Sustaining Complement Quality for Digital Product Platforms: A Case Study of the Philips Hue Ecosystem

Innovation in a digital world increasingly revolves around open platforms that consist of a core technology and a large variety of complementary products developed by an ecosystem of independent complementors. The platform ecosystem literature has mainly focused on indirect network effects arising from the quantity of complements, with little attention to the quality of complements, despite the importance of quality for the complementary value that drives platform ecosystems. Because digital products are malleable and dependent on the ever‐evolving ecosystem, we advance a relational and dynamic conceptualization of complement quality. Drawing on a systematic, in‐depth qualitative case study of the Philips Hue connected lighting platform and its complementary third‐party apps, we study how and why complement quality is sustained over time. By analyzing apps and their updates, we developed a process model that explains pathways through which complement quality is enhanced, maintained, or deteriorates. Changes in the platform core, changes in other ecosystem elements, and idiosyncratic connections by users result in expanding affordances, materializing glitches, and emerging obsolescence. Without further action, glitches and obsolescence lead to deteriorating quality. Joint action of complementors, platform owners, and users is needed to act upon affordances, glitches, and obsolescence, in order to maintain integrity and enhance functionality. This paper contributes to the literature on innovation in platform ecosystems by explaining the dynamic and relational nature of complement quality in a digital platform ecosystem and showing the interdependence of ecosystem members (the triad between platform owner, complementors, and users) in sustained development efforts.     

Industry Platforms and Ecosystem Innovation

This paper brings together the recent literature on industry platforms and shows how it relates to managing innovation within and outside the firm as well as to dealing with technological and market disruptions and change over time. First, we identify distinct types of platforms. Our analysis of a wide range of industry examples suggests that there are two predominant types of platforms: internal or company‐specific platforms, and external or industry‐wide platforms. We define internal (company or product) platforms as a set of assets organized in a common structure from which a company can efficiently develop and produce a stream of derivative products. We define external (industry) platforms as products, services, or technologies that act as a foundation upon which external innovators, organized as an innovative business ecosystem, can develop their own complementary products, technologies, or services. Second, we summarize from the literature general propositions on the design, economics, and strategic management of platforms. Third, we review the case of Intel and other examples to illustrate the range of technological, strategic, and business challenges that platform leaders and their competitors face as markets and technologies evolve. Finally, we identify practices associated with effective platform leadership and avenues for future research to deepen our understanding of this important phenomenon and what firms can do to manage platform‐related competition and innovation.     

Platform competition with complementary products

We characterize the pricing structure in a model of platform competition in which two firms offer horizontally differentiated platforms and two sets of complementors offer products that are exclusive to each platform, respectively. We highlight the presence of indirect network effects: platforms and complementors benefit from the quality and number of firms in their group and suffer from the quality and number of firms in the rival’s group through their effects on prices and market share. We then determine the incentives of platforms to subsidize the independent complementors in an equilibrium. We further analyze the incentives of each platform to form a strategic alliance with complementors through contractual exclusivity or technological compatibility, or to integrate with the complementors. Finally, we discuss the welfare consequences of these strategies.     

The European Commission's approach to mergers involving software-based platforms: Towards a better understanding of platform power

The European Commission’s digital single market policies are increasingly concerned with the impact of so-called ‘platforms’ on competition in the internal market. Whereas the European Commission acknowledges the contributions of platform companies to innovation, it also sees actual and potential damages occurring from their powerful position. As such, the European Commission aims to strengthen the enforcement of its competition law rules in this area. The main research question is how the European Commission has been evaluating the competitive effects of platforms under merger control and whether its approach is adequate to address the manifold concerns related to platforms and competition. Based on a case study analysis, we conclude that the European Commission (1) recognises the platform circumstance, their essential intermediary role in the digital industry and the importance of maintaining fair competition; (2) its analysis has been slowly evolving becoming more granular; (3) platforms’ behaviour and not their size per se is most often the central concern; (4) the proposed Digital Services Act and Digital Markets Act packages tackle platform concerns identified in the European Commission’s ex-ante analysis, signalling that its analysis seems to have inspired their creation.     

Modularity in making: simplifying solution space for user innovation

An increasingly popular form of open innovation in the digital age is ‘making,’ where users innovate across multiple disciplines and make products that meet their needs, using mechanical, electronic, and digital components. These users have at their disposal, a wide solution space for innovation through various modular toolkits enabled by digital‐age technologies. This study explores and outlines how these users simplify this wide solution space to innovate and make tangible products. Following a modularity theory perspective, it draws on case studies of users and their innovations: (1) Users with initial prototype product designs based on the Internet of things (IoT) from a maker event and (2) users with established product designs from the online community platform Thingiverse. The studies found that users reused the design in the form of existing off‐the‐shelf products and utilized digital fabrication and low‐cost electronics hardware as a ‘glue’ to create physical and informational interfaces wherever needed, enabling bottom‐up modularity. They iteratively refined their innovations, gradually replacing re‐used designs with own integrated designs, reducing modularity, and reducing wastage. The study contributes to open innovation and modularity with implications on the design of products and toolkits enabled by the digital age.     

Data portability effects on data-driven innovation of online platforms: Analyzing Spotify

The EU General Data Protection Regulation (GDPR) introduces a new right to data portability, which allows users to move their personal data to other platforms, potentially affecting competition between rival platforms offering similar (homogeneous/substitute) products or services within the European Union. However, it is still unclear what effects this new regulation could have on competition and, consequently, on innovation in digital markets. Therefore, this paper analyzes the effect of data portability driven by competition on the data-driven innovation response of online platforms such as Spotify, Google, and Facebook.We conduct an empirical analysis of Spotify, which is an online platform facing competition within the EU, and perform a comparison between data portability to number portability of the telecommunication sector to predict the future impact of the new regulation. Finally, we compare the observations on Spotify with Facebook and Google, which are companies in winner-takes-all markets.We argue that online platforms like Spotify, which face competition within the EU, will invest in two forms of data-driven innovation due to the effect of data portability. These types are ‘exploitation-innovation,’ by improving the existing technology, and ‘exploration-innovation’ by developing new technology. In ‘exploitation-innovation,’ firms, like Spotify, will increase investments in data-driven innovation to enhance users' engagement and retention to avoid churn. In ‘exploration-innovation,’ these firms will invest in data-driven innovation to develop new algorithms to include data from customers acquired from their competitors. On the contrary, online platforms, like Facebook or Google, which do not face real competition, will not have a substantial need to invest in data-driven innovation solely due to data portability.     

A platform approach in solution business: How platform openness can be used to control solution networks

This paper explores how customer solution providers leverage digital platform architectures and particularly platform openness to exert control over complex organizational networks. A multiple case-study approach studies three companies with digital platforms that orchestrate solution networks in the LED and ICT industries. Our findings show that the features of product modules (core or peripheral), service modules (relationship intensity and customization), and knowledge modules (explicit, tacit and codified) have differential influence on the levels of platform openness. By managing platform openness of different subsystems accordingly, the solution providers can achieve different control benefits, including ensuring module quality, increasing offering variety, reducing dependence on module providers, and facilitating resource sharing. We contribute to the literature on solution business by reconceptualising the platform approach from a two-level perspective. We also deepen the field's understanding of the role of digital platforms in solution business from an architectural perspective.     

开放平台与所有权平台的竞争:网络效应与策略选择

开放平台（标准）的出现给所有权平台带来很大冲击，也给经济学家提出了挑战．这种免费的资源提供的动机何在？它对创新活动有何影响？它会如何影响市场竞争的结果？本文提供了一个分析开放平台和所有权平台（双寡）竞争的理论模型，在考虑网络效应以及所有权平台拥有者的兼容策略选择等情形下。分析了不同平台的目标和均衡策略选择。在此基础上。我们还拓展分析了社会对不同产业结构（开放＋所有权VS所有权＋所有权）的选择激励．结果发现不同的参数设定会得到不同的结论。     

Network innovation versus innovation through networks

In today's dynamic, complex and interconnected environments, interfirm networks in its various forms (e.g. franchising, retail and service chains, cooperatives, financial networks, joint ventures, strategic alliances, clusters, public-private partnerships, digital platforms) are becoming increasingly important in helping firms improve their competitive position through an enhanced access to innovation, complementary resources and capabilities otherwise not available to them. Driven by increased performance pressures in unpredictable environments, firms embedded in networks are increasingly moving from cooperators to collaborators as value co-creators. The aim of this introductory article is to discuss the role of innovation in business networks by focusing on two major topics: Network innovation versus innovation through networks. In addition, we provide an overview of the articles included in the special issue on Networks and Innovation focusing on the questions: (1) what is the impact of network characteristics on a firm's innovation?; and (2) what are the determinants of innovation in interfirm networks?     

Stimulating smallholder dairy market and livestock feed improvements through local innovation platforms in the Himalayan foothills of India

Innovation platforms (IP) are increasingly used in agricultural development to address complex issues which require diverse actors to work jointly to identify constraints and implement solutions. Documenting outcomes associated with the use of IPs and identifying factors linked to positive results are important if performance is to be optimized. This study investigates changes in smallholder dairy production and marketing associated with the establishment of a series of innovation platforms in Uttarakhand, Northern Himalayan region, India. We studied the links between innovation platform processes and outcomes using systematic documentation of meetings and interventions along with a post-intervention assessment which compared households from villages with and without the innovation platform intervention. We found that households participating in IPs showed increased dairy milk sales, increased income and improved breeding and feeding practices. Factors associated with these outcomes were the process of issue identification, the diversity of actors participating in meetings and the quality of follow-up on the agreed action plans.     

Do birds of a feather flock together? Platform’s quality screening and end-users’ choices theory and empirical study of online trading platforms

We propose a model which incorporates both quality and quantity in end-users’ interactions and analyze how platforms can use quality screening to alleviate information asymmetry and motivate end-users’ participations. We address the question from theoretical and empirical perspectives. In the theory, we build a model in which two platforms compete but only one of them screens sellers’ products. We show that the quality screening influences consumers’ expectations of product quality and their choices of sellers and platforms. The resulting screening effect, together with the network and competition effects, further drives sellers to enter different platforms. The equilibrium result indicates that sellers’ incentives to join the platform that screens products follow a non-monotonic relationship with respect to the observable quality of products. We estimate the model in Alibaba’s Platforms - Tmall and Taobao. The results are consistent with the theory. Counterfactual analysis suggests quality screening benefits consumers and Alibaba.     

Open Service Innovation: The Role of Intermediary Capabilities

This study examines how intermediaries, in general, and those with digital service platforms specifically, engage with clients to help them innovate their services within their service ecosystem. Based on an embedded, longitudinal case study, the results reveal the cumulative development and deployment of technological, marketing, and co‐creation capabilities by intermediaries, and how these capabilities allow intermediaries to engage with clients, so as to enable clients’ open service innovation despite their internal challenges. In turn, this article extends theory on service innovation by clarifying the role and function of intermediaries in service ecosystems in enabling clients to leverage open service innovation. Second, this study contributes to resource‐based scholarship by clarifying how these three sets of capabilities and their micro‐foundations relate to each other. Despite the obvious importance of technological capabilities, online intermediaries are more than just “virtual” service platform providers. The intermediary’s technological and marketing capabilities assist clients in dealing with project‐related and organizational challenges to open service innovation. Acting as a higher‐order capability, co‐creation capabilities—through shaping marketing and technological capabilities over time and also through conditioning their deployment—improve the proficiency of these capabilities. The findings advance insights on the agential role of the intermediary’s co‐creation capabilities, purposefully developed and deployed to foster client engagement, and thus support service organizations in leveraging open service innovation.     

全网营销我先行

全网营销开始变得有些复杂。以前,敢于吃螃蟹的品牌企业一般都是采用"淘宝开店+淘宝外分销"的路线,两者泾渭分明,梳理起来也容易。但如今,包括京东、当当、苏宁易购、亚马逊、库巴以及重组后的腾讯电商等独立B2C开始做大,人人都在谈开放平台,卯足了劲大举招商,大有群英战淘宝的势头。     

Managing platform architectures and manufacturing processes for nonassembled products

The article presents methods for defining product platforms and measuring business performance in process intensive industries. We first show how process intensive product platforms can be defined using the products and processes of a film manufacturer. We then present an empirical method for understanding the dynamics of process intensive platform innovation, allocating engineering and sales data to specific platform and product development efforts within a product family. We applied this method to a major product line of a materials manufacturer. We gathered ten years of engineering and manufacturing cost data and allocated these to successive platforms and products, and then generated R&D performance measures. These data show the dynamic of heavy capital spending relative to product engineering as one might expect in a process intensive industries. The data also show how derivative products can be leveraged from underlying product platforms and processes for nonassembled products. Embedded within these data are strategies for creating reusable subsystems (comprising components, materials, etc.) and common production processes. Hard data on the degree to which subsystems and processes are shared across different products frequently are typically not maintained by corporations for the duration needed to understand the dynamics of evolving product families. For this reason, we developed and applied a second method to assess the degree of reuse of subsystems and processes. This method asks engineering managers to provide subjective ratings on an ordinal scale regarding the use of technology and processes from one product to the next in a cumulative manner. We find that high levels of reuse generally indicate that a product family was developed with a platform discipline. We applied this measure of platform intensity to two product lines of integrated circuits from another large manufacturer. We used this method to gather approximately ten years of information for each product family. Upon analysis, one product family showed substantial platform discipline, emphasizing a common architecture and processes across specific products within the product line. The other product family was developed with significantly less sharing and reuse of architecture, components, and processes. We then found that the platform centric product family outperformed the latter along a number of performance dimensions over the course of the decade under examination.     

Why co‐creation experience matters? Creative experience and its impact on the quantity and quality of creative contributions

This article introduces ‘virtual design competitions’ as a new means of opening up the innovation process and enriching the companies, ‘design‐ideas’ by utilizing the creativity of a multiplicity of external designers and enthused consumers all over the world. The ‘Swarovski Enlightened^? jewellery design competition’, explored in this study, demonstrates the enormous potential of virtual co‐creation platforms. It further highlights the importance of the co‐creation experience and its impact on the quantity and quality of designs submitted. First, we introduce the idea of virtual co‐creation platforms and the requirements on the design of such a platform. Second, we explore the impact of the co‐creation experience on the content contributed by participants. Our study shows that co‐creation experience significantly impacts the number of contributions by consumers as well as the quality of submitted designs. Our paper contributes to a better theoretic understanding of the impact of a participant's perceived autonomous, enjoyable, and competent experience, as well as participants' perceived sense of community on their experience. From a managerial perspective, it provides guidance in designing successful idea and design competitions. While innovation managers may be interested in creative contributions, for participants, it is the experience which matters. Fully featured community platforms rather than single idea submission websites are required to attract creative users to submit their ideas and designs.     

“To Own or Not to Own?” A Study on the Determinants and Consequences of Alternative Intellectual Property Rights Arrangements in Crowdsourcing for Innovation Contests

Firms are increasingly engaging in crowdsourcing for innovation to access new knowledge beyond their boundaries; however, scholars are no closer to understanding what guides seeker firms in deciding the level at which to acquire rights from solvers and the effect that this decision has on the performance of crowdsourcing contests. Integrating property rights theory and the problem‐solving perspective while leveraging exploratory interviews and observations, we build a theoretical framework to examine how specific attributes of the technical problem broadcast by firms affect the seekers’ choice between alternative intellectual property rights (IPR) arrangements that call for acquiring or licensing‐in IPR from external solvers (i.e., with high and low degrees of ownership, respectively). Each technical problem differs in the knowledge required to be solved as well as in the stage of development of the innovation process and seeker firms pay great attention to such characteristics when deciding about the IPR arrangement they choose for their contests. In addition, we analyze how this choice between acquiring and licensing‐in IPR, in turn, influences the performance of the contest. We empirically test our hypotheses analyzing a unique dataset of 729 challenges broadcast on the InnoCentive platform from 2010 to 2016. Our results indicate that challenges related to technical problems in later stages of the innovation process are positively related to the seekers’ preference toward IPR arrangements with a high level of ownership, while technical problems involving a higher number of knowledge domains are not. Moreover, we found that IPR arrangements with a high level of ownership negatively affect solvers’ participation and that IPR arrangement play a mediating role between the attributes of the technical problem and the solvers’ self‐selection process. Our paper contributes to the open innovation and crowdsourcing literature and provides practical implications for both managers and contest organizers.     

腾讯的系统

开放是腾讯突破瓶颈的必经之路，这需要它重新适应一个平台服务商的角色，其对规则制订的主导欲受到挑战。 对于乐风创想CEO任锋来说，最令他印象深刻的，也许不是在前不久的腾讯开放平台颁奖典礼上的风光无限，而是去年6月的生死之交。 任锋曾经是暴风影音联合创始人和CTO，后来自己创业。     

Disrupting the Disruptors or Enhancing Them? How Blockchain Reshapes Two-Sided Platforms

The importance of platform-based businesses in the modern economy is growing continuously and becoming increasingly relevant. Specifically, the deployment of digital technologies has enhanced the applicability of two-sided business models, enabling companies to act not just as builders and owners of assets, but also as orchestrators of external resources. Management research has, therefore, focused increasingly on the unique aspects of this model. At the center of a two-sided platform there is a platform provider that enables a transaction between the sides, reducing the relative transaction costs. However, in recent years, a new technology emerged that challenges some of the underlying assumptions of this model: the blockchain. Blockchain enables the creation of a peer-to-peer network that is able to authenticate transactions, upon which applications and services may be built. It allows users to conduct transactions without the need for a central platform. We explore how blockchain technology reshapes two-sided platforms, focusing in particular on the role of the platform provider. The research is based upon multiple case studies, using an inductive approach to explore this emerging phenomenon. Our findings show there is a significant shift in the role of the central player that links the two sides of a transaction using blockchain. We frame this as a shift from a “platform provider” to a “service provider,” leveraging the blockchain as a Platform-as-a-Service. Our work examines the peculiarities of this model, unveiling new dynamics in these businesses. Specifically, we show that different variables must be considered to classify two-sided platforms using blockchain. Furthermore, the essential characteristics of two-sided platforms must also be enlarged. For example, traditional platform theories emphasize the importance of cross-side network externalities in creating value. In blockchain-enabled platforms however, we show the use of “tokens” play a key role in creating different types of externalities between the two sides.     

Research trends of digital platforms: A survey of the literature from 2018 to 2021

In recent years, there has been a vigorous discussion about digital platforms due to their emerging significance in the digital ecosystem. However, despite common interests in the digital platform, comprehensive literature reviews on the topic are still limited. Therefore, this study offers a systematic and interdisciplinary review of the literature on digital platforms by collecting and analyzing a sample of 1,224 articles published from January 2018 to December 2021. In particular, this study focuses on which country leads platform research. By interpreting the concentration of research fields that study platforms and financial funding for platform research, this article provides a new perspective on the countries leading academic platform research. Our findings show that those holding platform hegemony in the real world are also active leaders in platform research. Amid fierce competition among major countries and continents surrounding the platform industry, this paper aims to provide an understanding of the ongoing research trend regarding platforms and be a guideline for future research.     

Digital Transformation and Innovation Management: A Synthesis of Existing Research and an Agenda for Future Studies

Management and organizational scholars have paid increasing attention to the interconnections between digital transformation and innovation management in the last decade. However, a highly fragmented understanding of this topic is what we are left with so far. In this editorial, we suggest an approach to open up the black box of the interplay between digital transformation and innovation management by providing a framework that identifies three levels of analyisis (i.e., macro, meso, and micro) along which existing and future research on the topic can be organized. This model encourages scholars to conduct theoretical and empirical studies on how digital transformation affects ecosystems’ structure and governance, how industries and firms compete and organize for innovation in a digitalized world, how the processes for developing new products and services change under the effect of digital technologies, and the implications of digital transformation on managing people and teams involved in the innovation process, among the other topics. We also provide a synthesis of the eight papers published in the Special Issue that this editorial introduces and develop an agenda for future research that will hopefully contribute to encourage and shape future scholarly efforts into this field.