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Platform Leadership. T-109.5410 Technology Management 15.11.2005 Eino Kivisaari Researcher, M.Sc. TML / SimLab / Technology Management. ”We are tied to innovations by others to make our innovation valuable. If we do an innovation in the processor, and Microsoft or independent software - PowerPoint PPT Presentation
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Platform Leadership
T-109.5410 Technology Management15.11.2005
Eino KivisaariResearcher, M.Sc.TML / SimLab / Technology Management
”We are tied to innovations by others to make our
innovation valuable. If we do an innovation in the
processor, and Microsoft or independent software
parties don’t do a corresponding innovation, our
innovation will be worthless. So, it really is a
desperate situation for us.”
David B. Johnson, Intel Architecture Lab
Product Platform Strategy
Platform is an architecture of the common elements implemented across a range of products
Defining technology = Key element(s) of the platform
Dictates life cycle, capabilities, limitations Is based on company’s core competence Difficult to copy by competitors The choice of defining technology is perhaps the most critical
strategic decision that a hi-tech company makes
What if platform elements are provided by different companies?
Platforms, Segments, Products
Product 1
Product 2
Product 3
Product 1A
Product 1B Product 1C
Element A
Element B
Element C
Segment A
Segment B
Segment C
Common PlatformElements
Unique product elements and common platform elements of a product lineProduct 5
(McGrath 2001)
Benefits of Platform Strategy
Enables rapid and consistent product development
Encourages a long-term view on product strategy
Operational efficiencies Reduced manufacturing costs Reduced design costs Easier Marketing and Support
Are these valid also when elements are provided by different (competing & collaborating) companies?
Annabelle Gawer and Michael A. Cusumano
Platform LeadershipHow Intel, Microsoft and Cisco Drive Industry Innovation Harvard Business School Press 2002
Available at HUT library
20-30 € in various webstores
Platform Leadership
Core Products vs. ComplementsCars / TiresComputers / Software etc...
Modularity of Complex ProductsMore modularity in developed industriesThis is the direction where mankind is going:
specialization Balance of Power?
Who conducts the orchestra?
Platformed High-Tech World
Increasing interdependency of products and services Ability to innovate by more actors than ever
Platform leaders must solve three problems:
Maintenance of the integrity of the platform With regard to future technological innovation and the
independent product strategies of other companies Platform evolution
How to permit platforms evolve technologically while maintaining compatibility with older components
Gaining and sustaining platform leadership
Four Levers of Platform Leadership
The authors analyzed a variety of organizations (Intel, Microsoft, Cisco, for example) and discovered four distinct but related levers of platform leadership
These four levers can help managers in both strategic formulation and implementation
Lever One: Scope
Deciding the scope of the company is the most important decision: Which complements to make in-house and what to leave to outsiders?
Companies that desire to become platform leaders need to determine how dependent they are on complements
Platform producers should avoid developing their own complements if they lack financial or technical capacity to compete in the relevant markets
However, as a rule of thumb, platform producers should have in-house capability, not only for complement production, but to serve as healthy competition for outsiders
Lever Two: Product Technology
Degrees of modularity and openness Product architecture can have a large impact on the
structure of an industry and the types of follow-on innovation
Product architecture determines who does what kind of innovation and how much investment in complementary products will occur outside the platform-leader organization
Leading companies guard their core technology but utilize tools such as modular architectures and disclosure of interfaces to ensure the supply of complementary products
Lever Three: External Relationships Collaborative vs. competitive
For long-term effectiveness, platform leaders must follow two goals simultaneously:
Search for consensus with complementors about technical standards and how they interface with products
Show the way by providing new complements (produced in-house), if this is seen to be necessary
Consensus needs to be forged by one company driving the process
Platform leaders should be industry enablers. They should help others innovate in better ways around the platform.
Platform leaders should not unnecessarily step out of their product boundaries into that of their complementors
Leaders can reduce external tensions with a humble approach and by acting on behalf of the entire industry
Level Four: Internal Organization
Coping with internal & external conflicts Platform producer must generate an internal organization
that enables it to manage complementor relationships with ease
Therein lies the challenge, as sometimes groups within a firm compete with complementors
It is crucial to communicate the multiple goals to the whole firm and generate a process that helps resolve conflicts
Separation of competing groups outsider companies become more willing to entrust personnel with information
Platform leaders can appear neutral if they establish different groups maintaining different roles
Case: Intel
Basic problem: People don’t buy processors, but PCs
Well... some people do…
Multibillion-dollar investments in processor design…
…How to make sure that demand for the processors stays & grows?
Case Intel — History In 1979 IBM decided to develop a new PC to
compete with Apple Intel 8088 Processor Microsoft DOS (Disk Operating System)
Soon after, PC-Compatibles emerged No exclusive contracts were made IBM allowed this, which speeded up production,
commerialization and adoption of PCs worldwide
PC-AT in 1984 demand exploded for IBM PC-AT and clones
PC Industry Evolution
Decline in vertical integration IBM, DEC, Univac, Wang started to lose
leadership
Specialists started to take overMicrosoft, Intel, Motorola…
Case Intel
Intel’s big entry thanks to IBM, but… PC-AT architecture started to feel like a
tight shirt Intel’s processors developed at a fast pace Biggest problem:
ISA data bus (Industry Standard Architecure)Very slow internal data bus for graphics,
storage etc.
The Rush Hour of Buses:ISA / MCA / EISA / VESA / PCI…
In 1980, MCA bus by IBM (MicroChannel Architecture)
Compaq: EISA (Extended ISA)
No real performance improvements, industry stayed with ISA for years
Lack of Platform Leadership
Intel was disturbed by the lack of leadership No one was able to advance the overall platform Unclarity of mandate – how should do it?
Standards Committees (a VESA graphics bus was actually developed)
Old Leaders …or Intel?
The PC platform was not moving fast enough for Intel
Intel Architecture Lab (IAL)
Created in 1991 ”Architects for the open computer industry” 550 engineers in 2001 (none of which
work on designing new microprocessors)
The mission of Intel Architecture Lab: To grow the overall market
PCI Initiative
The PCI bus, IAL’s first project in 1991 Transformation of the internal architecture
of the PC Goals: Speed, Modularity, Openness,
Space for growth Advancing the whole PC industryWhat could a PC become, if the best was
made out of it?
Intel takes lead with PCI
A big conceptual step for Intel from providing processors… …to architecting the whole platform
Indecision within Intel Big investment… Mandate was unclear, a too presumptuous move?
Success factors PCI was free and open to everyone IBM’s failure with MCA, an attempt towards verticality Winning over other firms, rallying collaborators Thinking ahead – avoiding lock-in to certain processor
generations
PCI Chipsets
Chip sets had to be redesigned with every new processor expensive & slow for OEMs
To convince everybody, Intel put its own skin in the game
Mass production of PCI chipsets Big players went along because they wanted to
take advantage of latest Intel chips quickly Intel starts making motherboards Big OEMs’ problem: How to differentiate?
”To a large extent, PCI set the tone for other initiatives… Intel realized through this experience that, when we set out to do so, we can move the industry
in some useful direction.”
Dave Carson, Intel Architecture Lab
USB
USB initiative began in mid-1990’s Serial connectors for peripherals had become a
serious bottleneck Intel had the vision and the technology, and this
time also the courage from the start Goal: making the best out of PC computers
…and growing the demand for Intel processors, of course…
Intel’s USB Strategy
To avoid confusion in the market Add-on cards Ethernet-connectivity Parallel port Different kinds of software
Intel wanted a better way to hook to a PC Hardware specification for USB Software specification Operating system support Open interface, everybody competing, let the best
innovation win
Building Momentum & Speed
Consortiums ”Rabbits” (USB: Logitech, Microsoft) SIG (Special Interest Group)
PCI, 5 members: Intel, DEC, Compaq, IBM, NCR USB, 7 members: Intel, DEC, Compaq, Microsoft,
IBM, Nortel, and NEC Only a few participants fast decisions
Intel IPR Strategy
PCI, AGP, USB: No fees whatsoever
However, Intel required that anyone who used their IP had to make their related IP open as well
Intel ”PlugFests”
Compliancy Workshops 100-200 companies attended Vendors could test interoperability of their
products (in a conference hotel somewhere in the US…)
Helped in creating good PR for the platform Goodwill Agreement: participants should not use
information gathered in PlugFests against their competitors
Enabling Tools
Software Development Kits (SDK) Device Development Kits (DDK) Software Libraries etc.Benefits:
Faster product developmentHelped in creating momentumLowered entry barriers for complementorsFostered innovationMade the overall cake bigger for everyone
”We think one of our core compentencies is that we are a trusted partner for almost everybody in the industry. We can talk to the graphics group’s
competitors openly about their products and about our specification, and they trust that we honor that. But you can’t just mandate trust.
You have to earn it.”
Craig Kinnie, Director, Intel Architecture Lab
Conflicts, Roles, Policy
Intel played on many fields at the same time
Intel’s roles: Industry enabler (expanding the whole pie) Neutral-broker (IAL promotes ”public interest”) Profit-seeking (eg. processor manufacturing)
competition with complementor that IAL is supporting
Many roles Separate internal groups a powerful strategy, when conflicting agendas exist internal & external debate (can be fruitful)
Alternative Strategies
CiscoAquire and Assimilate Complements and
Substitutes
Case Cisco
Strategy: Aquire & Assimilate Complements and Substitutes
Internet Router Company
Defining Technology:IOS (Internetworking Operating System)
Case Cisco Huge growth in annual sales
1991: $70 million1994: $1 billion2001: $22 billion
This was not done alone: Internet browsers by Netscape & MicrosoftHigh-performance servers by SunAll applications developed for the Internet
Case Cisco
A platform leader with 80% market share in core router products
Technology was based on open industry standards, distinction came from enabling interoperable networking between routers and a wide variety of other types of networking and communications technologies
Case Cisco
Cisco faced more competitors 3Com, Lucent, Nortel, Siemens, Fujitsu
In early 2000 Cisco started losing sales to Juniper NetworksCompetitors started being strong in niche
markets with advanced products
Case Cisco
Cisco strategyProviding complete solutions,
a one-stop-shop for networkingStructured aquisition of pieces needed
for the puzzleDriving industry standards overall growthForm alliances and partnerships
Cisco Product Debuts
1986 Routers1992 Dial-in access servers1993 LAN Switches1994 WAN Swithces1995 Hubs, Firewalls, Caching engines1996 Cable boxes, cable head-ends1997 DSL Head-ends1998 Internet Phones1999 Home modems2000 Wireless LANs
IOS + all these products = one-stop-shop
Platform Leader Wannabes
Palm: Handheld ComputingFighting a giant (Microsoft / PocketPC)
NTT DoCoMo: Wireless Content Internationalizing a successful domestic
platform (iMode) Linux: Open Source Software
Relying exclusively on external development and open standards
Summary Companies that possess keys to popular technology
cannot afford to live in a vacuum
Companies that fail to innovate or have others innovate will quickly find them themselves outmoded and obsolete
Platform thinking forces managers to consider entire industry
Platform leaders must maintain incentives for third parties to produce complements
…and help them do so
Platform leadership is a strategy of interdependence A vision of a business ecosystem
Platform leadership does not happen by accident
Post-Graduate Studies at HUT Courses, seminars, books, methodology... 70 op (45 ov) courses, plus a thesis T012Z = Telecommunications Management
post-gr. major (T124, Professor Riitta Smeds)
Working as Researcher Research projects, Teaching, Writing,
Conferences, Studying, Collaboration…
And then for something totally different…