A Literature Review on Platform Strategy

Many markets in today's economy are organized around platforms,which function as an interface between different groups of users and facilitate value-creation exchanges.The emergence of industry platforms is a novel phenomenon impacting most industries today,from products to services.Industry platforms are building blocks that act as a foundation upon which an array of firms,sometimes called a business ecosystem,can develop complementary products,technologies,or services.These platform-based markets are often viewed as two-sided,because platform providers must get both consumers and developers of complementary applications on board in order to succeed.Firstly,the paper presents the definition and typology of platforms,which identifies the distinct contexts in which different types of platforms appear and summarizes their principal characteristics depending on the context in which they occur.The platforms are designed and used in three main settings,which is internal firms,across supply-chains,as well as industry platforms.So the term‘platform' is used in three different settings:product platform,industry platform and multi-sided market/platform.The product platform can be defined as projects that create a new generation or family of products for a firm,or a set of common subsystems(components,modules,or parts) and interfaces from which a stream of derivative products can be efficiently created and launched.Industry Platform are products,services or technologies that are developed by one or several firms,and that serve as foundations upon which other firms can build complementary products,services or technologies.The platform provider may be a specialist component firm(Wintel) as well as a system integrator(Apple). Multi-sided platform can be defined as product,firm or institution that mediates transactions across multi-sided markets under network externalities.The literature on platform competition emphasizes the role of network effects,which prescribes rapidly expanding a network of platform users and complementary applications to capture entire markets.The platforms could be updated and evolved dynamically,from internal platform to supply chain platform,from supply chain platform to industry platform,and finally give rise to"business ecosystem". Platform strategy differs from product strategy in that the former also requires the support of the external ecosystem to generate complementary products and,more important,innovation.The success of an innovating firm often depends on the efforts of other innovators in a platform ecosystem.Thus we arrive at a general definition of platform:A set of stable components that supports variety and evolvability in a system by constraining(defining) the linkages among the other components.Overall,most research on platform strategy is based on the concept and methodology of economics.By the literature review on platform,the paper introduces a perspective of strategic management.The paper reviews the definition and features of platform,platform entry,platform envelopment as well as platform innovation.According to the strategy of entry into platform-based markets,late entrant can take over market leadership in a platform-based market,and an entrant platform can gain or retain market share when it competes with an incumbent platform.Understanding the relative importance of indirect network effects,product quality,and consumer expectations is of critical importance for platform providers to formulate entry strategies.According to platform envelopment,platform leaders must prepare for the future,even when they are focused and highly successful with their present businesses.This means creating a flexible and creative organization,with people who can learn about new technologies and markets.For example,now Sony finds itself trailing in the newer platform markets,comparatively Google's platform was initially based on a better search engine,but it has not stopped there,and bought and then refined the Android operating system and created the Chrome browser to facilitate mobile computing(and mobile searches as well as advertising). The platform innovation strategy is the focus of this paper.A platform ecosystem can also provide an emerging orientation to create novelty in business operations.Successful innovations usually depend on cooperation among firms and potential adopters.Intel and Microsoft are focal firms and leaders in its innovation ecosystem respectively.In an innovation ecosystem,platform providers are very critical to improve innovation performance.However,those companies play a central role through platforms complementing other products or services.This means the value of a business ecosystem shifts from product to network value,that is to say,networking capabilities enhance the creation and delivery of a company's own offerings.Actually,we view this paper as a helpful guide,rather than as a final word.In future,some questions should be further explored,such as how local platform becomes a global platform? Why different industry platform leader have different capabilities,and what are they? How does technological paradigm affect industry platform architecture? In fact,increasingly more platform firms are cultivating and developing new platforms,the future research could examine how new entrants can differentiate themselves by exploiting different dimensions of platform quality and successfully enter platform-based markets.Finally,the managerial implication and future research are discussed.