This paper brings together the recent literature on industry platforms and shows how it relates to managing innovation within and outside the firm as well as to dealing with technological and market disruptions and change over time. First, we identify distinct types of platforms. Our analysis of a wide range of industry examples suggests that there are two predominant types of platforms: internal or company-specific platforms, and external or industry-wide platforms. We define internal (company or product) platforms as a set of assets organized in a common structure from which a company can efficiently develop and produce a stream of derivative products. We define external (industry) platforms as products, services, or technologies that act as a foundation upon which external innovators, organized as an innovative business ecosystem, can develop their own complementary products, technologies, or services. Second, we summarize from the literature general propositions on the design, economics, and strategic management of platforms. Third, we review the case of Intel and other examples to illustrate the range of technological, strategic, and business challenges that platform leaders and their competitors face as markets and technologies evolve. Finally, we identify practices associated with effective platform leadership and avenues for future research to deepen our understanding of this important phenomenon and what firms can do to manage platform-related competition and innovation.

In this episode, Kevin Boudreau discusses his research on platforms, from his early perspectives to his current view of platforms as governed digital spaces. He also delves into the impact of AI and data on platforms, and how business schools can play an active role in helping companies adapt to the rapidly changing landscape.

This influential paper by Caillaud and Jullien from 2003 examines imperfect price competition between intermediation service providers, with a particular focus on aspects relevant to informational intermediation on the Internet. The authors analyze three key elements: indirect network externalities, non-exclusive use of multiple intermediaries, and price discrimination based on user identity and behavior. Using a developed model, they explore how these factors influence market structures and pricing strategies in intermediation markets. Key findings include that both efficient and inefficient market structures can emerge in equilibrium. Additionally, intermediaries have incentives to offer non-exclusive services to moderate competition and exert market power. The study provides a detailed analysis of pricing and business strategies employed by intermediation service providers and has significantly contributed to understanding competition dynamics in digital intermediation services, making it foundational for research on two-sided markets and platform economics.

This podcast episode features Chiara Farronato, a Harvard Business School professor, discussing her research on digital platforms. Farronato defines platforms as information aggregators that connect fragmented users, and she examines the impact of platforms like Airbnb on issues such as over-tourism and housing affordability. The discussion also explores the challenges of regulating large tech companies, contrasting the American approach of breaking them up with the European approach of implementing regulations. A key theme is the need for greater transparency from platform companies to foster trust and ensure beneficial societal impact.

Parker and Van Alstyne's seminal paper explores two-sided network effects in information markets, demonstrating how firms can strategically offer products for free by leveraging distinct markets of content providers and end consumers. Their model reveals that by understanding network externalities, companies can increase consumer welfare and firm profits simultaneously through sophisticated product coupling and pricing strategies. The research provides critical insights into how digital platforms like operating systems and internet browsers create value by balancing the needs of different user groups, effectively explaining the economic logic behind seemingly counterintuitive business models that offer core products at zero cost.

The discussion begins with positive network externalities, which are broken down into three key factors: accumulation, variety, and utility. Accumulation describes how interconnected items on a platform, such as Wikipedia articles, create value. Variety refers to the value generated by diverse complements, exemplified by apps in an app store. Utility represents the immediate value a platform offers, like an Uber ride. We then explore the concept of negative network externalities, which occur when positive effects become excessive. These include rivalry from increased user numbers, choice overload due to excessive variety, fragmentation from over-accumulation, and value degradation resulting from poor utility. The discussion further introduces the concept of amplified network externalities. This includes network connectivity and horizontal complementarity. Horizontal complementarity, a concept the authors note as underexplored, refers to the value created when platform complements are used together, such as calendar and video conference apps on a smartphone. The authors mention writing another paper focused solely on this concept. They also highlight super apps like WeChat and Grab as examples of platforms attempting to internalize horizontal externalities. This comprehensive framework provides a nuanced understanding of how network effects operate in platform markets, offering insights into both the positive and negative aspects of platform growth and diversification.

Baldwin and Clark's "Design Rules, Volume 1" explores how modular design transforms technological innovation. The book reveals how breaking complex systems into independent, interconnected components enables faster, more flexible technological development. By analyzing design architectures, the authors demonstrate how modularity reduces complexity, accelerates innovation, and provides strategic advantages across technological domains.

This podcast episode features Wim Vanhaverbeke, a digital strategy and open innovation expert, discussing digital platforms and their impact on open innovation. Vanhaverbeke explains his perspective on platforms as business models facilitating interactions, highlighting the complexities of multi-sided B2B platforms compared to two-sided models. He details how digitalization and AI enhance open innovation, offering examples of companies using platforms internally and externally for innovation. The conversation further explores the challenges managers face adapting to these evolving platform dynamics and the crucial role of data sharing in overcoming adoption barriers, particularly within regulated sectors like healthcare. Finally, Vanhaverbeke discusses future research directions focusing on open innovation, sustainability, and the democratizing effects of technology.