Competing with Giant Platform Operators: An Analysis of Which Traditional Manufacturing Companies are at Risk from Strategic Dependence on Other Companies’ Platforms in the Emerging Era of the Internet of Things

Maximillian Schreieck, Eric K. Clemons, Manuel Wiesche, and Helmut Krcmar (2019) – Platform Strategy Research Symposium

Abstract

Digital platforms have gained importance across a wide range of industries because they enable superadditive value creation in their platform ecosystems. Giant platform operators such as Google, Apple, Facebook, and Amazon dominate areas such as web search, mobile applications, social media, and online shopping and harvest most of the superadditive value in their ecosystems. With the advance of cloud computing technology and the Internet of Things, traditional industries such as manufacturing will also move towards platformization. If manufacturing companies become dependent on other companies’ platforms, these platform operators may be able to exploit manufacturers’ strategic dependence. In particular, platform operators may be able to extract much of the value that their platforms create, leaving the manufacturers with limited gains from their platform strategies. To understand how traditional manufacturers can address this issue, we first construct a simple mathematical model of the sources of value in digital platforms. We then study two German manufacturing groups and use this model to evaluate the groups’ platform strategy. We identify control of relevant information domains, control of the customer interface, and collaboration in joint platforms as important factors to understand when developing strategies to deal with giant platform operators and to avoid strategic dependence on these competitors. We contribute to the literature on digital platform emergence in two ways, through the construction of our model and through the use of this model to examine the platform strategies of traditional companies.

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