications in Japan was much higher than
in the USA.
– NTT had a near-monopoly over wireless phone services in Japan and
used this base as a marketing tool.
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Future Prospects for DoCoMo’s Platform
Strategy (Cont.)
3. Would the c-HTML programming language be a boon or a barrier for
DoCoMo?
– WAP was the most popular format in the USA and Europe.
– Lack of compatibility between c-HTML and WAP.
– Lack of compatibility could delay moving Web content to the i-mode
networks outside Japan.
– If standards converged (xHTML), then DoCoMo would gain easier
access to content but lose its proprietary edge.
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Presentation Outline







General Introduction to Platform Leadership
Case Study: Intel
Case Study: Microsoft & Cisco
Case Study: Palm & NTT DoCoMo
>>Case Study: Linux (Open Source Platforms)<<
Conclusions
Views of the book and topic area
University of Jyväskylä
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Linux



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Linux and Open Source Software
Some Background
The More Users, the More Innovators and Testers
Coordination Mechanisms and Modular Architecture
Motivations of Open Source Developers
Open Source and For-Profit Companies
University of Jyväskylä
SB Program
Linux and Open Source Software
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Linux is freely available, open source operating system modeled after UNIX
and developed by Linus Torvalds, with assistance of thousands of individual
volunteers.
For the first time in history, several thousands of individuals from around the
world successfully created a sophisticated and complex product.
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In 2001 ten million users worldwide.
Linux is commonly used as an operating system for servers running Web
sites.
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They have good ideas for new features and complements.
More reliable than Windows NT/2000
Much less costly than Windows or Unix
Commercial companies such as Red Hat and VA Linux also distributed
Linux with a variety of complementary products and services.
University of Jyväskylä
SB Program
Linux and Open Source Software (Cont.)
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The successful evolution of Linux into a rock-solid operating system
was itself improbable due to the large number of seemingly
uncoordinated independent software developers.
Linux and other open source developers did not seem to respond to
common economic incentives such as the profit motive.
– A lot of people spent countless hours for no pay and charged no fees for
their work.
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Platform leaders and wannabes would do well to have this level of
user activity and innovation tied to their platforms.
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Some Background
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Richard Stallman wanted to design an operating system that worked
like UNIX, would be free, and would be usable on different kinds of
computers.
Stallman designed, with the help of lawyer, a new kind of license that
he called the GNU General Public License.
He wanted to protect a particular kind of right for users of his
products:
– The right to use, copy and modify the software.
– It also allowed users to sell original or the modified version, but they had
to be ”copylefted” as well.
– Any modification to a copylefted program had to be copylefted.
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Some Background (Cont.)
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Linus Torvalds was using a program called Minix, what
was educational ”UNIX-like” operating system.
Minix was a commercial product and did not evolve the
system as fast as some users wanted.
In August 1991, Torvalds posted in the Minix Usenet
group an e-mail announcing that he was working on a
free operating system.
His posting drew immediate interest. He put together a
list of the ten to fifteen people who had to responded his
e-mail, posted his first version and solicited their
comments and feedback.
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SB Program
The More Users, the More Innovators and
Testers
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In 1991 and 1992, more and more software developers became
involved with Linux.
The possibility of a stable operating system that would enable:
– The users add new features themselves
– Learn more about operating system
– Learn more how to work in the process.
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Torvalds used the Usenet posting to receive information from many
Usernet members all over the world.
Torvals asked for all members to try it out and send comments/bugs
reports to the appropriate place.
– The more testers that try it out, the faster members can try to fix any
possible problems.
University of Jyväskylä
SB Program
Coordination Mechanisms and Modular
Architecture
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Torvalds usually communicated with users by e-mail and got to know
many of them.
– Personal control over the platform as it evolved.
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Responding to hundreds and then thousands of users who wanted to
add different features to Linux and build special programs became a
logistical problem.
Important ability of Linux was a modular architecture:
– Facilitated distributed development through separate, well-defined and
partitioned tasks and subtasks.
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Thousands of users could build complementary features and have
Torvalds or his colleagues incorporate them into the platform.
University of Jyväskylä
SB Program
Coordination Mechanisms and Modular
Architecture (Cont.)
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Torvalds was able to exert leadership based on his legitimacy as a
programmer.
In addition, ”lieutenants” appeared in the form of volunteers who
specialized in particular areas:
– Were willing to answer users’ questions in their areas
– Help guide the design.
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With this partitioning of authority among a selected group of users
and the originator of the system, Linux continued to evolve as a
programming platform and take on additional functionality.
In this evolution, the development of reputation among one’s peers
was essential to the assignment of responsibilities.
University of Jyväskylä
SB Program
Motivations of Open Source Developers
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Individual contribution and collective experience are intricately linked
in the process of software development.
Individual rewards to the developers included:
– A sense of belonging to a community,
– Satisfaction that comes with participating in a project,
– Value of society.
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Persons can derive benefits from building a good reputation such as
by getting well-paid job to keep producing the same kind of highquality software in a profit-oriented venture.
Contributors to open source software seemed to truly enjoy
programming.
– They have fun and learn new things.
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They have usually personal motivation, such as the desire to rebel
and do things differently.
University of Jyväskylä
SB Program
Open Source and For-Profit Companies
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Several entrepreneurs were interested in making a profit from Linux.
– Red Hat, VA Linux, Caldera, TurboLinux
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Companies sold special versions of Linux that packaged the free
software with a bundle of utilities and applications, as well as service
and support.
There were difficulties in business models that tried to combine free
software with for-charge products and services.
– Major problem:
• Most Linux users were sophisticated enough not to need the
services or bundles of complements that the commercial Linux
companies offered.
University of Jyväskylä
SB Program
Open Source and For-Profit Companies
(Cont.)
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There were companies that explored different ways to take advantage of the
open source movement to enhance their platforms or generate complements
NETSCAPE’S MOZILLA:
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Netscape decided to give the source code away for its browser and make
this an open source project
– Combining efforts of Netscape programmers with open source
developers.
The results were disappointing.
– Code was a 3-million-line pile of ”spaghetti”
– Netscape had licensed a lot of proprietary code from other companies
and these companies were not willing to give away the source code.
– Mozilla team had to write these components from scratch or find
substitutes.
University of Jyväskylä
SB Program
Open Source and For-Profit Companies
(Cont.)
– Difficulties to manage the Mozilla project without allocating a large number of its
own engineers.
– Difficulties to motivate hundreds and thousands of individuals to contribute to the
effort.
– Project took about two years and not the several months that Netscape had
expected.
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Positive side:
– Mozilla project gave Netscape a much better browser.
– The project demonstrated that it is possible to evolve a commercial platform
product with the assistance of open source developers.
University of Jyväskylä
SB Program
Open Source and For-Profit Companies
(Cont.)
IBM’S APACHE:
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IBM found another way to take advantage of open source movement to
enhance one of its major platform products.
Apache was the most popular Web server software, which is used to host
Web sites and run small Web applications.
– IBM had a Web server product of its own, but had a minuscule market share.
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The company decided to drop its in-house product and to adopt and
enhance Apache, adding any new code to the open source pool.
The purpose was to sell more servers by treating Apache as a complement
to its hardware platform.
IBM later decided to adapt Linux to work on its servers and that was another
move that made the IBM server hardware more popular.
University of Jyväskylä
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Presentation Outline
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General Introduction to Platform Leadership
Case Study: Intel
Case Study: Microsoft & Cisco
Case Study: Palm & NTT DoCoMo
Case Study: Linux (Open Source Platforms)
>>Conclusions<<
Views of the book and topic area
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Conclusion: Success Factors and
Indicators in Platform Leadership
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Successful Platform leaders can have a strong influence
over their industries in terms of innovation
Not all industries are suitable for a platform leadership
strategy
Becoming a platform leader requires that the product is of
limited use when used alone, it gains value when used in
conjunction with complementary products
Encouraging complimentary innovation in order to
advance the platform is a critical factor to success
University of Jyväskylä
SB Program
Conclusion: Lever 1 Scope of the Firm
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Platform leaders depend on the network of
complementor’s around them, without this the product is
less likely to be a success
Some innovation should still be carried out in-house to
the core platform product
Assessment should be carried out into what sort of
complement would add most value to the platform e.g.
having many continuously developing complements or a
core of stable applications
University of Jyväskylä
SB Program
Conclusion: Lever 1 Scope of the Firm
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Wannabe platform leaders should appreciate their own
capabilities in terms or resources e.g. concentrating
efforts to maximise levels of core business
Developing links with companies who have deep industry
knowledge is beneficial to make use of their market
advantage rather than trying to develop a market base of
your own
A successful platform will have a base which is hard for
competitors to imitate
A focus on future plans can ensure a platform stays in
front of competition,
University of Jyväskylä
SB Program
Conclusion: Lever 2 Product Technology
- Architecture
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Technology in platform terms is defined as three sections:
Architecture, Interfaces & Intellectual Property
Decisions made at the architecture level can have long
lasting impact on a platform in terms of future
compatibility issues
A modular architecture is desirable for a platform to be
easily integrated with complementary products
Modular design can encourage external companies to
develop applications as they encounter less problems in
integrating the two products
University of Jyväskylä
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Conclusion: Lever 2 Product Technology
- Interface
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Interface architecture to be conductive to outside
innovation must be open, that is publicly available so
complementors can see how to link their product to the
platform
This open architecture can be risky though as
complementors can quickly become competitors when
they have access to a companies technology
Continuous improvement of architecture is the only way
to keep ahead of competitors when the source code is
open to all, this is why companies such as Microsoft
guard their core code to avoid imitators
University of Jyväskylä
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Conclusion: Lever 2 Product Technology
- Intellectual Property (IP)
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The intellectual property of a platform is a sensitive issue
as many companies don’t want to reveal their technology
other than essential aspects like interface methods.
The open architecture can decrease development costs
for complementor’s and increase numbers of innovators
Benefits of open source IP can be seen in examples such
as Linux
University of Jyväskylä
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Conclusion: Lever 3 External Relationships
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A platform leader is highly dependant on the quality of its
external relationships
Long term effectiveness is seen to be achieved by
simultaneously following objectives
Through an effective relationship a platform leader can
remain in control and direct innovation
A platform leader should not alter strategy just to avoid
conflict with a complementor
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SB Program
Conclusion: Lever 3 External Relationships
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Different platform leaders should use different strategies
when it comes to complementor’s e.g. Intel were careful
not to encroach into partners operations, while Microsoft
are willing to move into markets already populated by
their own partner firms
Effective management of the ‘cross over’ is crucial to
future relationships and balance of the platform
The benefit’s a partner brings to a platform can also be
seen as a key factor in how a platform leader will go
about moving into the new sector
University of Jyväskylä
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Conclusion: Lever 4 Internal Organisation
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Internal organisation specific to platform leadership has
to take into account external partners e.g. Intel set up
specific teams to deal with partners
Goal definition is important for a platform leader so as to
define what each business unit should aim to achieve e.g
to drive complementary innovation or to look at other
market opportunities
Viewing the platform as a means to an end process can
aid platform leaders, while brokering external
complementor’s relationships provides a focus
University of Jyväskylä
SB Program
Conclusion: Limitations of Platform
Leadership Strategy
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Complicated process is open to many conflicting factors
Generating interest in the platform by external partners
can be a long and resource intensive process
Technological dependency can develop leaving the
platform leader stuck with a certain back bone thus
hampering the evolution of the platform
Fragile model dependant on third parties
University of Jyväskylä