Platforms strategy

A platform is typically one that allows others to build freely and openly on top of itself.

August 23, 2010
Platforms strategy

KARACHI: The platforms strategy is a fairly new concept in business nomenclature. A platform is typically one that allows others to build freely and openly on top of itself. The more open and free it is, the more rapidly it is likely to grow.

Microsoft Windows, for example, allows any vendor to build software for Windows without restrictions.

Similarly, when Facebook announced that it would allow any vendor to build applications on top of its ‘social media platform’, it fully embraced the platforms strategy and achieved rapid growth in return.

In fact, over a very short period of time, Facebook boasts over half a million applications in active use with over a million developers and entrepreneurs.

Of the 500 million active users on Facebook, 70 per cent use at least one of these third-party applications each month. Facebook dominates the web as the largest social network, getting more hits than the next top 30 websites combined, while Microsoft dominates the consumer PC market with 91 per cent market share (as of late 2009). The platform strategy has proven instrumental in both cases.

Microsoft or Apple?

Microsoft is the epitome of a platforms strategy because not only does it allow application developers to thrive, it also has a rich ecosystem of certified trainers providing accreditation and diplomas to technicians, repair shops specialising in Microsoft personal computers and partners authorised to sell Windows software licences in their respective localities.

Furthermore, Microsoft has also lent its platform to hardware makers like Dell and HP through tactics such as volume discounts, co-branding and application bundling.

The company has ensured its success by tying itself to the success of millions of other businesses. Apple, on the other hand, missed out on the party early on because it chose to take charge of repairs itself. The company also decided to control distribution and no initiatives were given to third-party vendors.

Apple’s iPhone platform is also extremely tight-fisted: all applications must be sold through Apple’s AppStore where Apple frequently exercises its right to reject applications from being listed or remove them without notice. It also charges 30 per cent commission on all revenues.

Although this anti-platforms strategy has crippled its computer sales, which now comprise only about 25 per cent of the company’s total revenue, it has worked tremendously well for the iPhone and iPod.

A platforms strategy requires not only inviting others to build on the platform, but also encouraging them to build an entire business around your platform.

The more open the platform, the more tremendous its growth. The Internet itself is the greatest platform upon which companies like Google and Facebook are built.

Published in The Express Tribune, August 23rd, 2010.


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