Platform ecosystems (1): Do they still matter or are they past their peak?
This is part one of seven blogs on platform ecosystems.
Why are platform ecosystems relevant?
Platform ecosystems are among the most written about topics in management and organization today. The figure below shows that the attention for platform ecosystems has increased significantly over the past 15 years. The number of articles published in the Financial Times that contain both the word ‘platform’ and the word ‘ecosystem’ was 11 in 2006. Growth really took off after 2017, with a highpoint of 158 articles in 2019. 2020 saw a drop to 128. Is this a Corona-dip caused by the fact that Corona did not leave much space for other news in 2020?. Or is the hype around platform ecosystems past its peak?
What is a platform ecosystem?
A platform offers a shared set of assets (technologies, capabilities, standards) that can easily be recombined into diverse applications (for more on platforms see the truly excellent book Platform Revolution by Parker, Van Alstyne and Choudhary: https://amzn.to/3br7isv). Organizations and individuals that are active on a platform constitute the platform ecosystem. They collaborate online with the platform and with each other, creating a system of continuous innovation. Most of the partners in an ecosystem, like app developers, have standardized agreements with the owner of the platform which regulate profit sharing, access rights and the further do’s and don’ts of the platform. Superplatforms like Google, Apple, Amazon and Facebook have become household names. Their ecosystems consist of thousands of organizations, large and tiny. If you want to know more about the characteristics, pros and cons of platform ecosystems see our book How to survive the organizational revolution (https://amzn.to/3aCnuH8).
What is the reason behind the increased attention?
The main reason behind the increasing attention for platforms is that they are no longer used exclusively by online players. Brick-and-mortar companies also have discovered the power of platforms. In an interesting study a few years ago, Peter Evans and Anabelle Gawer took stock of the number of platforms. You can find their interesting research here: https://bit.ly/37zgwAu. Their list of platforms included mainly ‘born digital’ platforms. Doing a similar study today would have to include the new trend that traditional companies have started to create platforms. Many of them are enabled by the Internet of Things. Some examples are:
- John Deere’s platform connects farmers and their equipment with partners like Kespry (drones) and the WeatherChannel. The platform gives advice to farmers about many aspects of their business
- Haier’s HOPE (Haier Open Partnership Ecosystem) platform connects developers to Haier’s appliances group to embed IoT in kitchen appliances and washing machines
- Bayer’s Fieldview helps farmers optimize their yield through datasharing
- Philips operates a number of platforms, ranging from Male Grooming with advice about shaving and beard styles to Pregnancy+ that helps ensure a healthy pregnancy
- Signify’s Interact IoT platform offers services based on information gathered via sensors in LED lighting
- Santander’s Openbank initiative makes financial services available online via an ecosystem of developers
This is only a short list of established enterprises that build platforms. The key lesson is clear though: platform ecosystems are useful in any business, not just for the Googles and the Facebooks. Platforms set up by incumbents may perhaps not get the visibility of these superplatforms, but they still play an important role in transforming the economy. Corona, if anything, will stimulate the development of such platforms further, now that we have seen what they can do for us. Therefore the Corona-dip is a temporary artefact and a thorough understanding of how to manage platform ecosystems is indispensable for any manager today. The next blogs in this series will highlight some of the issues managers face.
About this series
In a series of seven blogs I give my view on the ins and outs of managing platform ecosystems. I will discuss the four challenges of managing platform ecosystems, what companies do to overcome the challenges, a model for the governance of platform ecosystems, modelling ecosystems through value maps, how value proposition based ecosystems relate to platform ecosystems and when to opt for a closed or open ecosystem.