[CAnet - news] Platform Architect as a Network-centric Strategy

For more information on this item please visit my blog at 
http://billstarnaud.blogspot.com/
-------------------------------------------




 [From N. Venkat Venkatrama's blog -- BSA]

http://network-strategy.blogspot.com/2007/05/platform-architect-as-network-c
entric.html



Platform Architect as a Network-centric Strategy

My work in recent years has focused on strategies from a network-centric
point of view. Here are some core differences when we shift the frame from a
firm-centric view to a network-centric view.

1. Instead of looking at a corporation as a portfolio of products (single
business firms) or portfolio of businesses (multi-business firms), look at
corporations as a portfolio of capabilities leveraging a portfolio of
relationships (within- and across different organizational entities and
including customers). Co-creation with complementary corporations and
customers emerge as a useful frame to think about strategic choices.

2. Recognize the role of Internet as the new infrastructure to architect
business models that deliver superior value to customers (and by extension,
the shareholders).

Viewed this way, there is symbiotic relationship between business and IT
strategies. Each needs the other; neither alone is sufficient for winning
performance.
---------------
So, what new business models emerge when viewed from a network-centric point
of view? One that I have been intrigued by for sometime is what I label as
platform architect. The term platform has become widely used (and perhaps
even abused) in business writings today. But, the logic of architecting a
platform reflects the essence of strategic thinking in network-centric
terms. Let me outline some essential ideas.

1. The automotive industry may have created the first product platform
whereby automakers such as GM or Ford designed ways to share a set of
components common to different automobiles. It helped in streamlining
production and efficient procurement of components and subsystems from
vendors. In the automotive industry, product platforms are also labeled as
vehicle architecture that specifies how the various components and
subsystems fit together. This is an example of proprietary or closed
platform architecture. GM's vehicle architecture differed from Ford's or
Chrysler's.


2. The computer industry transformation allows us to go beyond
single-company, proprietary closed architecture to a more multi-company,
relatively open architecture. 

Understanding this shift in the computer industry allowed researchers to
introduce key concepts of design rules and modular operators by Carliss
Baldwin and Kim Clark. The six modular operators introduced by them in the
book is a useful way to understand the shift in the computer industry. These
are:

    Splitting - Modules can be made independent.
    Substituting - Modules can be substituted and interchanged.
    Excluding - Existing Modules can be removed to build a usable solution.
    Augmenting - New Modules can be added to create new solutions.
    Inverting - The hierarchical dependencies between Modules can be
rearranged.
    Porting - Modules can be applied to different contexts.


This shift also allows us to understand the importance of platform leaders.
Annabelle Gawer and Michael Cusumano show how Intel, Microsoft and Cisco
(among others) drive innovation in the computer industry through platform
leadership. Indeed, a significant part of the Microsoft antitrust case is
based on ideas of network effects and 'divided technical leadership'--a term
introduced by Professor Tim Bresnahan in an unpublished working paper
(available here). The essential point is to recognize that a platform need
not be under the control of a single firm but could be designed by the
coordinated efforts of multiple different firms, each leading in one or more
layers of the stack (as shown in the figure above). Thus, we refer to the
dominant architecture of the personal computer as Wintel (Windows-Intel)
architecture. Coordination across complementary capabilities through
different types of is an essential requirement of crafting strategies in a
network-era. Platform architect is one who is capable of coordinating
different components into a coherent architecture that creates direct and
indirect network effects.

3. So, does the idea of platform architecture have any role beyond the
computer industry? To the extent that network effects may be operating,
platform architecture will be important. To the extent that business models
are being created on a global networked infrastructure, platform
architecture will be critical. We are beginning to see attempts by companies
to architect platforms in music (e.g., Apple ipod/itunes and Microsoft
Zune), photography (Yahoo-Flickr, Google Picasa) and e-retailing (Amazon,
eBay), social networking (MySpace, Facebook), media (YouTube) and so on. I
have developed some preliminary maps of some of these shifts that I use in
my presentation on network-views of strategy. In an intriguing post, JP
Rangaswami of BT even suggested that American Idol be viewed as a platform
and enumerated a set of criteria that is useful to explore the ideas of
platforms beyond the technology sector.
----
So, are you really a platform architect?

One--platform architecture is essentially network-centric. it involves
coordination of modules (or sub-components) designed and delivered by
different independent entities. So, while we may credit Apple for shifting
the music industry to the network era, its success equally well depends on
the broader ecosystem that it has orchestrated. Microsoft--despite
succeeding in architecting the Wintel platform--has been unable to win with
Zune thus far. Similarly, GM OnStar is a relatively closed (GM-centric)
telematics platform that has not yet been adopted by any non-GM automakers
for it to be considered a network-centric strategy while Microsoft is
initially partnering with Ford Motor Company to launch a new dashboard OS.
When Microsoft extends this experiment to deliver this functionality to
non-Ford cars, it becomes a platform architect in the same spirit of Windows
and Office platforms.

    Behind every successful platform is vibrant ecosystem of complementary
capabilities. 



Two--platform architects earn revenue in two ways. There is direct payment
from the users of the platform (e.g., Windows Vista or Office 2007, Sony PS3
or Xbox) or indirect payment from other parties involved in business
transactions (e.g., advertising in the case of Google or transaction fee in
the case of Visa or Amazon or eBay). The choice depends on network
characteristics and customer propensity to pay for different features under
different conditions.

    Thinking through the location of cash register is critical to successful
platform architect strategy.


Three--the scope of platform architecture straddles multiple different
industry boundaries. The single-company proprietary platform like the
automotive vehicle architecture is a firm-centric strategy. In contrast,
platform architect from a network-centric point of view is cross-industry.
Is Google a search engine or an advertising platform? Is Microsoft a
software company or something else? Is Amazon an e-tailer or e-commerce
platform or something even broader? What makes the platform architect
strategy challenging is that it defies traditional industry boundaries.

    Myopic demarcation of platform scope is likely to lead to failed
strategies. 


Four--platforms evolve and morph. Networks by definition are connected and
dynamic. The dynamic nature is by virtue of addition of new nodes and new
linkages. New entities and new relationships change the scope of platforms.
Amazon's success is partly due to its ability to evolve its definition of
business scope and adapt to the new functionality and market demand (look at
Amazon's launch of DRM-free onlin emusic downloads as an alternative to
iTunes in different music formats). Competitive moves also redefine the
scope of platforms. When Google acquired YouTube, it put in motion a chain
reaction of new connections (e.g., NBC and MySpace joining together). RIM
announced that its popular blackberry software will be available on
competing phones that run Microsoft mobile OS. In some cases, the
implication are more emerget (than designed) as in the case of mash-ups
using APIs from different entities (The facebook platform releasing itsAPIs
is the latest). For an updated matrix of mashups, see here.

    Defending successful platforms call for proactively recognizing the
likely evolutionary shifts and being in a position to capture value. 

Posted by N. Venkatraman at 8:20 AM    


-------------------------------------
To SUBSCRIBE:
send a blank e-mail message to
[email protected]

To UNSUBSCRIBE:
send a blank email message to
[email protected]
-------------------------------------

These news items and comments are mine alone and do not necessarily reflect
those  of the CANARIE board or management. 


-----------
[email protected]
[email protected]
www.canarie.ca/~bstarn
skype: pocketpro
SkypeIn: +1 614 441-9603


_______________________________________________
news mailing list
[email protected]
http://lists.canarie.ca/mailman/listinfo/news