dence that too many complementors can reduce the incentives of new complementors to invest. ^c) Some markets with strong network externalities (such as through incompatible formats) and little opportunity for differentiation or niche strategies tend to evolve into “winner take all” or “winner take most” businesses, like Windows and Office for PC software, eBay for online buying and selling, or Akamai for Internet content hosting services. Google is moving in this direction as well for Internet search and contextual advertising. ^d

We have seen many platform battlegrounds in the history of technology, with prominent examples coming from the commercialization of electricity, radio, and television. My first platform-related research was the battle between

Sony—another great product company in its heyday—and Japan Victor Corporation over the home videocassette recorder (VCR).^e During 1969–1971, Sony engineers had compromised their technology goals to produce an earlier standard using ^¾-inch-wide tape, the U-Matic, in order to get the support of other firms. This product never succeeded with consumers because of its bulk and cost. When Sony engineers produced a smaller ^½-inch tape version in 1975, the Betamax, Sony management tried to persuade other firms to adopt this product as the new standard. Sony refused to revise the design to accommodate other firms such as GE in the U.S., which wanted a longer recording time.

Japan Victor, backed by its giant parent Matsushita Electronics, came

ILLUS TRATION B Y JOHN HAR WOOD

c See Kevin Boudreau, “Too Many Complementors? Evidence on Software Firms,” Working Paper, HEC-Paris School of Management, November 2006.

d For characteristics of “winner take all” markets, see Thomas Eisenmann, Geoffrey Parker, and Marshall W. Van Alstyne, “Strategies for Two-Sided Markets,” Harvard Business Review, October 2006, 1–10.

e See Richard S. Rosenbloom and Michael A. Cusumano, “Technological Pioneering and Competitive Advantage: The Birth of the VCR Industry,” California Management Review 29, 4 (Summer 1987); and Michael A. Cusumano, Yiorgos Mylonadis, and Richard S. Rosenbloom, “Strategic Maneuvering and Mass-Market Dynamics: The Triumph of VHS Over Beta,” Business History Review (Spring 1992).

viewpoints

out in 1976 with its own product, the VHS recorder. Some observers thought it was technically inferior. But JVC and Matsushita treated VHS more as an industry platform. They incorporated feature suggestions from other firms, broadly licensed the new technology, provided essential components to licensees, and aggressively cultivated a complementary market in prerecorded tapes. The much larger number of firms licensing VHS encouraged tape producers and vendors to make and sell many more VHS than Betamax tapes. Users responded and bought more VHS machines, encouraging more firms to license the standard and then more tape producers and distributors and consumers to adopt VHS. Betamax disappeared.

We can tell almost the same platform vs. product story with the Macintosh. Apple chose to optimize the hardware-software system and monopolize revenues from the product. By contrast, a platform strategy would have meant licensing the Macintosh operating system widely and working openly with other companies and complement producers to evolve the platform and create applications for the mass market. Apple did not do this and remained (for the most part) the only producer of the Mac, keeping prices high (about twice the cost of an IBM-compatible PC using technology from Microsoft and Intel) and diffusion low. The Macintosh survived as a second standard with a few percent of the market only because it found two niches—desktop publishing as well as consumers who were willing to pay for an easier-to-use and more elegant product. But software applications producers—the major complementors of computer platforms—overwhelmingly chose to support the more broadly selling IBM-compatible machines.

Which brings me to more recent “ truly great” products from Apple that have done better in the market. The iPod, with its unique “click wheel” interface and new touchscreen, is the best-selling music player in history, currently with about a 70% market share. It also has attracted complementary hardware that have made it more valuable, such as connectors for car or home-stereo systems, or add-ons that turn the iPod into an FM radio, digital recorder, or cam-