The Common Strategy That Drove Apple, Intel and Microsoft To Success

The platform is an ancient concept. It was designed to command attention and respect. But perhaps more importantly, it was intended to establish and symbolize the dominance of those who created it over everyone else.

Which is why it is both a fitting metaphor - and strategy - for success in technology.

Of course, the nature of the platform has changed, but it is no less powerful for being intangible rather than tangible. And, as the following article explains, it has served many companies well.

But there is also a corollary to its application. Bill Gates of Microsoft was the first to grasp it, but the company may have become besotted with its own power and the ease with which it came to dominate, losing in the process, the capacity to see how the platform and its network spinoffs were changing the nature of the opportunity.

Intel was a relatively quick follower but focused too much on that which engineered its success and because hesitant about embracing new technologies. Apple may have been the last to grasp it, but had the advantage of learning from the others' mistakes as well as from the advances they engendered which it used to its advantage.

In sum, the platform is a powerful perch from which to rule, but it is a lonely place on which to get stuck. JL

Steve Lohr reports in the New York Times:

What really made these companies winners to establish an industry-spanning platform rather than merely products. Platforms yield lucrative network effects, complementary products and services and increasing returns. The payoff is market power and huge profits. Bill Gates got it immediately. It took Andy Grove 10 years to figure out, and 20 years for Steve Jobs.

In retrospect, things look easy, even obvious. Microsoft, Intel and Apple all rose to dominance as if their fates were inevitable.

Of course, it never looks so clear as it’s happening. Shelves full of books have been written about these three companies and the outsized personalities who built them — Bill Gates, Andy Grove and Steve Jobs. In a new book, David B. Yoffie, a professor at the Harvard Business School, and Michael A. Cusumano, a professor at Massachusetts Institute of Technology’s Sloan School of Management, are adding to that literature by applying a strategic framework to the corporate handiwork of the three, and find common themes. They call these shared features “Strategy Rules,” which is also the title of the book.

Mr. Yoffie and Mr. Cusumano have been studying these companies for nearly three decades and have been collaborating off and on for decades. Initially, Mr. Yoffie was a specialist in corporate strategy, while Mr. Cusumano was an expert in software development and managing product teams. “David was developing high-level strategy, and I was focused on, O.K., how do you get this stuff done,” Mr. Cusumano recalled.

The two have a reputation for taking more than an academic approach to their research, doing a lot of first-hand reporting. Mr. Cusumano dug into the workings of Microsoft for a 1995 book, written with Richard W. Selby, “Microsoft Secrets.” And the Mr. Cusumano and Mr. Yoffie collaborated on a 1998 book that scrutinized the browser wars between Microsoft and Netscape, “Competing on Internet Time.” That book was published just as the federal government’s antitrust suit against Microsoft was coming to court. Microsoft obtained an early copy of the manuscript and tried to subpoena copies of the authors’ transcripts from their interviews with 44 current and former Netscape employees for the book. A federal judge later denied that request.

As for insider access, it certainly helps that Mr. Yoffie is a long-time board member of Intel. The new book benefits from interviews with Mr. Grove and other former executives at Intel, Microsoft and Apple.

The handful of guidelines in the book, which flow from detailed observations of Mr. Gates, Mr. Grove and Mr. Jobs, include combining long-term vision with the steps needed to get there (“Look Forward, Reason Back”) and building an organization that exploits a leader’s strengths (“Shape the Company Around Your Personal Anchor”).

Yet what really made these companies huge winners was understanding and applying the dynamics of high-tech markets (“Build Platforms and Ecosystems”). In digital-age competition, the long goal is to establish an industry-spanning platform rather than merely products. It is platforms that yield the lucrative flywheel of network effects, complementary products and services and increasing returns. The payoff is market power and huge profits.

Mr. Yoffie and Mr. Cusumano have been studying the impact of the snowballing phenomena as case studies in industry since the 1990s, as these principles of market behavior were also identified in early research by economists including Garth Saloner, Carl Shapiro, Michael Katz and W. Brian Arthur.

The Windows operating system was one such platform almost from the outset, and the Intel industry-standard microprocessor would become one. Under Mr. Jobs, the authors note, Apple was long a product-first company. He preferred beautifully designed products that worked in splendid isolation. But even he eventually grasped the value of platforms. In October 2003, Apple released iTunes for Windows, so Apple’s hit iPod music player could enter the larger market of PC users. “Apple’s fortunes changed forever,” Mr. Yoffie and Mr. Cusumano write. In June 2007, after initially resisting, Mr. Jobs announced that outside developers would be allowed to create software applications for the iPhone. Soon, its App Store took off.

“Bill Gates got it immediately,” Mr. Yoffie said. “It took Andy Grove 10 years to figure it out, and 20 years for Steve Jobs.”

“Jobs was always a product first, platform second kind of guy,” Mr. Yoffie added. “But he figured it out eventually.”

Mr. Yoffie and Mr. Cusumano write of “striking parallels” between the early high-tech leaders and four members of the next generation, who they write about briefly: Larry Page of Google, Mark Zuckerberg of Facebook, Jeff Bezos of Amazon, and Huateng Ma of Tencent, a leading Chinese Internet company. They all, the authors point out, have a deep understanding of technology and “platform thinking.”

The authors’ emphasis on the pivotal role of platform strategy raises questions about the long-term prospects for Apple, the reluctant platform adopter. In the book and in interviews, the authors say this could be the company’s Achilles heel someday. The market share of the companies in Android camp for smartphones and tablets — using software Google distributes for free — is 80 percent, more than five times that of Apple’s iOS software. And if the Apple Watch, they say, is to become a “personal digital platform,” the company must open it up to work with all smartphones, not only iPhones — just as Apple eventually opened up the iPod to work with PCs as well as Macs.

Still, while the Android camp rules in market share, Apple harvests most of the profits in the smartphone market. “Platform theory has always looked at market share, but Apple has taught us to look at profits too,” Mr. Cusumano said. “It’s certainly made me think twice about market share.”