Incumbents' strategies for platform competition: shaping the boundaries of creative destruction

This chapter builds upon the idea that products and organizations are complex systems made up of many interconnected elements. How these elements are connected is a matter of technological and organizational design choices. Such choices define general rules which organize the inner working of complex systems, define the strengths of the connection among elements and set rules of entry for new components and exit for obsolete components. These rules provide the foundations of what has been recently called a ‘platform’, (i.e. ‘an evolving system made of interdependent pieces that can each be innovated upon’) (Gawer and Cusumano, 2002). This chapter's chief aim is providing a simple framework which identifies four distinct types of platforms on the basis of their key technological and institutional traits. Within each type, the rules of competition, the opportunities of innovation, the relative advantages and disadvantages of incumbents vs. potential entrants dramatically differ. We explore such differences and propose implications for policy and practice.