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-
