Competing on a Common Platform

This proposed paper explores the relationship between the level of openness of a platform’s governance and the robustness of its ecosystem. We define robustness as both the ability of firms within the ecosystem, and the... [ view full abstract ]

This proposed paper explores the relationship between the level of openness of a platform’s governance and the robustness of its ecosystem. We define robustness as both the ability of firms within the ecosystem, and the ecosystem itself to sustain competitive advantage (Iansiti, and Levien, 2004). Often the success of an ecosystem as a whole is at odds with that of a single firm, (Iansiti and Levien, 2004; Baldwin and Woodard, 2007). For example, an ecosystem overall may benefit from open governance structures as they increase aggregate value creation, but the dominant or lead firm within a niche may no longer be able to appropriate all of the rents associated with this value creation. We ask then, under varying platform governance structures, how can a firm contribute to the health of an ecosystem while also maintaining strategic advantage? We will demonstrate how ecosystems are robust when open and collectively managed. With an inductive study of a platform that transitions from closed and proprietary, to open and collectively managed, we explore the varying and dynamic strategies firms develop to both contribute to the ecosystem and guard competitive advantage. Instead of evaluating this process from the lens of the platform “owner” or “sponsor”, we evaluate the decisions members of the ecosystem make vis-à-vis changes to the governance.

The research setting for this work is the Eclipse platform, an integrated development environment (IDE) written in Java. It was funded and created solely by IBM but released as an open source project that allowed derivative works to be distributed royalty-free worldwide in 2001. To alleviate partner concerns and grow an independent ecosystem, IBM transitioned the project from proprietary control to an independent private foundation, creating a collectively managed resource in 2004. As one participating firm explained, “There were some very large players that said we’re not going to be part of something that IBM controls...IBM could not be seen as a controlling entity. It is like stagnate the growth or set it free. I am sure that was a very hard problem for IBM to work out internally...if you set it free, you don’t really know what it is going to do.” Eclipse is well suited to study because it consists of three components which are critical in unpacking the process by which firms arbitrate strategies to engage in building and exploiting an ecosystem. First, Eclipse is an extensible, vendor neutral, open source platform built by a pool of common resources (e.g. development man hours, design expertise, existing code, etc.) contributed by member firms. Firms that contribute and develop on the platform, freely share assets and knowledge to both harden and extend the platform’s capabilities. Firms collaborate to both identify core user requirements and develop a platform that meets those needs. Second, Eclipse is an open source community ruled in principal by meritocracy. Third, Eclipse transitions to be also defined as a non-profit foundation which manages distribution of IP, governance of the community, and ecosystem. The foundation is wholly owned by the members but directed by a small representative board of firms. Our study tracks the transition of Eclipse from IBM-owned and dominated to collectively managed.

From Fall of 2004 to 2007 a series of interviews and observations of the Eclipse community were conducted. Data collected included 1) interviews with founders of Eclipse, current and former board members, leaders of the foundation, committee participants, committers and project managers; 2) observations of board meetings, committee sessions and two Eclipse conferences; 3) collection of archival data to validate firm participation in the community and the launch of new projects on the platform. Forty interviews were conducted which ranged from one to three hours with both IBM as the platform founder and the participating firms that joined the community. In total, we conducted interviews with 18 firms, and 4 interviews with employees of the foundation. We engaged in a range of 1-3 interviews with each firm. Where possible, we conducted multiple interviews per firm to better account for potential variance in perspective by role (e.g., marketing managers may have a different perspective than developers). An inductive approach was substantiated to understand the process by which firms make choices to engage. We followed an iterative analytical approach leveraging grounded theory to develop common themes and working hypotheses. Data analysis then included four phases: 1) mapping of governance structures employed to manage Eclipse; 2) identifying and comparing firm motivations and strategic choices to either engage, deepen engagement or disengage with Eclipse; 3) synthesizing of firms into four distinct categories based on strategic choices and motivation; 4) analyzing of how firms sort in and out of these distinct categories based on changes to the governance structure.

We are in the process of developing our findings and expect to have completed analysis by August 1st. Our preliminary findings show that there are a range (e.g. four) of ecosystem strategies firms employ to engage with the platform. Firms sort in and out of these strategies as the governance structure changes from closed to open. For example, we find when the platform is collectively managed and open, a more balanced and dense set of strategies are deployed by the member firms. The density of firms acting on any one of these given strategies has implications for the sustainability of the ecosystem as a whole and for the firms individually.

References:
Baldwin, Carliss Y., and C. Jason Woodard. "The architecture of platforms: a unified view." Harvard Business School Finance Working Paper (2008) pp.09-034.
Iansiti, Marco, and Roy Levien. The Keystone Advantage: What the New Dynamics of Business Ecosystems Mean for Strategy, Innovation, and Sustainability. Harvard Business Press, 2004