Dethroning an Established Platform

Increasing numbers of companies big and small, whether providing hardware devices, traditional software or software in the cloud, are attempting to become platform masters by releasing application programming interfaces that allow others to build software and hardware products or complementary services on top of their technology offerings. Platform competition is expanding into many markets and can be found today in a variety of industries and on different scales: from nearly universal platforms such as the Internet, credit cards and the telephone to newer Internet-enabled platforms such as Facebook, Skype, Google Maps and PayPal.

The authors argue that the experiences of “platform dethroners” such as Apple’s iPhone, Facebook and Google’s Gmail "Ò which entered their industries relatively late and yet succeeded in dethroning powerful incumbent platforms "Ò offer four important lessons for companies entering or competing in platform markets:

1. Find a distinctive and underserved segment of users. Apple did this by focusing on the consumer, not the business, market with the original iPhone.
2. Leverage your existing platforms. A platform dethroner can use another distinct platform it owns in order to gain traction for the new platform.
3. Differentiate based on emerging needs. Successful platform dethroners, the authors maintain, can achieve a powerful type of differentiation by focusing on what the platform dethroner does better than competitors that could drive demand tomorrow.
4. Simplify the business model for partner companies that build applications for your platform. Apple made it as easy as possible for individual developers to enter the industry by lowering both technological and financial barriers to building apps for the iPhone platform, the authors argue. The single model and sleek interface of the iPhone platform also made it significantly more attractive to app developers, who needed to build only one version of their app.