Platform ecosystem

Last updated

Many markets are structured as platform ecosystems, they can be open or closed platforms, where a stable core (such as a smartphone operating system or a music streaming service) mediates the relationship between a wide range of complements (like apps, games or songs) and prospective end-users. [1]

Contents

Overview

The word “ecosystem” comes from biology and is a contraction of “ecological system”; it refers to a system in which entities have some degree of mutual dependence. In a platform ecosystem, the value created by each member influences the value created by others. Because a robust and high-quality ecosystem of complements attracts more customers, complements need each other even though they might also be competing against each other. [2] [3] [4]

A platform’s boundaries can be well-defined with a stable set of members dedicated wholly to that platform, or they can be amorphous and changing, with members entering and exiting freely, and participating in multiple platforms simultaneously. For example, consider the difference between the television/movie streaming services HBO on Demand and Amazon Prime. HBO on Demand exists to serve only HBO content up to consumers. The shows available are tightly controlled, and there is limited entry and exit of show producers. The Amazon Prime ecosystem is much more open. In fact, just about any content producer – including individual independent filmmakers – can make their content available on Amazon Prime.

In many platform ecosystems, there are switching costs that make it difficult or costly to change ecosystems. Platforms and their complements often invest in co-specialization or sign exclusivity agreements that bind them into stickier, longer-term relationships than the market contracts used in typical reseller arrangements. A video game that has been made for the Microsoft Xbox, for example, can only be played on a PlayStation console unless a new version of it is made (and the game producer may have signed a contract with Microsoft that prohibits this). A platform ecosystem is thus characterized by relationships that are neither as independent as arms-length market contracts, nor as dependent as those within a hierarchical organization. It is, in essence, a hybrid organizational form. [1] It strikes a compromise between the loose coupling of a purely modular system and the tight coupling of a traditional integrated product. [5] It enables customers to mix and match some components and complements, while still enabling some co-specialization and curation of the complements and components available for the system. In ecosystems, gaining the support and approval of the other members and legitimacy matters, as the very concept of an ecosystem is based on the idea that every organism is interdependent on other organisms within the system and gaining acceptance from powerful actors is therefore crucial. [6]

Example

Video game systems are an iconic example of platform ecosystems. Consoles need to launch with high-quality games. Since it is difficult to induce game developers to make games for a console that has not yet been widely adopted, most game console producers must produce games themselves (or subsidize their production) to ensure that high-quality games are available when the console launches. On the other hand, end users want more games than just those produced by the console producer, so console producers like Microsoft, Sony, and Nintendo also license third-party developers to produce games for their consoles. They carefully screen the licensed games for quality and compatibility, and they may require the game developers to sign exclusivity agreements or to customize the games for the console.

Platform ecosystem as parallel conversations

Platform, ecosystem, and particularly "platform ecosystem" is a disputed term in information systems, organizational management, and technology and innovation research Jochem Hummel said on 21 February 2020 in a lecture of the Digital Business Strategy postgraduate module at Warwick Business School. "Different researchers mean different things when referring to platform ecosystems," Jochem said, "creating parallel conversations." Similar comments were raised by Melissa Schilling on 30 November 2017 in a symposium titled 'A Multi-Disciplinary Perspective on Platform Ecosystems Research.' [7] Melissa argued that almost every website was nowadays called a platform, with an ecosystem where users could choose between buying products or services from different vendors. "Does this mean McDonalds is a platform ecosystem?", she asked the other panelists. Since 2017, the consensus has emerged among scholars that platforms ecosystems typically require the involvement of in some way or another digital technology. This may have triggered the term to become less popular as scholars started using the term 'digital platform' or 'digital platform ecosystems' instead popularized through, for example, the 2018 'Special Issue: Digital Infrastructure and Platforms' in Information Systems Research. [8]

Digital platform ecosystem

The emergence of digital platform ecosystems, [9] which are dominating the market, has been made possible by the hybridization of digital technologies. [10] These platforms are a combination of products, services, and digital technologies developed by one or more companies, forming a technological foundation on which other companies can build complementary products and services, generating network effects. The "Big Five" companies, including Facebook, Apple, Microsoft, Google, and Amazon, are prime examples of digital platform ecosystems. The concept of a digital platform is closely related to that of an ecosystem, referring to the population of actors that collaborate with the platform sponsor to co-create value. [11] From a systemic dimension, it is possible to identify four categories of actors characterizing the digital platform ecosystem: the platform sponsor, the platform provider, complementors (supply-side) and users (demand-side) [12]

The sponsor of a digital platform ecosystem is responsible for designing and owning the intellectual property rights of the platform. They establish the components, rules, and architecture [13] of the platform. Apple, for instance, is the platform sponsor of its renowned Apple platform. The users of the platform are the consumers who use the services offered, while the content and application developers, known as complementors, are the supply-side users. Examples of such developers are WhatsApp Inc., Deliveroo, Uber, and Car2go, which provide items like music, games, and information. The platform provider, who is usually the platform sponsor, serves as the contact point for all users of the digital platform ecosystem, providing the platform's core technologies. The interactions among the actors in digital platform ecosystems result in co-created value through various digital algorithms, [14] enabling the platform to quickly connect both sides of the market and facilitate complementary innovations.

Put it differently, the platform sponsor plays a critical role in designing digital platforms' algorithms, taking into account four essential factors from a structural perspective: shared standards, rules of participation, degree of openness, and direct and indirect network effects. Shared standards are the first critical element that offers clarity for how digital platform components interact. The second element is the rules of participation that are essential to make digital platform ecosystems work effectively. The third element is the degree of openness, which involves decisions on how much core technology to share with the complementors, which actors can participate in the platform, and the compatibility of the innovation platform with other complementary and substitutive digital platforms. Lastly, network effect dynamics imply that each additional user makes the platform more valuable to every other user on the same or the other side, known as same-side and cross-side network effects. [15]

To understand the purpose of digital platforms, there are three distinct types of platforms: transaction platforms, innovation platforms, and hybrid platforms. [16] Transaction platforms are designed to facilitate transactions and interactions within the market side, such as Twitter, Uber, Airbnb, Amazon Marketplace, Alibaba, and LinkedIn. On the other hand, innovation platforms provide a technological foundation for complementors to create new complementary innovations. [17] Examples of innovation platforms are Xiaomi Miui, Apple iOS, Google Android, Nintendo, Sony PlayStation, and Amazon Web Services. Lastly, hybrid platforms combine both transaction and innovation functions, [17] like Amazon, which offers a marketplace for transactions and web services for innovation.

See also

Related Research Articles

<span class="mw-page-title-main">Video game</span> Electronic game with user interface and visual feedback

A video game, also known as a computer game or just a game, is an electronic game that involves interaction with a user interface or input device to generate visual feedback from a display device, most commonly shown in a video format on a television set, computer monitor, flat-panel display or touchscreen on handheld devices, or a virtual reality headset. Most modern video games are audiovisual, with audio complement delivered through speakers or headphones, and sometimes also with other types of sensory feedback. Some video games also allow microphone and webcam inputs for in-game chatting and livestreaming.

<span class="mw-page-title-main">History of video games</span>

The history of video games began in the 1950s and 1960s as computer scientists began designing simple games and simulations on minicomputers and mainframes. Spacewar! was developed by Massachusetts Institute of Technology (MIT) student hobbyists in 1962 as one of the first such games on a video display. The first consumer video game hardware was released in the early 1970s. The first home video game console was the Magnavox Odyssey, and the first arcade video games were Computer Space and Pong. After its home console conversions, numerous companies sprang up to capture Pong's success in both the arcade and the home by cloning the game, causing a series of boom and bust cycles due to oversaturation and lack of innovation.

<span class="mw-page-title-main">Video game console</span> Computer system for running video games

A video game console is an electronic device that outputs a video signal or image to display a video game that can be played with a game controller. These may be home consoles, which are generally placed in a permanent location connected to a television or other display devices and controlled with a separate game controller, or handheld consoles, which include their own display unit and controller functions built into the unit and which can be played anywhere. Hybrid consoles combine elements of both home and handheld consoles.

A game engine is a software framework primarily designed for the development of video games and generally includes relevant libraries and support programs such as a level editor. The "engine" terminology is akin to the term "software engine" used more widely in the software industry.

A closed platform, walled garden, or closed ecosystem is a software system wherein the carrier or service provider has control over applications, content, and/or media, and restricts convenient access to non-approved applicants or content. This is in contrast to an open platform, wherein consumers generally have unrestricted access to applications and content.

Game programming, a subset of game development, is the software development of video games. Game programming requires substantial skill in software engineering and computer programming in a given language, as well as specialization in one or more of the following areas: simulation, computer graphics, artificial intelligence, physics, audio programming, and input. For multiplayer games, knowledge of network programming is required. In some genres, e.g. fighting games, advanced network programming is often demanded, as the netcode and its properties are considered by players and critics to be some of the most important metrics of the game's quality. For massively multiplayer online games (MMOGs), even further knowledge of database programming and advanced networking programming are required. Though often engaged in by professional game programmers, there is a thriving scene of independent developers who lack a relationship with a publishing company.

A technology evangelist is a person who builds a critical mass of support for a given technology, and then establishes it as a technical standard in a market that is subject to network effects. The word evangelism is borrowed from the context of religious evangelism due to the similarity of sharing information about a particular concept with the intention of having others adopt that concept. This is typically accomplished by showcasing the potential uses and benefits of a technology to help others understand how they can use it for themselves.

Open innovation is a term used to promote an Information Age mindset toward innovation that runs counter to the secrecy and silo mentality of traditional corporate research labs. The benefits and driving forces behind increased openness have been noted and discussed as far back as the 1960s, especially as it pertains to interfirm cooperation in R&D. Use of the term 'open innovation' in reference to the increasing embrace of external cooperation in a complex world has been promoted in particular by Henry Chesbrough, adjunct professor and faculty director of the Center for Open Innovation of the Haas School of Business at the University of California, and Maire Tecnimont Chair of Open Innovation at Luiss.

Xbox Games Store was a digital distribution platform previously used by Microsoft's Xbox 360 video game console and formerly by the Xbox One. The service allowed users to download or purchase video games, add-ons for existing games, game demos along with other miscellaneous content such as gamer pictures and Dashboard themes.

A two-sided market, also called a two-sided network, is an intermediary economic platform having two distinct user groups that provide each other with network benefits. The organization that creates value primarily by enabling direct interactions between two distinct types of affiliated customers is called a multi-sided platform. This concept of two-sided markets has been mainly theorised by the French economists Jean Tirole and Jean-Charles Rochet and Americans Geoffrey G Parker and Marshall Van Alstyne.

<span class="mw-page-title-main">Virtual assistant</span> Software agent

A virtual assistant (VA) is a software agent that can perform a range of tasks or services for a user based on user input such as commands or questions, including verbal ones. Such technologies often incorporate chatbot capabilities to simulate human conversation, such as via online chat, to facilitate interaction with their users. The interaction may be via text, graphical interface, or voice - as some virtual assistants are able to interpret human speech and respond via synthesized voices.

Platform evangelism is the application of technology evangelism to a multi-sided platform. It seeks to accelerate the growth of a platform's commercial ecosystem of complementary goods, created by independent developers, as a means to the end of maximizing the platform's market share. This initiative focuses on providing developers the resources to innovate, participate, and provide feedback to grow the platform.

Cloud gaming, sometimes called gaming on demand or game streaming, is a type of online gaming that runs video games on remote servers and streams the game's output directly to a user's device, or more colloquially, playing a game remotely from a cloud. It contrasts with traditional means of gaming, wherein a game is run locally on a user's video game console, personal computer, or mobile device.

In the video game industry, digital distribution is the process of delivering video game content as digital information, without the exchange or purchase of new physical media such as ROM cartridges, magnetic storage, optical discs and flash memory cards. This process has existed since the early 1980s, but it was only with network advancements in bandwidth capabilities in the early 2000s that digital distribution became more prominent as a method of selling games. Currently, the process is dominated by online distribution over broadband Internet.

A mobile application or app is a computer program or software application designed to run on a mobile device such as a phone, tablet, or watch. Mobile applications often stand in contrast to desktop applications which are designed to run on desktop computers, and web applications which run in mobile web browsers rather than directly on the mobile device.

<span class="mw-page-title-main">Geoffrey G. Parker</span> American economist

Geoffrey G Parker is a scholar whose work focuses on distributed innovation, energy markets, and the economics of information. He co-developed the theory of two-sided markets with Marshall Van Alstyne.

<span class="mw-page-title-main">Cross-platform play</span> Ability of players using different video game systems to play with each other simultaneously

In video games with online gaming functionality, also called cross-compatible play, cross-platform play, crossplay, or cross-play describes the ability of players using different video game hardware to play with each other simultaneously. It is commonly applied to the ability for players using a game on a specific video game console to play alongside a player on a different hardware platform such as another console or a computer. A related concept is cross-save, where the player's progress in a game is stored in separate servers, and can be continued in the game but on a different hardware platform.

<span class="mw-page-title-main">Platform economy</span> Economic and social activity facilitated by technological platforms

The platform economy is a name used for certain types of economic and social activities facilitated by platforms, typical such activities being online sales or technology frameworks. Platform businesses control an increasing share of the world's economy and sometimes disrupt traditional businesses.

A digital platform is a software-based online infrastructure that facilitates user interactions and transactions.

Annabelle Gawer is a French-born British business theorist whose research concerns digital platforms. Born in France, and educated in France and the US, she works in the UK as Chaired Professor in Digital Economy and director of the Surrey Centre of Digital Economy at the University of Surrey.

References

  1. 1 2 Rietveld, J., Schilling, MA, & Bellavitis, C. (2019-01-14). "Platform strategy: Managing ecosystem value through selective promotion of complements". Organization Science. 30 (6): 1232–1251. doi: 10.1287/orsc.2019.1290 . SSRN   3061424.{{cite journal}}: CS1 maint: multiple names: authors list (link)
  2. ↑ Jacobides MG, Cennamo C, Gawer A (2018). "Towards a theory of ecosystems" (PDF). Strategic Management Journal. 39 (8): 2255–2276. doi: 10.1002/smj.2904 . S2CID   59432126.
  3. ↑ Ceccagnoli M, Forman C, Huang P, Wu DJ (2012). "Cocreation of values in a platform ecosystem: The case of enterprise software". MIS Quarterly. 36 (1): 263–290. doi:10.2307/41410417. JSTOR   41410417. S2CID   8009863.
  4. ↑ Schilling, MA (2019). Strategic Management of Technological Innovation (6th ed.). Boston: McGraw Hill.
  5. ↑ Schilling, M.A. (2000). "Towards a general modular systems theory and its application to inter-firm product modularity". Academy of Management Review. 25 (2): 312–334. doi:10.5465/amr.2000.3312918.
  6. ↑ Khanagha S, Ansari S, Paroutis S, Oviedo L (2020). "Mutualism and the Dynamics of New Platform Creation: A Study of Cisco and Fog computing". Strategic Management Journal. 43 (3): 476–506. doi: 10.1002/smj.3147 .
  7. ↑ Rietveld, Joost; Tee, Richard; Schilling, Melissa; Boudreau, Kevin; Nambisan, Satish; Suarez, Fernando; Van Alstyne, Marshall (2018). "A Multi-Disciplinary Perspective on Platform Ecosystems Research". Academy of Management Proceedings. 2017: 13774. doi:10.5465/AMBPP.2017.13774symposium.
  8. ↑ Constantinides, Panos; Henfridsson, Ola; Parker, Geoffrey G. (2018). "Special Issue: Digital Infrastructure and Platforms". Information Systems Research. 29 (2): 381–519. doi: 10.1287/isre.2018.0794 . Retrieved 21 February 2020.
  9. ↑ Parker, Geoffrey; Van Alstyne, Marshall (2010-06-07). "Innovation, openness & platform control". Proceedings of the 11th ACM conference on Electronic commerce. EC '10. New York, NY, USA: Association for Computing Machinery. pp. 95–96. doi:10.1145/1807342.1807357. ISBN   978-1-60558-822-3. S2CID   2098592.
  10. ↑ Evans, David S. (2003-09-01). "Some Empirical Aspects of Multi-sided Platform Industries". Review of Network Economics. 2 (3). doi: 10.2202/1446-9022.1026 . ISSN   1446-9022. S2CID   154056938.
  11. ↑ Ozalp, Hakan; Cennamo, Carmelo; Gawer, Annabelle (November 2018). "Disruption in Platform-Based Ecosystems". Journal of Management Studies. 55 (7): 1203–1241. doi:10.1111/joms.12351. ISSN   0022-2380. S2CID   158157172.
  12. ↑ Calabrese, Mario (2020). "Business platform ecosystem: Un nuovo modello organizzativo per l'innovazione sostenibile". Corporate Governance and Research & Development Studies (2): 53–75. doi:10.3280/cgrds2-2020oa10563. S2CID   234051907.
  13. ↑ Hauptman, Oscar (September 2003). "Platform Leadership: How Intel, Microsoft, and Cisco Drive Industry Innovation". Innovation. 5 (1): 91–94. doi:10.5172/impp.2003.5.1.91. ISSN   1447-9338. S2CID   14785362.
  14. ↑ Dijck, José van; Poell, Thomas; Waal, Martijn de (2018-10-02). The Platform Society: Public Values in a Connective World. Oxford University Press. ISBN   978-0-19-088978-4.
  15. ↑ Tiwana, Amrit (2014), "Platform Governance", Platform Ecosystems, Elsevier, pp. 117–151, doi:10.1016/b978-0-12-408066-9.00006-0, ISBN   9780124080669 , retrieved 2023-04-23
  16. ↑ Malherbe, Magali; Simon, Fanny (2021). "The Business of Platforms: Strategy in the Age of Digital Competition, Innovation, and Power, Michael A. Cusumano, Annabelle Gawer, David B. Yoffie. HarperCollins, 2019, 320p". Management International. 25: 240. doi: 10.7202/1088148ar . ISSN   1206-1697. S2CID   249254402.
  17. 1 2 Gawer, Annabelle (October 2021). "Digital platforms' boundaries: The interplay of firm scope, platform sides, and digital interfaces". Long Range Planning. 54 (5): 102045. doi:10.1016/j.lrp.2020.102045. hdl: 10044/1/83281 . ISSN   0024-6301. S2CID   225029662.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.