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PLATFORM LEADERSHIP

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Title: PLATFORM LEADERSHIP


1
PLATFORM LEADERSHIP
How Intel, Microsoft and Cisco Drive Industry
Innovation
Authors Annabelle Gawer Michael
A.Cusumano Software Business Program
26.02.2003 Presentation prepared by Yumin
Dong, Lulu Zhang, Arto Ojala Mark Dagnall

2
Presentation Outline
  • General Introduction to Platform Leadership
  • Case Study Intel
  • Case Study Microsoft Cisco
  • Case Study Palm NTT DoCoMo
  • Case Study Linux (Open Source Platforms)
  • Conclusions
  • Views of the book and topic area

3
What is a Platform Leader?
  • A Platform Leader is an organisation which has an
    objective to develop a network of complementors
    which can add value to one of its own products by
    developing innovative add ons which add value
    to the core product.
  • For a simple example think of a bakery, the core
    product may be a cake but to add value to it an
    external firm may supply chocolate or fruits to
    add value to the initial product. The bakery
    would be the Platform Leader as they are the ones
    driving the partners to provide added value
    products.

4
Platform Leadership An Overview
Platform Leader
Complementors
Consumers
Complementors
Complementors
5
Platform Leader Example Microsoft IBM / Sun -
Microsoft
  • Microsofts MS-Dos was facilitated by IBM
    co-operation. By shipping Ms-Dos with IBM
    compatible pcs Microsoft entered the market in a
    big way but continued to develop their platform
    to ensure they were always too far ahead for
    competitors to catch up. This initial strategy
    has lead to Microsofts sustained leadership with
    nearly all software products being compatible
    with Windows.
  • Suns Star office complies with Microsoft file
    extensions to ensure it is viable in the market
    because with no support for the platform leader
    i.e. Microsoft Office formats, Sun know they have
    no chance to gain any market share.

6
Platform Leadership Framework
  • The framework consists of four levers
  • Scope
  • Product Technology
  • External Relationships
  • Internal organisation
  • The levers are designed to enable managers to
    make an effective strategy for platform
    leadership or to enable a re-evaluation of an
    existing framework.
  • The framework is designed to take into account
    the circumstances of individual industries and
    the specific skills of an organisation.

7
Platform Leadership Framework Lever 1
  • Lever 1 Scope of the firm
  • Deals with what the firm does internally, and
    what it encourages others to do externally.
  • Is it better to concentrate efforts to internally
    develop complementary products or alternatively
    to rely on the market to produce them?
  • Can a balance be easily be achieved and what is
    the best approach?

8
Platform Leadership Framework Lever 2
  • Lever 2 Product Technology (architecture,
    interfaces, intellectual property)
  • Handles decision making of platform leaders and
    wannabes concerning the architecture of the
    product.
  • Decisions should be made as to the degree of
    modularity and the degree of openness the product
    will have as potential complementors can also
    easily become competitors.

9
Platform Leadership Framework Lever 3
  • Lever 3 Relationships with External Competitors
  • Concerned with defining the balance of
    collaboration in a relationship, i.e. how will
    the relationship be balanced, towards competition
    or collaboration?
  • Resolution of potential conflict should also be
    considered with this stage e.g. moving into a
    complementors core markets.

10
Platform Leadership Framework Lever 4
  • Lever 4 Internal Organisation
  • This lever allows platform leaders and wannabes
    to use internal structures for resolution of
    conflict.
  • Organisation of teams with similar goals into
    related groups regulated by one body.
  • Separate groups into distinct bodies in order to
    address potential conflict.
  • Effective communication is seen as an important
    facilitator of this lever.

11
Presentation Outline
  • General Introduction to Platform Leadership
  • gtgtCase Study Intelltlt
  • Case Study Microsoft Cisco
  • Case Study Palm NTT DoCoMo
  • Case Study Linux (Open Source Platforms)
  • Conclusions
  • Views of the book and topic area

12
Intel Case
  • Key Points
  • Intels Rise to Platform Leadership
  • The story
  • Intels Strategic Principles for Platform
    Leadership
  • The Four Levers
  • Platform Leaders and Complementors
  • How Intel Manages Conflicts of
    Interest
  • Discussing

13
Key Points
  • Intels position and situation in the PC
    industry
  • Intel is in the business of providing the
    engine for the PC. That engine is doubling in
    capacity every 18 to 24 months, according to
    Moores law.What Intel really want is to ensure
    that the rest of platform goes with it,
    everything around the microprocessor to be
    keeping pace and improving and scaling, so that
    the microprocessor can deliver its potential.
  • The strength of growing
  • Intel grows by growing the entire pie,
    growing by getting new applications, by finding
    new users for the PC. Vividly
  • That use or application is important to me,
    and to do that well, I need to buy a new
    processor
  • The key strategy issue
  • How to encourage and direct the vast array
    of interrelated innovations that will make the PC
    system work better?

14
Key Points(cont.)
  • The characteristics and huge benefits of being a
    leader in the industry
  • In some terms, industry leadership is often
    concreted by the industry standards and
    intellectual property
  • You can determine, or at least heavily influence
    the evolution of the industry.
  • Act as the first-mover in the markets, obtain the
    advantages of speed and timing

15
Key Points(cont.)
  • To achieve the leadership of platform, there are
    some strategic requirements of the company which
    we can get through the case of Intel
  • A Events and circumstances, as well as a keen
    understanding of what the firm can do, allow
    managers to develop a vision that they then try
    to make real by taking strategic actions.
  • Constant awareness about industry
    environment
  • B Strategy development is an iterative, even
    messy process. This understanding preserves a
    role for visionary leaders circumscribe the
    nature and the impact of their actions in an
    environment where strategy is emerging from the
    interaction between the firms external and
    internal opportunities and actions to influence
    their environment.
  • Mediation and adjustment are vital regarding
    dynamic environment

16
Key Points(cont.)
  • Ecosystem, orchestrate, complementor,
    competition, collaboration, balanced strategy
  • Capability stack of PC industry

17
Intels Rise to Platform Leader
  • Intels problems ( in the early 1990)
  • It was becoming increasingly difficult to
    grow demand for PCs.
  • At least two root causes to this problem
    (background)
  • An increasingly obsolete PC architecture
  • ISA bus was very slow, which prevented other
    components of PC to deliver their potential,
    especially microprocessor, which was the key
    product of Intel.
  • The lack of industry leadership to advance the PC
    system (hardware and software)
  • The bus struggle between IBM and Compaq delayed
    the progress of developing the PC platform

18
Intels Rise to Platform Leader
  • Many companies had a stake in the PC design. No
    single supplier could evolve the overall system
    by itself, let alone overthrow overall system.
  • Intels primary business of developing
    microprocessor was a big growth industry.
  • A solution to the problem of the PC architecture
    was required to accommodate Intels future
    vision.
  • At that time, as the No.1 microprocessor maker,
    Intel had strength to do some changes of PC
    system that benefiting itself as well as the PC
    industry.

19
Intels Rise to Platform Leader
  • The Creation of IAL---Intel Architecture Lab
  • Goal Architecture for the open computer industry
  • In detail
  • Success depends on cooperation among key industry
    players.
  • Common understanding PC industry needs to create
    new uses and thus new users for the PC.
  • Modular architectures with open interfaces
    between computers make it possible for many
    companies to participate in the innovation
    process.
  • Look at what people would want to do with the PC
    if it was as good as it could be what was
    preventing the industry from delivering on that
    goal not what Intel was doing, but what the
    industry limitations were.

20
Intels Rise to Platform Leader
  • A lesson and warning from the huge success of
    Compaq
  • In 1987, Intel tried to move the industry in a
    direction favorable to one of its new products
    80386 chip, with 32-bit flat address space.
  • IBM and Microsoft were unwilling to adopt it by
    their own reasons.
  • Compaq first commercialized the 386 chip with its
    Compaq 386
  • Consumers came to believe that 386 was a Compaq
    brand
  • Conclusion
  • Intel could not be insensitive to the
    dynamics of the industry. 80386 chip case was a
    good example of the motivations of possible
    adopters, OEMs, and complementors of the Intel
    chip.
  • Intels response
  • Launched its famous Intel Inside marketing
    campaign to gain some recognition of consumers
    and thus increase its own bargaining power in its
    ecosystem.

21
Intels Rise to Platform Leader
  • PCI bus was a vital event in Intels
    transformation into a platform leader
  • In 1991, IALs first project By sponsoring a
    change in the bus structure (PCI-peripheral
    component inter-connector) and providing a chip
    set that implemented these architectural changes
    in an actual product, Intel achieved its great
    transformation---platform leader
  • Process of this event was full of risks,
    indecisive, iterative and complex
  • Three factors guaranteed the success
  • The technology of PCI is beneficial to the
    majority of PC industry
  • The coalition of IBM
  • The strong back by chip set and motherboard
  • Solving a common problem in a manner that will
    facilitate the realization of ones future plan
    is a key part to platform leadership

22
Intels Strategic Principles For Platform
Leadership
  • After the success of PCI bus project, Intel
    strengthened its platform leadership by careful
    strategic implementation, including three main
    roles
  • Sponsor of systemic architectural innovation
  • Stimulator of external innovation on complements
  • Coordinator of industrial innovation that spanned
    across many firms boundaries
  • All these roles involved inevitably with four
    levers, which are
  • Scope of the firm
  • Product technology
  • Relationship with external complementors
  • Internal organisation
  • These four levers are intertwined, they cant be
    separated

23
Intels Strategic Principles For Platform
Leadership
  • Outline
  • Driving Systemic Architecture Innovation
  • Intels system mindset
  • Building momentum around interface
  • Relinquishing royalties on IP
  • Using public forums to generate momentum and
    refine standards
  • Compliance workshops
  • Creating and distributing enabling tools
  • Stimulating Innovation on Complementary products
  • organisational structure and evolution
  • Coordinating Role
  • Conclusion

24
Intels Strategic Principles For Platform
Leadership
  • Driving systemic architectural innovation
  • In the late 1990s, Intel sponsored several new
    initiatives, including AGP, FireWire, and USB.
    All these innovations benefited the PC
    performance, which manifested the progress of
    microprocessor, the key product of Intel
  • USB has a broader meaning to PCs, and eventually
    to Intel
  • The USB was a new interface linking a PC to
    external devices such as the keyboard, scanner,
    printer, and any new external device, which can
    stimulate new experience of PC, thus create new
    users of PC
  • All innovations lead to a modular architecture
    with open interfaces, which make it possible for
    many companies to participate in the innovation
    process

25
Intels Strategic Principles For Platform
Leadership
  • Intels System Mindset
  • How to improve the system performance and growth
    prospects for PC?
  • Sponsor interface standards
  • These interfaces became the technological
    mechanism for channeling external innovation,
    ensuring platform integrity through compatibility
    of complementary products, and creating an
    industrial consensus on platform technological
    evolution
  • A company can innovate in one layer and not worry
    about what is going on in other layers because we
    have interfaces on either side of them, thus
    break down the cost of innovation
  • Enable small companies, innovative companies make
    smaller investments and yet potentially win a
    large market share in a segment they can own. The
    most important issue is, the more of these
    companies that participate, the broader
    innovation we get.

26
Intels Strategic Principles For Platform
Leadership
  • The benefit
  • If Intel played a key role in designing those
    interfaces, Intel could help this ecosystem
    flourish, and position itself more firmly and
    perhaps permanently at its center
  • Raise the barriers to entry for any company that
    might want to compete directly with the
    Intel-sponsored, industry-backed architecture,
    for example by trying to introduce a new
    microprocessor standard that use different
    technical interfaces.
  • The challenges
  • Vision about the evolution of the PC platform
  • Sense of the business opportunities for potential
    complementors
  • Involved difficult technical choices, the right
    place for being enough robust and lasting for a
    fairly longer time

27
Intels Strategic Principles For Platform
Leadership
  • To achieve this goal, Intel adopted several ways,
    including
  • Building Momentum around Interfaces
  • Lever 3 managing relationship with external
    companies
  • Relinquishing Royalties on Intellectual Property
  • Lever 2 product technology
  • Using Public Forums to Generate Momentum and
    Refine Standards
  • Lever 2 and Lever 3
  • Compliance Workshops The PlugFests
  • Lever 2 and Lever 3
  • Creating and Distributing Enabling Tools
  • Lever 2 and Lever 3

28
Intels Strategic Principles For Platform
Leadership
  • Building Momentum around Interfaces
  • Establishing strategic interest groups and
    gradually building momentum
  • Getting outside firms to support new standards
    requires time, patience and planning.
  • In early phase, Intel initiated relationships
    with a small group of outside firms and brought
    them together in strategic interest groups (SIG)
  • For PCI, there were five companies Intel, DEC,
    Compaq, IBM, and NCR
  • For USB, there were seven companies Intel, DEC,
    Compaq, Microsoft, IBM, Northern Telecom, and NEC
    Technologies
  • SIG Selection Rules
  • Software Microsoft
  • Hardware IBM, HP, Compaq

29
Intels Strategic Principles For Platform
Leadership
  • Reasons
  • Have a long-term commitment to the new
    technology, lend credibility to SIG, and attract
    other firms to the new technology
  • Small group made fast decisions
  • In collaboration with SIG members, Intel designed
    the first features of the new standard
  • Even influential firms like Microsoft and Compaq
    tend to back Intels proposals because they had a
    chance to participate early in the design process
    and to influence the evolution of the standard

30
Intels Strategic Principles For Platform
Leadership
  • Relinquishing Royalties on Intellectual Property
  • Intel did not require potential adopters of the
    interface specifications to pay any fees for use
    of that technology.
  • But Intel usually required companies to agree to
    reciprocal licensing, which created a zone of
    free IPs that covered technological areas in
    which several companies were involved.
  • Reason Buses are enabling technologies
  • Interfaces exist to entice other firms to use
    them to build products that conform to the
    defined standards and thus work efficiently with
    the platform.
  • Enabling technologies channel and facilitate
    complementary innovation, reinforcing the
    architectural leadership of the firm that
    sponsored them

31
Intels Strategic Principles For Platform
Leadership
  • Using Public Forums to Generate Momentum and
    Refine Standards
  • The goal was to create momentum in the industry
    for whatever standard Intel was trying to promote
  • Open up the discussions to larger public
    gatherings, including Development Forums and
    Implementors Forums. Through these forums, Intel
    brought together thousands of ISVs and IHVs, as
    well as the press and analysts. In some terms,
    the latter have a tremendous impacts on momentum.
  • Set up web sites that were used to the exchange
    of questions and answers about the standards
    Intel promoted.
  • The same thing done by Cisco, IBM, Microsoft,
    Sun, Linux, ..All industrial leaders----to
    GENERATE MOMENTUM

32
Intels Strategic Principles For Platform
Leadership
  • Compliance workshops
  • Another type of forum that Intel relied on to
    refine a new standard and help companies develop
    prototypes was compliance workshops, PlugFests
  • The importance of compliance workshops
  • PlugFests are lifeblood in trying to
    create these standards
  • Successful compliance workshops helped create
    legitimacy and popularity for a new standard
    because they demonstrated that companies were
    already committed to designing compatible
    products. They are key part of the process
    through which a new technology supported by one
    or a small group of firms gradually becomes a
    standard.

33
Intels Strategic Principles For Platform
Leadership
  • Creating and distributing enabling tools
  • Another step for IAL to generate momentum and
    refine a new standard, with the cooperation of
    other Intel groups, was to create and disseminate
    technical tools that enabled companies to use the
    new technologies in product development.
  • Intel usually distributed tools like SDKs and
    DDKs (device development kits) by its
    Implementors Forums and Developers Forums, and
    trained people to use them.
  • The development and diffusion of these tools is
    costly. That has a similar economic logic like
    innovation on interfaces by facilitating and
    channeling complementary innovation, these
    enabling tools reinforce the architecture
    leadership of the sponsored company.

34
Intels Strategic Principles For Platform
Leadership
  • Driving Systemic Architecture Innovation
  • Intels system mindset
  • Building momentum around interface
  • Relinquishing royalties on IP
  • Using public forums to generate momentum and
    refine standards
  • Compliance workshops
  • Creating and distributing enabling tools
  • Stimulating Innovation on Complementary products
  • organisational structure and evolution
  • Coordinating role
  • Conclusion

35
Intels Strategic Principles For Platform
Leadership
  • Stimulating Innovation On Complementary Products
  • Three main activities
  • To facilitate complementary innovation, typically
    discloses private information about the design of
    its products as well as computers containing
    prototypes of Intels upcoming chips
  • Send skilled engineers and savvy marketers to
    transfer technical expertise and share knowledge
    about the market
  • Make equity investment in third parties

36
Intels Strategic Principles For Platform
Leadership
  • Organisation structure and organisational
    Evolution
  • Intel Architecture lab (IAL)
  • Worked as a catalyst, to be whatever it takes so
    that new applications emerge or new uses of
    applications emerge taking all of the CPU power
    Intel can produce
  • Content Group, including Developer Relationship
    Group (DRG)
  • Strive to establish good working relationships
    with external software developers
  • Microprocessor Product Group (MPG)
  • Not only defines what the microprocessors are,
    but also defines the market needs that Intel must
    address, and coordinates the collaterals for each
    new microprocessor launch
  • Intel management makes modifications to its
    internal organisation structure almost yearly
    regarding the changes

37
Intels Strategic Principles For Platform
Leadership
  • Coordinating role
  • To deliver some PC capabilities to the end
    user required coordination among different actors
    in the industry.
  • Since PC industry is an ecosystem, the nature of
    innovations required the cooperation of many
    companies in the PC industry. This required
    Intel, more precisely IAL, to take on the key
    role of coordinator and mediator among external
    companies.
  • This required time and patience. It typically
    required three to five years for Intel to fully
    establish a capability in the marketplace.

38
Intels Strategic Principles For Platform
Leadership
  • Conclusion
  • Throughout the review, for being a platform
    leader, the company needs to think about and
    implement four levers in a coordinated fashion.
    Some external constraints or strategic choices on
    some of the levers create specific options for
    the other levers. It is the internal consistency
    of the four levers taken together that can ensure
    a successful platform leadership strategy.
  • The decisions Intel executives made regarding to
    how to allocate internal resources to back up the
    platform leadership strategy belong to lever 4,
    but they are interdependent with other levers.
    Like Content Group and Intel Capital, they are
    also related to lever 1 and lever 3.
  • For example, in the case of USB Intel had to make
    decision about lever1 ---what to do within the
    company, and also about lever 4----organisation
    support -internal support structure

39
Platform Leaders and Complementors
  • How Intel Manages Conflicts of Interest?
  • Through the exploration one can say that the
    difficulties Intel faced are common obstacles on
    the path of any company attempting to pursue
    platform leadership.
  • Key factors Trust and Tensions
  • The ability to convey a long-term commitment to
    cooperative relationship is essential for Intel
    to act effectively as a platform leader.
  • The important role of IAL IAL has acquired a
    reputation as a trustworthy and relatively
    impartial broker of information between Intel and
    third parties. IAL is looking out for the good of
    the overall industry.
  • The role of IAL allows Intel to rally consensus
    among industry players while has a voice
    regarding how specific PC technologies and
    standards evolve.

40
Platform Leaders and Complementors
  • External tensions
  • Intel managers want other companies to innovate,
    but they also want to preserve their abilities to
    diversify and potentially compete in
    complementary markets themselves. Especially,
    when Intel start to compete with current and
    former partners, suppliers, customers.
  • Internal tensions
  • Job 1 refers to all activities aimed at
    strengthening Intels position as the leading
    chip maker. IAL is always doing Job 1.
  • Job 2 refers to activities aimed at building
    successful business in processor related
    technologies. Product Group often does Job 2 or
    explores new businesses, unrelated to processor,
    that might evolve to become new core business for
    Intel in the future.
  • These two Jobs often cause conflicts within Intel

41
Platform Leaders and Complementors
  • External conflicts
  • Platform leader and outside companies have
    different objectives
  • Risk is too big or time horizons clash
  • Platform leaders lead on complementors
  • Platform leaders compete with complementors
  • The sources of conflicts Friends or Foes?
  • Multiple roles, acting as the complementor,
    consumer and competitor at the same time is the
    reason of conflicts
  • What to do about conflicts?
  • Build a reputation for trustworthiness
  • Exert some restraints over scope of activities
  • Take a gradual, low-key approach
  • Keep implementation specifications open though
    not free

42
Platform Leaders and Complementors
  • Internal conflicts
  • Related to differing strategies or time horizons
    among the various groups within the company
  • Assisting complementors conflicts with
    internal-product group
  • The conflicts between IAL and Product Group
  • New investments detract from the platform
    business
  • Intel Capital do Job 1 or Job 2?
  • What to do with conflicts ?
  • Acknowledge conflicts
  • Manage conflicts
  • Create a culture that encourage debates

43
Platform Leaders and Complementors
  • Economic Analysis of the Job 1 and Job 2
    Trade-Off
  • Any company, platform leader or not, needs to be
    on the lookout for potential new business
    opportunities because demand may diminish in its
    own market
  • Counting on external firms to produce all
    necessary complements is not always feasible
  • Platform leader needs to be concerned about
    maintaining enough bargaining power with
    complementors
  • An issue is distribution of overall industry
    profits that is linked to the issue of bargaining
    power between the firm and its complementors.

44
Platform Leaders and Complementors
  • Strategy setting through confrontation and debate
  • Strategic long-range planning meetings
  • Product line business plan meetings
  • Cooperate communications
  • Internal organisationseparate group pursuing Job
    1 AND Job 2
  • keeping the IALs agenda separate from the
    product groups agenda has worked internally as
    well as externally
  • Keep internal tensions alive keep Job 1 and Job
    2
  • Conclusion platform leaders need to balance
    multiple roles

45
Discussing
  • An addition to the book
  • In the late 1980s, Intel consolidated its
    Intellectual Property position in microprocessor
    by terminating cross-licensing agreements with
    other companies and, more importantly, began
    extending its first-mover advantage over rivals
    by accelerating the rate of new products
    introduction. With 1994 sales of 9.85 billion, 1
    billion more than the second largest producer,
    NEC. (Sources of Industrial Leadership by
    Mowery Nelson)
  • Bundling sales in 1999, Intel paid a fine of one
    anti-trust lawsuit proposed by U.S. Trade
    Commission in 2001, EU Anti-Trust organisation
    conducted an investigation about Intels Intel
    inside campaign and ceased in 2002.
  • During the decrease of the desktop market and IT
    industry recession, Intel has entered the laptop
    and mobile technologies markets.
  • Centrino is the first brand that bundled several
    products of Intel and will be introduced to the
    market in March 2003.

46
Discussing(cont.)
  • Centrino included a new type of microprocessor
    called Bania, which can longer the time of
    battery one Intels chip set and several
    specific chips for wireless communications. The
    laptop manufacturer who adopts the whole Intel's
    hardware package can use the brand centrino and
    get large amount of agio, those only adopt
    microprocessor must use the brand of Pentium M.
    HP and Dell sued this unfair proposal but,
    accepted the whole hardware package
  • Centrino is Intels first kind of product
    excluding microprocessor, it has adopted the same
    business model as Intel Inside did
  • One PC manufacturer complained we can get some
    better unbundled components.Intel is trying to
    enter system design further and further, and from
    the perspective of product design and create
    value for customer, Intel narrowed the free space
    of innovation.

47
Discussing(cont.)
  • Behind the brand campaign Intel Inside and the
    coming Centrino, is the thinking standards and
    technologies would change and shift, but brand
    awareness would not.
  • Behind the collaboration and coalition in the
    industry is the ambition to try to provide a
    total solution and make the company transparent
    in order to provide seamless high-quality service
    to customer
  • By homogenizing the innovations by open standards
    and strategic coalitions as well as skillful
    complementors and partner management Intel aims
    at strengthen its own competitive capabilities
    and weaken the comparative strengths of the rivals

48
Discussing
  • New challenge Intel has to face The aligning of
    IBM and AMD
  • ..Better for customer, interesting for industry
    evolution

  • Conclusion
  • Industry perspective
    company perspective

management
Productsservices
technologies
markets
49
Presentation Outline
  • General Introduction to Platform Leadership
  • Case Study Intel
  • gtgtCase Study Microsoft Ciscoltlt
  • Case Study Palm NTT DoCoMo
  • Case Study Linux (Open Source Platforms)
  • Conclusions
  • Views of the book and topic area

50
Outline
  • Microsoft Cisco Introduction
  • Intel vs. Microsoft vs. Cisco in Four Lever
    Strategy
  • Microsoft
  • Microsoft Strategy
  • Platform Evolution
  • Representative Conflicts
  • Leverage of Platform
  • Microsofts Application Business
  • New Platform Strategy
  • Future Prospects--- Risks Endeavors

51
Microsoft Cisco
  • Microsoft is the platform leader in PC operating
    systems and related technologies.
  • Cisco is the platform leader in Internet-based
    networking technology.
  • Like Intel, Microsoft and Cisco have many similar
    strategies in building their platform leadership,
    such as proposing new interface standards or join
    with other firms and try to create standards.
  • Unlike Intel, Microsoft and Cisco have the
    different strategy in their manipulation to the
    four levers of platform leadership.

52
Intel .Vs. Microsoft .Vs. Cisco in Four Lever
Strategy
Intel Microsoft Cisco
1.scope of firm Relied mainly on outside firms Self-produced partnered with other firms Partnered with other firms acquire potential ones
2. product technology Relied on open PC interface Depending on proprietary technology Relied on open Internet or other industry standards
3. relationship with external complementors Establishing TRUST is a key means to preserve the good relationship Competed with competitors and ward off its technology by all means. Cooperate with complementors and acquire the potential ones meanwhile.
4. internal organisation. Separated all the groups clearly Integrated different groups Make separation of many groups
53
Microsoft Strategy
  • Make your own complements
  • No one company could easily change any of the
    hardware or software standards that made up the
    PC in order to satisfy the backward
    compatibility.
  • In order to be compatible with the existing
    software and applications, Windows OS updated
    little by little.
  • Unlike Intel, Microsoft early on in its history
    moved aggressively into producing its own
    complements, applications, such as Excel, Word
    and SQL database system.

54
Microsoft Strategy (cont.)
  • Microsoft dominated a key part of PC platform
    (OS) with a mainly proprietary technology (MS-DOS
    and Windows).
  • Microsoft worked hard to evolve its operating
    system and shared the interface specifications
    openly with potential complementors.
  • Microsoft used the monopoly policy to bundle the
    IE with Windows 95, which finally resulted the
    Antitrust case in 1998.

55
Platform Evolution
  • 1975, Bill Gates founded Microsoft holding the
    business idea to sell the programming languages
    only.
  • 1980, IBM asked Microsoft to develop an OS for
    its new PC. DOS was born and this event made
    Microsoft emerge as the PC software platform
    leader.
  • After 1990, Windows series was introduced by
    Microsoft to the market and quickly Microsoft
    dominated the market.
  • In 2001, Windows XP came out. It was the first
    stage of Microsoft to dominate the mass-market OS
    bundled with various Internet-related
    technologies within the new OS.

56
Representative Conflicts
Event Result
Microsoft Sun 1997, Sun sued Microsoft as Microsoft violated Suns licensing terms. The final settlement reached in 2001, Microsoft lost the case, paid Sun 20 million and broke off with Sun.
Microsoft Kodak Microsoft worked with Kodak for its printing technology used in XP and then adopted this technology as its default standards and discard Kodak totally. Microsoft relented and changed the feature in a later version of XP.
57
Leverage of Platform
  • Open but Not Open Platform Interface
  • Compatibility
  • Technical lock-in
  • Open standard
  • Microsoft controls the DOS and later the Windows
    design and future evolution
  • To Competitors
  • Quickly incremental updating
  • Quickly release the new products
  • To Users
  • Force users to upgrade their applications
  • Force users to upgrade their machines

58
Microsofts Application Business
  • Early and aggressive movement from OS into
    Applications
  • DOS core (bought in 1980)
    Incrementally innovated to Windows
  • First application for PC, Flight Simulator
    (bought in 1980)

  • Incrementally innovated to other applications
  • Office, spreadsheet and word application
    (copied from others)
  • Incrementally
    innovated to Word and Excel.
  • Bundling

59
Microsofts Application Business (cont.)
  • Close integration of application and system
    groups
  • Know each other inside Microsoft
  • Avoid competition with competitors
  • Enabling tools and technologies
  • Promote standards
  • Provide enabling technologies to application
    developers

60
New Platform Strategy
  • In mid-2000, Microsoft announced a five-year plan
    to merge Windows, applications and Internet into
    Microsoft.Net.
  • New product and tools portfolio (three core
    components)
  • .Net software platform infrastructure and tool
    set for building applications
  • .Net services for users
  • .Net services or Web-based applications that
    Microsoft expected partner companies to provide

61
Future Prospects--- Risks Endeavors
  • Risks
  • There is no guarantee that the 4.5 million
    Windows developers and users around the world
    would follow Microsofts lead.
  • Many kinds of other alternative technologies
    could do what Microsoft promised to do using .NET
    technology.
  • Microsoft has no reputation to ensure that its
    complementors have successful business.
  • Endeavors
  • Restructured and shuffled the executives in 2000.
  • Set the plan to take a huge investments (around
    20 billion solely on .NET development work).
  • Try to make .NET framework relatively easy for
    developers and customers to convert in order to
    gain followers.
  • Cooperate with Intel to provide the necessary
    service for .NET technology.

62
Cisco
  • Outline
  • Cisco Introduction
  • Strategy Evolution
  • Four Elements in Ciscos Strategy
  • Ciscos strategy for platform leadership
  • Ciscos Acquisitions in 2000
  • Incremental Platform Evolution
  • Partnership with Complementors and Competitors
  • Ciscos Internal organisation
  • Future Prospect for Ciscos Strategy
  • Conclusion

63
Cisco Introduction
  • Cisco is platform leader as it provides
    infrastructure hardware and software behind the
    Internet.
  • Cisco was created in 1984. Originally, it was
    only a router provider.
  • Later, it became the Internet communication
    equipment (router, switch, etc.) and the combined
    software provider.
  • Cisco calls its basic software IOS for
    Internetworking Operating System.
  • Cisco has many competitors, such as Lucent,
    Nortel, Juniper, etc.

64
Strategy Evolution
  • Ciscos founding principle is customer-oriented.
  • In early 1990s, Cisco began to acquire
    complementary technologies to enrich its
    insufficient resources of developing full network
    technology.

65
Four Elements in Ciscos Strategy
66
Ciscos strategy for platform leadership
--- Enclosure movement
  • In 1993, Cisco acquired Crescendo and entered the
    switch market successfully.
  • Acquisition Teams in Cisco are in charge of
    evaluating the target acquisition through a set
    of criteria.
  • After 1996, Cisco shifted focus to cable boxes,
    modems and even wireless LANs in 2000 through
    acquisition.
  • Between 1993 and 2000, Cisco acquired more than
    71 companies spending more than 20 billion.
  • Each acquisition usually makes a new product line
    in Cisco.

67
Ciscos Acquitions in 2000
Company Month Price (in millions of dollars) Technology
ArrowPoint Communication May 5700 Content networking
SightPath March 800 Software management of web content
Qeyton Systems May 800 Optical networking software
Altiga Networks Jan 567 Consulting service, virtual private networks
68
Incremental Platform Evolution ---
IOS Software as Glue
  • IOS benefits
  • IOS glues different networking technologies
    together
  • IOS is the de facto Cisco platform rather than
    the Internet router
  • IOS software could seamlessly link heterogeneous
    media and devices across the broadest set of
    protocols
  • IOS limitations
  • IOS is the hodgepodge of code from different
    products and networking protocols
  • IOS is open but not open platform technology

69
Partnership with Complementors and Competitors
  • In 1990s, Cisco allied with manufacturers of Hub
    devices, such as DEC.
  • In 1994, Cisco allied with HP of the ATM
    products.
  • In 1998, Cisco allied with Compaq to devise
    standards for allowing network administrators to
    use any Web browser to manage different networks.
  • In 1999, Cisco allied with Motorola to develop
    wireless Internet access.
  • In 2000, Cisco allied with Oracle to develop
    e-business infrastructure.

70
Ciscos Internal organisation
  • 1994, Cisco was decentralized into five different
    units according to the main product line.
  • 1996, Cisco reorganized around three lines of
    business enterprise, small/medium businesses and
    service providers.
  • In 2001, Cisco reorganized again into eleven new
    groups based on key technologies, led by Internet
    switching, optical networking and wireless
    products.

71
Future Prospect for Ciscos Strategy
  • Problem 1 vast number of acquisitions had not
    been enough to keep the company at the leading
    edge of key networking technology.
  • Problem 2 how far could Cisco continue to push
    its acquisitions strategy?
  • Problem 3 internal tension may baffle its
    acquisition or partnership strategy.
  • Problem 4 too many segments of products may
    decrease its influence as the platform leader in
    market.
  • Problem 5 IOS technology

72
Postscript (Ciscos acquisition in 2003)
  • In Jan. 2003, Cisco spent 154 million to acquire
    Okena company, entering the network security
    market.
  • In Jan. 2003, Cisco Asian area spokesman
    announced Cisco will provide wireless LAN
    solution this year through allying with the
    partners.

73
Conclusion
  • From Intel, Microsoft and Cisco examples we know
    that there is no one formula for platform
    leadership to follow.
  • Intel relied on the complementors for its
    microprocessor platform leadership, Microsoft
    relied on proprietary technology for its software
    platform, whereas Cisco relied much on
    acquisition and partnership on its networking
    technology platform leadership.
  • But, it is true that every industry and
    technology has its own characteristics, we will
    see again in the following cases companies that
    what those platform wannabes do to learn from
    them.

74
Presentation Outline
  • General Introduction to Platform Leadership
  • Outline of the book structure and contents
  • Case Study Intel
  • Case Study Microsoft Cisco
  • gtgtCase Study Palm NTT DoCoMoltlt
  • Case Study Linux (Open Source Platforms)
  • Conclusions
  • Views of the book and topic area

75
The Palm
  • Outline
  • The Palm Strategy
  • Establishing a market for the Palm Pilot
  • Emerges in the PDA segment
  • Palms response
  • Facilitating external innovations
  • Future prospects for Palms platform strategy

76
The Palm Strategy
  • 12 million handhelds sold 2001, expected to grow
    to near 34 million by 2004.
  • Palm had more than 70 of global share for its
    hardware services.
  • The PDA device and its operating system Palm OS
    made up the platform.
  • The platform needs the following complements
  • Software applications
  • Wireless services

77
The Palm Strategy (Cont.)
  • Palm executives pursued two related activities
  • Facilitate complementary innovations at outside
    firms by providing
  • Interface information
  • Technical assistance
  • Financial assistance
  • Goal was to help thousands of external software
    developers write applications that enhance the
    value of Palms hardware and operating system
    software.
  • Increase the market for devices running Palm OS.
  • Licensing the operating system to competitors as
    well as partners.

78
Establishing a market for the Palm Pilot
  • Founded by Jeff Hawkin Donna Dubinsky 1992.
  • Goal Develop software applications for the
    fledgling handheld device market.
  • Handheld market had started with resounding flop
  • In 1993 Apple failed in its attempt to sell its
    own handheld, the Newton.
  • In the same year Palm introduced a product called
    the Zoomer, which was built in collaboration with
    Casio, GeoWorks and Tandy.
  • The Zoomer sold only 15 000 units, but Palm
    learned much from that experience.

79
Establishing a market for the Palm Pilot (Cont.)
  • The essentials of the PDA platform
  • Simpler features
  • Lower price
  • Better handwriting recognition
  • Connection with the PC through a one-button
    synchronization
  • Palm made its brilliant second debut in 1996
    with the launch of the Palm Pilot 1000 and Palm
    Pilot 5000.
  • In the end of 1996 the Palm owned 51 percent of
    the nascent PDA market

80
Establishing a market for the Palm Pilot (Cont.)
  • The Palm Pilot certainly was not a substitute for
    the PC.
  • This position allowed Palm to avoid attracting
    too much of Microsofts attention in the handheld
    space.
  • The philosophy was to keep a low profile so that
    Microsoft would not see Palm as a dangerous
    competitor.
  • Palm managers did not advertise capabilities of
    their product before a PDA mass market emerged.
  • But Palm engineers must have viewed their
    operating system as a potential platform from the
    beginning and expected outside developers and
    partners to help it evolve.
  • The Palm Pilot sold some million units in 1996
    and 1997.
  • The PDA mass market was a reality
  • Potentially large profits in this business

81
Emerges in the PDA segment
  • Profitable businesses attract attention and real
    competition entered the PDA arena.
  • Microsoft noticed Palms success and renewed
    their efforts to improve the cut-down version of
    Windows.
  • Microsoft developed relationships with various
    hardware makers, like HP and Compaq.
  • Pocket PC operating system ran a version of
    Windows and therefore could use modified Windows
    application as well as offer the familiar Windows
    user interface.
  • Application developers could use many of same
    user interface code and programming techniques as
    they did for Windows applications.
  • Pocket PC also included many popular
    applications, like media player and games.

82
Emerges in the PDA segment (Cont.)
  • Handsprings Visor
  • A low priced version of the Palm Pilot that used
    Palm OS.
  • Included
  • Digital camera, radio, data synchronize via a USB
    connection (Palm Pilot used a serial port)
  • Palm cut prices on its products, suggesting that
    Handspring had taken the lead in defining price
    points for PDAs as well as hardware design.
  • Platform leadership is weakened if external
    innovations do not reinforce demand for the
    product or if the product loses its edge over a
    competing product.

83
Emerges in the PDA segment (Cont.)
  • Symbian from UK was trying to make Psions
    operating system (EPOC) a platform for
    Web-surfing handheld computers and cell phones.
  • Symbian members licensed EPOC from Psion.
  • More than any other PDA operating system, EPOC
    seems well
  • positioned to be the operating system of choice
    for the converging worlds of handhelds and
    wireless phones.
  • Major investors are Nokia, Motorola, Ericsson and
    Matsushita.

84
Palms response
  • Palm reacted to Microsofts new entry by not
    reacting.
  • Executives continued to act as if they would
    sustain their position as the industry leader.
  • Set the agenda and drive the industry.
  • How can the Palm do that ?
  • Large market share
  • Successful product
  • Architecture
  • Features
  • Technology

85
Palms response (Cont.)
  • Palms leaders understood that attractive
    software applications would augment the value of
    the Palm Pilot.
  • Palm began to provide developers with software
    tools useful in creating complementary software
    applications that ran on Palm OS.
  • Palm published the source code for the bundled
    applications with the SDK (released in 1996).
  • An open architecture that allows external,
    complementary innovation.
  • Relationships with external developers to
    stimulate these innovations.
  • Mobilize complementors and to suggest new users
    for its platforms.
  • Palm.net
  • Wireless Internet connections available.
  • Getting functionally closer to wireless phones.
  • At the same time wireless phones were evolving to
    resemble PDAs.

86
Facilitating external innovations
  • Palm provided a full set of software development
    tools to outside companies to help them build
    applications.
  • Goal was to provide a programming interface (API)
    for the key technologies in Palm OS.
  • Applications would work with PC as well as
    Macintosh.
  • Palm created formal and informal mechanisms to
    stabilize its interface standards and facilitate
    technical exchanges and business dealings.
  • Community of users
  • Where developers and end users exchanged
    information.

87
Facilitating external innovations (Cont.)
  • Outside companies do most of innovations.
  • In 2001 Palm had
  • 145 000 external software developers.
  • A dozen of e-reading programs.
  • Thousands of e-books.
  • Programs that can read and edit Microsoft Word
    and Excel files.
  • Database programs
  • Hundreds of games
  • Financial management programs.
  • Tools that allow users to customize their own
    Palm OS programs.
  • and so on..

88
Facilitating external innovations (Cont.)
  • Over 500 hardware developers.
  • Keyboards
  • Voice recorders
  • Digital cameras
  • Global positioning programs (GPS)
  • Wireless connection systems.
  • Palms goal was to convince outside companies to
    invest their skills, talents and energy into
    creating products optimized to the Palm OS
    platform.
  • Palm sought out agreements with potential
    complementors and made alliance with
  • Nokia, Sony, Motorola, IBM

89
Future prospects for Palms platform strategy
  • How to maximize chances of success
  • Be patient, dont try to be a platform leader
    before your product has gained mass-market
    acceptance.
  • Effort and public relations to attract
  • License, Support, Subsidize partners and
    Complementors
  • Maintain a low profile in the early days of
    market development and focus on designing a
    product that people want to buy.
  • It takes time to earn the trust of applications
    developers.
  • A platform strategy is not substitute for a
    product strategy.
  • For a platform strategy to work, the mass market
    has to adopt the product in large numbers.
  • Depends on having features and prices suitable
    for the mass market.

90
Future prospects for Palms platform strategy
(Cont.)
  • It is possible to evolve from leadership in
    hardware or product design to leadership in
    software.
  • Palm decided to license its operating system to
    competitors in the hardware space such as
    Handspring and Sony.
  • Palm could make more money from software and
    services, rather than from hardware.
  • Palm did not yet have such a strong position with
    its operating system.
  • Microsofts Pocket PC and Symbians EPOC remained
    viable competitors, particularly because the
    market for PDAs was still in an early stage.

91
Future prospects for Palms platform strategy
(Cont.)
  • A platform leader should maintain architectural
    control over its platform.
  • Handspring seemed to be the leader in hardware
    architecture.
  • Despite aggressive policy of licensing Palm OS
    even to competitors, Palm might not have created
    enough barriers to entry in its own core
    business.
  • Challenges were coming both from within Palms
    ecosystem and from other software platform
    producers
  • Competing devices (Handspring and Sony)
  • Operating systems and hardware (Microsoft and
    Symbian)
  • Nokia and other cell-phone giants were also
    entering the PDA battlefield with hybrid cell
    phones.

92
Future prospects for Palms platform strategy
(Cont.)
  • Managers need to prepare for multiple scenarios
    and develop an aggressive strategy to promote the
    outcome they favor.
  • Three possible scenarios
  • A convergent device would win out over a
    single-purpose device.
  • The operating system that best handled Web phones
    functionality would probably become the
    dominant software platform.
  • Symbian EPOC software seemed to have a technical
    and strategy edge here, given the support it had
    from cell-phone giants such as Nokia and Motorola.

93
Future prospects for Palms platform strategy
(Cont.)
  • Users would prefer handheld devices that
    substitute for their PCs and performed other
    functions, such as wireless telephony and
    PDA-Tasks.
  • Microsofts Pocket PC, the software acts like a
    small PC.
  • Users would prefer specialized devices.
  • Continue to carry separate cell phones, PDAs and
    small PCs.
  • Multiple platform leaders.

94
The NTT DoCoMo
  • Outline
  • The NTT DoCoMo Strategy
  • The i-mode Technology platform
  • i-mode Structure
  • Standards battles in Wireless Transmission
    Technologies
  • The i-mode Business Model
  • The i-mode Content and Delivery Process
  • Attracting Third-Party Complementors
  • DoCoMos Globalization Strategy
  • Future Prospects for DoCoMos Platform Strategy

95
The NTT DoCoMo Strategy
  • In 2001, DoCoMo was
  • The worlds largest provider of internet-based
    mobile wireless services .
  • Japans largest company in terms of market
    capitalization.
  • And they have 21 million users and another
    300,000 new users signing up each week.
  • NTT DoCoMo became a market leader in Japan by
    focusing on three areas
  • The technology platform
  • A new business model
  • Unique content
  • DoCoMo was a platform leader in Japan and
    platform leader wannabe in the rest of the world.

96
The NTT DoCoMo Strategy (Cont.)
  • i-mode Internet service
  • An instantly accessible
  • Always-on
  • Japanese used their i-mode phones to
  • Surf Websites
  • Exchange e-mails or photographs (now also video
    files)
  • Download their horoscopes
  • Play popular Japanese cartoon characters

97
The i-mode Technology platform
  • Consisted of two standards for creating content
    and for transmitting data wirelessly
  • An application programming language for
    small-screen Web device (c-HTML).
  • A data transmission standard (PDC PHS
    W-CDMA).
  • c-HTML compact HTML
  • Content providers had to use c-HTML.
  • Similarly to HTML, it is easy for developers to
    write applications.

98
The i-mode Technology platform (Cont.)
  • Data transmission standard
  • PDC/PHS packet-switching technology, sends data
    9.6 kilobytes per second.
  • W-CDMA (3G) data transmission standard 2
    megabytes per second (will be the future
    standard).
  • Packet-based transmission allowed to offer
  • 24 hours online a day
  • Paid only for each packet of data what user sent
    or received.
  • GSM phones required a dedicated-line connection
    or circuit each time a user wanted to access to a
    service.

99
i-mode Structure
http//www.nttdocomo.co.jp/english/p_s/imode/
100
Standards battles in Wireless Transmission
Technologies
  • The late 1990s and early 2000s was battle of the
    standards
  • The standard that emerged would be global.
  • Operators want their customers to be able to use
    their phones around the world.
  • Equipment and content vendors had to choose one
    standard or set up to handle multiple standards.
  • Which standard would win, was by no means clear
    in 2001.
  • Three optional modes
  • W-CDMA
  • cdma2000
  • TDMA

101
The i-mode Business Model
  • Business model began with the companys strategy
    for content.
  • DoCoMo maintained a complete control over which
    devices i-mode subscribers could use.
  • Developers designed applications only for one,
    rather than for the larger number of screen forms
    possible with WAP devices.
  • WAP developers had to support the lowest common
    dominator among screen form factors because they
    were never sure which device a customer might be
    using.
  • i-mode content developers followed one standard,
    which offered a rela
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