Strategy of platform leadership and the ecosystem view

The purpose of this Bachelor’s thesis was to investigate what kind of success factors have been identified in prior research concerning the competition of technology platforms and what strategic choices companies have to affect their success in the competition. Based on the literature review the main success factors are: modularity, quality and innovativeness of the platform. Success also requires the development of business models that benefit all parties, and the sharing of economic benefits within the ecosystem. Companies can affect these above-mentioned factors by controlling the pricing and openness of their platform and by creating barriers of entry for their competitors and by timing their market entry successfully. Platform competition is especially influenced by network effects and the characteristics of two-sided markets. The more complementary products there are available for a platform, the more attractive it is for the consumers. High number of consumers makes the platform further increases the attractiveness of the platform for additional complementors which creates a positive feedback-loop, where a popular platform cumulatively increases its’ competitive advantage. This is why many of the identified strategies focuses on building a large ecosystem and maintaining the benefits that a large ecosystem provides. The literature examined in this review doesn’t provide concrete framework that combines the economic and technical sides of platform competition. Based on the findings however, it is possible to give general strategic recommendations. Early entry to market favors an open platform and a strategy that aims to grow the ecosystem rapidly and create barriers of entry for the competition. Later entry to market and overthrowing an incumbent platform requires notable innovativeness or significantly higher quality than the incumbent. To ensure higher overall quality, a more closed and tightly controlled platform might be in order. This results in a smaller surrounding ecosystem that necessitates higher pricing, but the premium is justified by substantial increase in technical quality and performance