What do we mean by platform? I particularly like this definition by MIT Professor Michael Cusumano: “A platform or complement strategy differs from a product strategy in that it requires an external ecosystem to generate complementary product or service innovations and build positive feedback between the complements and the platform. The effect is much greater potential for innovation and growth than a single product-oriented firm can generate alone.”
The importance of platforms is closely linked to the concept of network effects - the more products or services it offers, the more users it will attract. Scale increases the platform’s value, helping it attract more complementary offerings which in turn brings in more users, which then makes the platform even more valuable… and on and on and on.
Platforms have long played a key role in the IT industry. IBM’s System 360 family of mainframes, announced in 1964, featured a common hardware architecture and operating system, enabling customers to upgrade their systems with no need to rewrite their applications. The ecosystem of add-on hardware, software and services that developed around System 360 helped it become the premier platform for commercial computing over the next 25 years.
In the 1980s, the explosive growth of personal computers was largely driven by the emergence of the Wintel platform based on Microsoft’s operating systems and Intel’s microprocessors, which attracted a large ecosystem of hardware and software developers.
The 1990s saw the commercial success of the Internet and World Wide Web, driving platforms to a whole new level. Internet-based platforms connected large numbers of PC users to a wide variety of web sites and online applications. The power of platforms has grown even more dramatically over the past decade, with billions of users now connecting via smart mobile devices to all kinds of cloud-based applications and services.
What’s the current state and growth potential of platform companies? How many large platforms are currently operating around the world? What’s their impact on established enterprises? These are among the questions addressed in in a recent report, The Rise of the Platform Enterprise: A Global Survey led by Peter Evans and Annabelle Gawer and sponsored by the Center for Global Enterprise. The report is based on a comprehensive survey of the 176 platform companies around the world with an individual valuation exceeding $1 billion. Their aggregate market value was over $4.3 trillion.