PLATFORM LEADERSHIP

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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

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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

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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.

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Platform Leadership An Overview
Platform Leader
Complementors
Consumers
Complementors
Complementors
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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.

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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.
  

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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?

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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.

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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.

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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.

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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

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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

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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?

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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

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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

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Key Points(cont.)

• Ecosystem, orchestrate, complementor,
  competition, collaboration, balanced strategy
• Capability stack of PC industry

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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

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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.

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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.

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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.

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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

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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

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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

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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

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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.

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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

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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

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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

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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

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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

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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

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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.

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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.

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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

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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

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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

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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.

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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

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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.

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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

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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

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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

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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.

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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

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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
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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.

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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.
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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