VARIETY AND DYNAMICS OF PLATFORMS

Given the growing spread of the phenomenon in various industrial sectors, platforms are receiving attention across disciplines. Wheelwright and Clark (1992) first talked of platform products whose core design seeks to appeal to a large customer base while its openness to marginal modifications attempts to captivate peripheral users with more specific needs.

In this context, Cusumano and Gawer (2002) and Gawer (2009) successfully elaborate the concept of ‘technology platforms’ in order to account for ICT-based innovations, like virtual networks and modular structures, emphasizing the associated infrastructures, interfaces and standards. From this viewpoint, technology platforms facilitate interop­erability of different firms and technologies in the context of, for instance, high-tech industries. Consoli and Patrucco (2008, 2011) and Patrucco (2012) stress instead the organizational implications of platforms, articulating the notion of ‘innovation plat­forms’ as hybrid coordination modes that combine both interactions and transactions with hierarchical coordination and management of the networks.

Despite the differences that a comparison between different approaches and perspec­tives necessarily implies - an exercise that would be out of the scope of this chapter - common to both technology and innovation platforms is the notion of directed and coordinated organization as opposed to the spontaneous and anonymous organization typical of market processes. Innovation platforms, however, emphasize first the coexist­ence of both market transactions and collaborative interactions, and second that they produce an outcome - an innovation - that is the result of collective learning and align­ment of investments.

In these structures a variety of agents participate in the production and supply of prod­ucts and services; each unit exists independently according to own goals and capacity but, at the same time, responds to a collective goal through shared communication rules. The point, though, is that such differences across agents matter to a great degree. In turn, the architectures in which they operate are flexible and can be configured in different ways for different uses, very much akin to computer platforms. A central component of the rationale underpinning platforms is maximizing the variety of contributions stemming from a diverse knowledge base while maintaining coherence though a minimum level of hierarchy. As will be discussed further, innovation platforms are purposefully open to entry of new actors and, thereby, of new competencies. The extent of contribution by each additional unit depends endogenously on the relative value of internal competencies measured against the collective goal. At the core of the logic of a platform stand three powerful sources of increasing returns: economies of scale due to increased volumes of throughput; economies of scope due to lower costs of producing variations around the core product and services of the platform; and economies of system, that is, the creation of dedicated control procedures to improve utilization of the installed capacity.

Relevant dynamics within platforms span technological and organizational levels, and bear upon both the static and the dynamic coordination of knowledge. From a static viewpoint, platforms connect and integrate activities and capabilities of relevant agents within an industry, thus supporting specialization and favoring the accumulation of specific knowledge. From a dynamic viewpoint, platforms stimulate changes in both the structure of the network and the mechanisms for the governance of technological knowledge (Antonelli, 2015).

Let us now draw attention to the structural and dynamic properties that character­ize innovation platforms (Table 15.2). The coupling of two distinctive characteristics of platforms: (1) their role, whether finalized, to support the generation of technological knowledge or its exploitation, and (2) the levels of exclusivity of membership make it possible to identify the basic elements of a typology. Closed platforms are character­ized by substantial membership exclusivity. In closed platforms, the members belong to a single platform. In open platforms, members are active in many different platforms. Generative platforms are mainly finalized to support the generation of new technological knowledge, while exploitation platforms are implemented to support the exploitation of knowledge after its generation, and its incremental development.

This typology of platforms shows their performance and dynamics. Closed-generation platforms are likely to exhibit higher levels of stability and loyalty in partnership, lower risks of opportunistic behavior and hence higher overall levels of stability.

Table 15.2 The dynamic variety of platforms

Source: Authors’ elaboration.

from one platform to another. Open-generation platforms are characterized by higher fragility, as the members may have more opportunities to leave one platform and join one other or more platforms.

Open-exploitation platforms reduce asymmetries in the distribution of the rents stem­ming from knowledge as non-exclusivity increases the bargaining power of exploiters and reduces the monopolistic strength of ‘inventors’. At the same time open-exploitation platforms may offer larger opportunities of knowledge exploitation if they have high levels of fungibility and thus can be applied to a variety of different fields. Typically, open-exploitation platforms are found when the scope of application of a technology is large. Closed-exploitation platforms are found with technologies that have a limited scope of application. Given these conditions open-exploitation platforms typically exhibit lower levels of stability. Closed-exploitation platforms favor the bargaining power of ‘inventors’ and are better suited to support the appropriation of technological innova­tions with a limited range of applications.

In this context, inclusion in collective structures for knowledge sharing does not diminish the uncertainty associated with competition in fast-changing contexts but rather changes the nature of such uncertainty. To be viable, infrastructures like innova­tion platforms require, on the one hand, a degree of stability that confers coherence to shared goals and, on the other hand, room for further novelty. From this, it follows that a necessary condition for the emergence of novelty is that a system maintains a degree of openness to be able to adapt to modified circumstances. The key point is that the imple­mentation of major technical changes generates new opportunities for learning but in so doing also leads to skill shortages. For instance, empirical work, such as Brynolfsson and Hitt (2000), demonstrates that the large-scale diffusion of ICTs, often the backbone of innovation platforms, stimulates the emergence of new tasks and competencies. In turn, where new knowledge comes from and how it is to be absorbed, integrated and used by different members of the network depend on the degree of openness of the platform. Likewise, how the cost of this knowledge is borne by the participants also depends on the openness of the platform.

As anticipated by Richardson (1972), and reiterated by many others, when coordi­nation between closely complementary activities and competencies is essential for the success of innovation, firms rely upon a variety of inter-organizational arrangements. Joint ventures, equity agreements, R&D partnerships, coalitions and consortia all allow blending market and contract-based with integral solutions, strong with weak relations, in order to acquire and coordinate the necessary productive and innovative knowledge. Complex and hierarchical governance forms emerge when the task is the coordination of knowledge - sourced both internally and externally - and the facilitation of multi-sided learning.

The view of platforms as collective structures bears important consequences for the management of platforms and centered networks in that it stresses the problem of inclu­sion and exclusion in the network and highlights the major role played by those firms that are the leaders of the network. Concepts like architectural knowledge (Henderson and Clark, 1990), platform leadership (Gawer and Cusumano, 2002), architectural capa­bility (Jacobides, 2006), or that of system integrators (Prencipe et al., 2003) have been introduced recently to describe precisely that decisive capacity, possessed by the platform

Organizational innovations, ICTs and knowledge governance 331 leaders, to coordinate and manage the work of complex organizations. More precisely they refer to the capability to combine elements typical of the integrated models (such as authority and control), with characteristics typical of networked structures (such as a suf­ficient degree of openness) in order to select the significant competencies and knowledge to include in the network.

As a matter of fact, the main object of the platform leader is to drive the innovation process in the industry. This cannot be achieved without loosening the collective struc­ture and goal during the continuous adaptation to the fast-changing market conditions. In this regard, Iansiti and Levien (2004) talked of the three most important objectives that a network leader faces: (1) to maintain platform integrity and the compatibility between complementary products; (2) to manage technological innovation within the platform without losing backward compatibility with existing products and technologies; and (3) to preserve the leadership against other firms acquiring power within the plat­form. Iansiti and Levien labeled as ‘keystone’ those leaders able to benefit from and, at the same time, to generate significant externalities within the platform in order to sustain the collective performance of the network. While ‘dominator’ leaders behave mostly in a predatory way, integrate the network vertically and horizontally and seek to appropriate most of the value produced by the network, ‘keystone’ leaders achieve the mix between value appropriation and value sharing between the platform’s partners.

Cusumano and Gawer (2002) argued that the main problem of platform leaders can be identified in two key features of contemporary platforms: (1) the increasing interdepend­ency of products and services; and (2) the increasing ability to innovate through the par­ticipation of numerous partners, especially in the high-tech sectors. The combined effect of these two elements determines to what degree the development and improvement of one element in the product/service/organization of the platform is complementary and interdependent to the development of all others elements.

Platforms succeed only when the diverse incentives and capabilities of a variety of heterogeneous actors are organized so that they align and converge appropriately. In fact, only the convergence of a plurality of complementary actions aligned though sequential chains of user-producer relations can shape the actual direction and speed of the process. For instance, one of the problems faced by Intel in the 1990s was precisely to create the appropriate set of incentives for hardware and software producers to introduce innova­tions that parallel improvements in microchips.

The changing architecture of networks plays a key role here. The inclusion and exclu­sion of specific actors, characterized by idiosyncratic productive and innovative capabili­ties, as well as incentives, change the strategic behavior of the coalition, its objectives and the likely actions through which these can be achieved. The need for dynamic coordina­tion (i.e., coordination at each point in time of the heterogeneous actors embedded in the network) is clear if the goal is to be the successful realization of a common innovation. In such a systemic context, dynamic coordination requires some forms of hierarchical organization and yet, for the complexity involved in the system, no single firm commands both the technological and managerial resources necessary to make such coordination effective technologically and efficiently in terms of the coordination costs. Some interme­diate forms of organization are required and it is likely that the implementation of net­works centered on key firms and their strategic action emerges as more appropriate than pure solutions such as market exchange and vertical integration. Innovation platforms as

hybrid organizational forms emerge precisely as the appropriate strategy in order to allow bureaucratic organizations to react to improvements in product or services by acquiring externally the know-how necessary to innovate.

In a context of distributed capabilities and knowledge often sourced externally, the challenge for individual firms is to enlarge the range of external capabilities that can be accessed and integrated with internal ones, while guaranteeing efficiency and cohesion in access and integration of external knowledge, as well as the distinctiveness of capabilities. Also, empirical evidence about platforms shows that different firms developed different technologies as well as modeled their strategic decisions by fine-tuning their choices on the base of the characteristics of their environment and of internal and external resources available.

Intel and Microsoft are, for example, firms that largely benefited from both external collaboration and competition, making their innovations crucial elements of their plat­forms. Again, Intel and Cisco, despite their many differences, supported the acquisi­tion of external knowledge in those technologies where internal competencies were less developed. This strategy enlarged the scope of their platforms and, especially in the case of Intel, resulted in a modular and open platform architecture. Microsoft, instead, can be described as a ‘dominator’ firm rather than a ‘keystone’ or a platform exploiting its innovation system. In many cases, Microsoft is fully appropriating value without sup­porting collective dynamics of knowledge, but, on the contrary, developing a closed and rather hierarchical network architecture (Bresnahan, 2002; Gawer and Cusumano, 2002; Casadesus-Masanell and Yoffie, 2007; Gawer and Henderson, 2007). Smaller firms, such as Palm (bought in 2010 by Hewlett Packard) and NTT DoCoMo, show further diversity and specificities. Finally, a special case such as Linux - although not a ‘pure’ company but a free operating system supported by a community of volunteering programmers and collaborators - demonstrates the power of collective dynamics based on collaboration, exchange of external knowledge, and the sharing of common goals and objectives in the development of platforms (Tee and Gawer, 2009; Eisenmann et al., 2011).

Table 15.3 summarizes the main elements of six different platforms in the ICTs sectors according to three main dimensions (Gawer and Cusumano, 2002) documenting the variety of their strategies and characteristics.

15.5