Professor Annabelle Gawer is a Lecturer on technology strategy at Imperial College, London, after having been faculty in the Strategy and Management department for several years at INSEAD. She graduated from MIT with a Ph.D. in Management of Technological Innovation, and also holds an MSc in Industrial Engineering from Stanford University (1992.) She is an expert in high-tech strategy and author, along with Michael Cusumano of MIT, of the book Platform Leadership: How Intel, Microsoft, and Cisco Drive Industry Innovation.

Annabelle's book highlights the strategic value to firms of successfully developing a platform and assuming the role of network orchestrator. Annabelle identifies the primary importance of controlling a platform as part of a broader goal to grow a market and structure it in one's favor. 

"Collaboration and cooperation between firms is particularly important with complex systems, and where specialization and modularization occur. Platform leadership can be looked at in terms of both creating value and capturing value in these cases. 

As a platform leader, you create value by making it possible for many other companies to innovate around your platform, which is necessary to deliver value for end users.  You are orchestrating product innovation through activities such as setting standards, disclosing interface information, and supporting design specifications, and as a result, encourage and accelerate the growth of your market.

But in addition, there is an aspect of capturing value. The objective of platform leadership is not just to create the market, but also to derive long-term benefit from it.  The primary method of capturing value is by influencing the direction of innovation in a way that favors both your design and long term plans."  

Annabelle points out that not all markets will evolve to support modularized product platform layers and dominant platform leaders. The dominant platform in some cases will remain embedded in an integrated stack.
 
"While new categories often first appear in the form of tightly integrated products, it isn't accurate to generalize that in all cases they will always evolve into modularized platform based categories.

Two key conditions must be met:  The first is that the size and profitability of the market has to be large enough to attract specialization and modular providers. A smaller niche market may not be support this.  Secondly, the platform should provide potential versatility for other applications.  'Can the platform be expanded or used for different uses?' If it is narrowly dedicated to a single purpose, the attractiveness of a modular platform is again limited.

Specialization and modularization is a strong possibility where these conditions are met.  But if the tight integration of layers adds enough value, the tightly integrated product can still win."

While controlling a platform with a large installed and complement base creates a source of competitive advantage for the firm, this advantage can erode if ecosystem partners switch to or support other platforms, creating a platform shift.  Annabelle recognizes this danger, and councils a proactive long-term platform development plan which is market rather than partner driven. 

"Part of successful platform management requires not losing sight of the customer who buys the end product.  While you need to maintain close relationships with developers and complementors, at the end of the day the end-user - the customer - makes a choice of purchasing the end-product.  You have to keep providing the best product.

This sounds simple but can be quite difficult to manage. There is a danger of being so committed and involved with managing your existing platform and complement relationships that you become blind to a threat coming from a different place. You need to be aware of what is happening externally, and evolve your platform in a way that encourages the developers of complements to support you. You can't be held hostage by them."

From the partner's viewpoint, Annabelle notes that it makes sense to be diligent in selecting which platform to support, but that the reality of the marketplace may force your hand or at least limit your decision making latitude. 

"You need to do your homework as a partner about the various platform options. But In some cases, there aren't a lot of platform choices. Even if choice exists, cross platform commitment is a matter of resources. Of course it is preferable and improves bargaining power to support multiple platforms, but this isn't always possible in the short term

Your dependence on a platform comes with risk. The better platform choice is in the end the standard that is likely to win by creating momentum in both installed base and network…rather than simple technical superiority. As a partner your real interest should be in who can grow the market, and is most likely to succeed."

This last point highlights the virtuous circle that makes platform and layer ownership such a powerful competitive position, and why maintaining a platform leadership position is of such high strategic importance.

From Hunter or Hunted - Chapter 10