How platform leaders win

Abstract

Purpose

To study successful strategies in platform industries, which are IT products that enable (a network of) users to communicate with each other, and that, consequently, exhibit network effects.

Design/methodology/approach

The authors studied 15 platform industries, including their first‐mover, early entrants and current leaders. Also studied were historical documents, for example to find the time of market entry.

Findings

Unlike traditional products (e.g. consumer products), platforms evolve over time by technically integrating separate platforms (“embrace and extend”). Two key patterns were found among platform leaders: follower advantage and staircase strategies. While follower advantage is also prevalent in traditional industries, staircase strategies are not. Complementary resources (i.e. resources the firm possesses outside of the product in question, for example R&D skills or customer relations) did not explain why the current leaders won.

Research limitations/implications

First‐mover advantage was largely illusionary and follower advantage prevalent. Some leaders of platform industries entered the industry early and some entered late, but it is not clear why a particular entry timing was successful in one platform industry but not in another. The authors cannot (yet) predict how a platform industry evolves, particularly in the presence of network effects.

Practice implications

To become the leader in a platform industry, do not become the first mover, but enter some time afterwards, and manage the “embrace and extend” platform evolution using staircase strategies.

Originality/ value

This study analyzed a sample of 15 platform industries, i.e. more than a few case studies.

Citation

Hidding, G.J., Williams, J. and Sviokla, J.J. (2011), "How platform leaders win", Journal of Business Strategy, Vol. 32 No. 2, pp. 29-37. https://doi.org/10.1108/02756661111109752