Michael A. Cusumano - The Business of Platforms

T his book brings together research, ideas, and experiences that the three authors have accumulated over the past thirty years. The initial motivation was to write a much-needed sequel to Platform Leadership: How Intel, Microsoft, and Cisco Drive Industry Innovation (Gawer and Cusumano, 2002). Many companies and other organizations used that book to help them think about platform strategy and ecosystem innovation. It also laid the groundwork for additional research by ourselves and many other scholars. However, much time has passed, and there is much more to say about the business of platforms.

Platform Leadership introduced a framework that we called the Four Levers, intended to help managers at platform companies make key decisions with regard to strengthening their positions and ecosystems. Lever 1 dealt with how to balance the encouragement of third-party firms to innovate around the platform versus the decision to build your own complements. Our obvious example was a firm like Microsoft, which built both Windows (the platform) and Office (an essential complement). Lever 2 discussed how to design a platform that is accessible and modular so that external firms could more easily build their own complementary innovations. Lever 3 addressed initiatives to help ecosystem companies innovate around the platform, such as enabling tools, developer forums, and targeted venture funds. Lever 4 explored how platform leaders can organize internally to maintain some semblance of neutrality when they competed with their complementors and needed third-party firms to trust them.

In addition to the book, which focused on leadership principles for existing platform companies, we introduced two new concepts in a 2008 MIT Sloan Management Review article: coring and tipping.

The current book incorporates these ideas but examines platform strategy in a much broader context. In particular, Platform Leadership only treated what in this book we call innovation platforms. Now we discuss innovation platforms with many more years of experience, and we devote equal time to what we call transaction platforms, which are far more common. In addition, we discuss hybrid companies and platforms, which include the most valuable firms in the world.

It took us three years to complete this book. We started in 2015, when Michael Cusumano and Annabelle Gawer began collecting data to see if platform companies did indeed outperform conventional businesses over long periods of time. This turned out to be the case. We also wrote up our initial thoughts on market dynamics and how business models and strategy differed for innovation platforms as compared to transaction platforms. David Yoffie joined the project after the publication of Strategy Rules: Five Timeless Lessons from Bill Gates, Andy Grove, and Steve Jobs (Yoffie and Cusumano, 2015), which included a detailed analysis of how platform thinking evolved at Microsoft, Intel, and Apple. We then expanded the scope of this new book to examine common mistakes among platform companies, challenges for conventional firms trying to compete with digital platforms, platform governance and antitrust issues, and some emerging platform technologies that could greatly impact the future. Again, we hope to influence future research about platforms among our academic colleagues and students, but our primary audience has remained managers and entrepreneurs.

We are particularly pleased to work again with Hollis Heimbouch of HarperBusiness. Hollis was our editor for Platform Leadership when she was at Harvard Business School Press. She also was our editor at HarperBusiness for Strategy Rules (now translated into eighteen foreign languages). Her early interest in another book on platforms motivated us to finish the project and make the book as accessible as possible to practitioners. We also appreciated her suggestions on the manuscript.

Platforms are unique businesses driven by network effects and multisided market dynamics. Studying them was not a well-defined or popular topic among strategy and innovation scholars when we began our research and work with these types of companies in the late 1980s and early 1990s. In writing this book, not only have we moved considerably beyond our initial thinking, but we also have been able to build on a growing body of scholarship. Most notably, we need to thank our colleagues (in order of seniority) Richard Schmalensee, Thomas Eisenmann, David Evans, Geoffrey Parker, Marshall Van Alstyne, Andrei Hagiu, and Sangeet Paul Choudary for their many excellent books and articles. We cite their work numerous times.

We are indebted to several outside readers who provided detailed feedback on the manuscript. We are particularly grateful (in alphabetical order) to Pierre Azoulay, Donna Dubinsky, Nilufer Durak, Andreas Goeldi, Shane Greenstein, Andrei Hagiu, Mel Horwitch, Reed Hundt, Divya Joshi, Mary Kwok, Michael Scott Morton, Apoorva Parikh, Richard Schmalensee, Kiyoshi Tsujimura, Julian Wright, Nataliya Langburd Wright, and Feng Zhu. Peter Evans, working in part with Annabelle Gawer, also inspired us to create a comprehensive list of platform companies. Also providing very useful feedback from seminars and discussions about the data analysis were Carliss Baldwin, Robert Seamans, and other attendees at Boston Universitys Platform Strategy Research Symposium in July 2018. For contributions to the innovation and transaction platform framework, we thank Michael Jacobides and Carmelo Cennamo. In addition, Ganesh Vaidyanathan helped with the quantum computing discussion; Samantha Zyontz, as well as Gigi Hirsch and David Fritsche, helped with the CRISPR discussion.

Several research assistants helped with the platform company database and analysis. We thank Danny Nightingale, Damjan Korac, Georges Xydopoulos, and Ankur Chavda (who provided the most recent statistical analysis). We also thank David Yoffies Harvard Business School research associates Eric Baldwin and Daniel Fisher for additional assistance with background research and editing as well as his faculty assistant, Cathyjean Gustafson.

Finally, we would like to acknowledge our spouses and families for their patience and encouragement. Michael Cusumano thanks his wife, Xiaohua Yang. Annabelle Gawer thanks her husband, David Bendor. David Yoffie thanks his wife, Terry Yoffie.

Michael A. Cusumano

Annabelle Gawer

David B. Yoffie

December 2018