Archive for January, 2012
Frederick P. Brooks, who wrote the classic The Mythical Man-Month, begins The Design of Design by describing several models of design. He covers the ubiquitous rational model of design and proposes alternative approaches based on his experience designing complex systems. Brooks believes studying the design process can help us get better at designing and teaching design to others. Exploring the process of design also supports organizing for and managing design activities. Although he focuses on the design of computer systems, he brings many examples and viewpoints to bear from other fields of design including architecture, mechanical engineering, and industrial design.
Systematic design excluding intuition yields pedestrian follow-ons and knock-offs; intuitive design without system yields flawed fancies. How to weld intuition and systematic approach? How to grow as a designer? How to function in a design team?
Brooks believes that the the rational model of design is fundamentally wrong. He defines the rational model as having a goal, desiderata (secondary goals or requirements), a utility function (a way to weigh various desiderata in terms of goodness), and constraints (frequently time, budget, or other resource). This approach is commonly used in many engineering disciplines.
The rational model assumes a single design tree of decisions which must be traversed in a linear manner to find the best design hiding among the leaves. As a designer works through each successive decision, the final design comes into focus as various alternatives are eliminated on the way to the final goal. The designer can back-track if a particular line of design decisions dead-end in an unsatisfactory outcome. The rational model is manifested in the Waterfall software development process. However, for large and/or complex design projects, design decisions are frequently not limited to design alternatives, but spawn entirely new designs, adding new dimensions to the tree.
In an essay devoted to exploring the design tree for the addition of a new wing to his house, Brooks discovers two prominent themes within the book: design uncovers new requirements and designs. Again, Brooks arrives at the conclusion that the process of design is more like exploratory creation than elimination of a known set of alternatives. In the video below, Brooks mentions that his attempts to document a tree structure for decisions related to his house remodel have proved to be much more difficult than even he anticipated.
the hardest part of design is deciding what to design.
The primary flaw in the rational model is that it is not possible to know the design goal in advance. This assumption underpins much thinking in requirements methodologies. If the goal is not known at the outset, then it is not possible to use a single decision tree to arrive at a final design. Moreover, it is typically not feasible to articulate every single design alternative within a clean decision tree.
Brooks asserts that by eliciting requirements, the design becomes clear. This is in opposition to the view that all requirements can be known at the outset and the design phase is meant simply to translate those requirements into an implementable specification. He believes that design cannot be separated from requirements. In the book and video below he relates a personal experience as a programmer which led him to understand that implementing a set of known requirements allows the final design to be illuminated through successive iterations of refined requirements.
Predictability and great design are not friends.
Brooks also finds fault in the rational model because “it is a good way to get follow-on products” rather than disruptive or innovative offerings. This model of design is good at producing “functional enrichment” but is not based in an iterative or exploratory approach to requirements and design which is required for completely new products and services.
An alternative to the rational/waterfall model is the co-evolutionary model (Maher and Poon, 1996). The co-evolutionary design model is fundamentally exploratory and acknowledges that as each plateau is reached, a new vista appears, and with it a new perspective on the problems, requirements, and eventual solution. The design team cycles through resolving a problem, evaluating the solution, and then discovering a new set of problems, requirements, goals, and constraints. The movement and interaction between the problems and solutions refines the final design and the team’s understanding of the problem domain. The perfect design is never reached, rather a more in depth understanding is gained as assertions are tested against business and customer needs. As opposed to the rational model of design, the co-evolutionary model explicitly identifies the ongoing relationship between requirements and design. It is not founded on the notion that requirements are fixed and the requirements process has a discrete end-point which occurs prior to design and development. The design team’s understanding of the problem itself deepens as prototypes and solutions are developed.
Great designs come from great designers, not from great design processes.
This book covers several overlapping aspects of complex systems design: models of the design process, how design is different today than it was in the past, and how individuals contribute to great designs. Brooks is a proponent of single individuals or pairs of individuals creating designs over large teams. He believes that the integrity of the design concept (the overall architectural model of the object under design) is the most important factor for great designs. Because teams today are distributed, the process of creating, communicating, and evolving the design concept becomes more difficult.
The essay titled “The Divorce of Design” explores the consequences of the separation of the designer from production and usage. This theme runs throughout the book–previous generations of inventor/designers who made products versus current design teams which consist of specialists who are separated from complex chains of manufacturing and component production. This change results in many of the questions Brooks poses: how can designers maintain close contact with the beneficiaries of their design?, how can individual specialists collaborate to create a coherent design that meets the needs of the end-user?, how can great designers be trained and found?
No amount of process improvement can raise the ceiling of the community’s practice. Great designs do not come from great processes; they come from talented people doing hard work.
He extends his thinking about individual designers by thinking about product processes which often surround design processes. He finds the approvals and stages associated with product processes to be a hindrance to innovation. Product processes are designed to reduce variation and exceptions; however, innovations are by definition exceptions so they do not usually thrive in a process-centric environment.
The essays in the book covers many design topics including requirements, constraints, aesthetics and style in technical design, why expert designers make mistakes, and how to effectively use previous designs. Brooks has been in the computer industry since the 1950′s and brings an interesting perspective on design–many of his examples are from IBM mainframe operating systems (OS/360, JCL) of the 1960′s and 1970′s. He ends the book with a set of design case studies from mechanical engineering, residential architecture, and computer systems. The case studies provide requirements, constraints, decisions and the final design in order to illustrate the complex and dynamic nature of the design process across various disciplines (one of the questions he poses in the book is whether there can be a universal design method that exists independently of a subject matter domain).
In the first half of the video below, Brooks explains his critique of the rational model of design. He is challenged by several students on a number of his points, which he doesn’t fully address, but it’s an interesting presentation nevertheless. The second half of the video corresponds to the second part of the book which addresses team design and collaboration, which Brooks believes to be characteristics of 20th and 21st century design (as opposed to 19th century design).
Innovation isn’t confined to break-out, market-creating, blockbuster products and services. There are innovation types available for each phase of the category life cycle, from growth through maturity and decline, to end of life. The innovation types for each life cycle phase are grouped according to four value disciplines that identify strategies which can be activated to achieve new offerings, increased customer service, cost efficiency, and improved portfolio management. In Dealing with Darwin, Moore also maps innovation strategies to two primary business architectures: complex-systems and volume-operations. Considering innovation along these two lines allows a company to select its most effective strategy.
The single most important act of strategy leadership is to select the innovation vector upon which your company will develop its sustainable competitive advantage—its core. To do this properly requires a deeper understanding of the properties of each of these innovation types.
Moore identifies five life cycle categories for products and services: emergent, growth, maturity, decline, and end of life. Disruptive innovation, the type of innovation which is most often associated with high technology, occurs in the emergent category. This phase is described in his book, Crossing the Chasm, and involves the leap from early adopters to mainstream buyers where it enters the growth phase. Although disruptive innovation is highly desirable, it is not the only type of innovation available to companies. Innovation types span the entire category life cycle and can contribute to overall corporate growth. In Dealing with Darwin, Moore devotes one chapter to each life cycle phase and its innovation strategies. This model of innovation broadens your outlook on opportunities for growth and new offers.
Moore overlays the category maturity lifecycle with the four value disciplines described by Michael Treacy and Fred Wiersema in The Discipline of Market Leaders. The four disciplines are: product leadership, customer intimacy, operational excellence, and category renewal.
This group of innovation types is characterized as very powerful, expensive and risky. Therefore, they must be executed in high growth markets to realize the necessary returns and market share wins. Here’s Moore discussing this zone.
Disruptive Innovation – Products and services which create technology discontinuities and new market categories are part of this set. Existing standards and value chains are over-turned in favor of new approaches. Digital media (music, film) and social media networks are examples.
Application Innovation – Finding new uses, new audiences, and re-combining existing functionality are attributes of this category. Although standards change, existing value chains are disrupted. Examples from the book are the application of Macintosh computers to desktop publishing and using fault tolerant computers to run ATM networks.
Product Innovation – Here, existing products are improved through functionality and usability for existing markets. Success is achieved through time to market and patent protection. Improvements such as wireless connnectivity in laptops, cameras in cell phones, and hybrid engines in cars are examples of product innovation. Other examples are moving
Platform Innovation – Platform leaders create foundational or ingredient systems on which third parties can build further value. Success here relies on architectural leadership, relationship building, and creating benefits for the entire ecosystem. Famous examples are Intel and Microsoft.
This group of innovation types are less risky and less powerful, but can give a company money back through cost and efficiency savings. Due to its lower power potential, this group is better suited for mature markets where market share is more likely to be constant. Here’s Moore talking about the Customer Intimacy zone.
Line-Extension Innovation – Line-extensions introduce new sub-categories within existing offering groups. Much of the infrastructure stays the same, but user-facing features or packaging changes sufficiently to create novel products and services. Examples are SUVs for an auto manufacturer or laptops for a computer manufacturer.
Enhancement Innovation – This is a smaller, more targeted, modification or feature enhancement to an existing offering such as Teflon coating for pans or higher pixel ratings for digital cameras.
Marketing Innovation – Marketing innovation uses new or highly effective marketing campaigns such as viral strategies, social media, or crowd sourcing to outpace competitors.
Experiential Innovation – This category occurs most frequently in service offerings, or by adding a service to an existing product. Here the overall experience of a offering is enhanced through personalization, 1:1 attention, or a higher level of value add.
Like Customer Intimacy, the Operational Excellence zone is less risky and less powerful, but can give a company money back through cost and efficiency savings. Due to its lower power potential, this group is better suited for mature markets where market share is more likely to be constant. Here’s Moore talking about the Operational Excellence zone.
Value-Engineering Innovation – The goal in this category is to decrease costs in manufacturing / development for existing offers without changing their composition. Optimizing component parts and the overall assembly / creation process are tactics here.
Integration Innovation – This is the flip-side of value-engineering innovation–the customer’s cost of ownership is decreased by simplification and/or consolidation into a single entity that can be managed more effectively than multiple pieces.
Process Innovation – The goal of this type of innovation is to reduce waste and cost from processes that support and enable the offer, rather than offer itself. Inventory management and quality programs can be used here.
Value-Migration Innovation – This type of innovation is described in Adrian Slywotzky’s book Value Migration. Companies taking this approach will move away from segments of the value chain which are commoditized to segments which are richer in profit and growth opportunities.
Category renewal considerations come into play when a business is declining and must be wound down or immediately exited.
Organic Innovation – Re-positioning a company to a growth category is the goal of organic innovation. Examples are IBM moving from hardware/software to services and Microsoft moving into browser software.
Acquisition Innovation – This strategy equates to mergers and acquisitions, either as a buyer or seller.
Harvest and Exit – This decision effectively closes out a line of business.
Design thinking is a method for transformation and value creation that can be applied to business, the environment, and human needs. When applied to large scale issues, design thinking can create solutions that go beyond aesthetics, usability, and profit. In Change by Design, Tim Brown, CEO of IDEO,illustrates how integrative, systems thinking can bring more powerful and wide ranging benefits than are typically associated with the design discipline. Using a human-centered approach, prototypes, storytelling, and a focus on experiences, design thinking emphasizes holistic solutions rather than incremental improvements to consumer objects.
I was trained as an industrial designer, but it took me a long time to realize the difference between being a designer and thinking like a designer. Seven years of undergraduate and graduate education and fifteen years of professional practice went by before I had any real inkling that what I was doing was more than simply a link in a chain that connected a client’s engineering department to the folks upstairs in marketing…Only gradually did I come to see the power of design not as a link in a chain but as the hub of a wheel.
The power of design thinking comes from its human-centered orientation and participatory nature. By connecting with the lives, behaviors, aspirations, and needs of the people it serves, design thinking begins with a solid foundation for creativity and problem solving. For Brown, design thinking starts with human needs, uses prototyping as its journey, and participation as its destination. Participatory design creates “many more forms of value than cash” because it involves, empowers, and takes into consideration many viewpoints.
By integrating what is desirable from a human point of view with what is technologically feasible and economically viable, designers have been able to create the products we enjoy today. Design thinking takes the next step, which is to put these tools into the hands of people who may have never thought of themselves as designers and apply them to a vastly greater range of problems…The evolution from design to design thinking is the story of the evolution from the creation of products to the analysis of the relationship between people and products, and from there to the relationship between people and people.
Brown uses Isambard Kingdom Brunel as an example of an early design thinker. Brunel designed the Great Western Railway and had a vision of creating an experience of floating across the countryside. To create this experience he engineered flat gradients, viaducts, and tunnels that were part of a larger plan for an integrated travel system linking London to New York via trains and ships. Brunel designed a transportation experience with a system-wide view in mind to create more than just a railway journey.
The willing and even enthusiastic acceptance of competing constraints is the foundation of design thinking…Constraints can best be visualized in terms of three overlapping criteria for successful ideas: feasibility (what is functionally possible within the foreseeable future); viability (what is likely to become part of a sustainable business model); and desirability (what makes sense to people and for people)… A competent designer will resolve each of these three constraints, but a design thinker will bring them into a harmonious balance.
Constraints are a mirror of the real world in which a design will operate and provide benefit. Keeping all three dimensions of constraints in mind enables the design team to balance the needs of the business, with that of the end user and broader community. Starting a design project with just a single attribute in mind can lead to incremental solutions that do not add significant or lasting value.
Asking the right questions
Posing questions which are aspirational yet specific enough to guide creativity is an essential starting point for design thinking. Brown gives many examples in the book of “how might we?” questions which energize brainstorming. Asking a question that is too specific in a design brief narrows the range of value a solution can provide. Conversely, asking too broad of a question doesn’t provide sufficient constraints to create a solution that meets a defined need. Since design projects frequently begin with a design brief, it’s important to ask questions that will stimulate design thinking instead of merely incremental improvement.
The basic problem is that people are so ingenious at adapting to inconvenient situations that they are often not even aware that they are doing..The tools of conventional market research can be useful in pointing toward incremental improvements, but they will never lead to those rule-breaking, game-changing, paradigm-shifting breakthroughs that leave us scratching our heads and wondering why nobody ever thought of them before. Our real goal, then, is not so much fulfilling manifest needs by creating a speedier printer or a more ergonomic keyboard; that’s the job of designers. It is helping people to articulate the latent needs they may not even know they have, and this is the challenge of design thinkers.
Brown believes that traditional focus groups or user interviews only yield incremental improvements because the people who are using a current solution or are immersed in a current context are not aware of all the workarounds and augmentations they have made to overcome usability and functional issues. Brown is a proponent of working with the “most extreme users” in the design process because people who are pushing the boundaries of objects and systems frequently expose new opportunities that mainstream uses do not. He believes that there is a huge opportunity in edge cases where there is little interest from large companies.
The process of the design thinker, rather, looks like a rhythmic exchange between the divergent and convergent phases, with each subsequent iteration less broad and more detailed than the previous ones. In the divergent phase, new options emerge. In the convergent phase it is just the reverse: now it’s time to eliminate options and make choices. It can be painful to let a once-promising idea fall away, and this is where the diplomatic skills of project leaders are often tested.
Design thinking brings together both synthetic and analytic approaches along with divergent and convergent thinking. Because integrative thinking is the “ability to exploit opposing ideas and opposing constraints to create new solutions”, it is a cornerstone of design thinking. Much of management training is focused on making decisions and converging on a final outcome. Design thinking adds a divergent phase which is used to generate options through brainstorming and other creative techniques. Pairing the two phases creates a cycle of ideation and selection through which new ideas are generated and identified for implementation. Exploration of alternatives and derivative ideas is encouraged by the cycle between synthetic and analytic thinking.
Prototyping, or “thinking with your hands”, is a key element of the design thinking method. Brown suggests time to first prototype as a success metric for projects. Prototyping is participatory, supports learning, and encourages continual improvement through iteration. Prototypes get the conversation going and get everyone’s hands on the end product. Large scale prototypes can model environments; services can be prototyped through role playing and narrative. There is a balance to successful prototyping–over investing in an early prototype can stop creativity in its tracks as the team stops divergent thinking and gets into implementation mode.
Considering the experience of a product, service, system, or environment enables the design thinker to provide more satisfying solutions which address more than just technical or functional requirements. Effective brand and relationship building relies on engagement and participation, which are hallmarks of design thinking techniques. Experience design puts the design team in the shoes of their end users and puts a human focus on the end solution. The experience of a product or service is also a broader canvas on which to create and provides more opportunities for adding value. Experiences also tend to emphasize relationships between people, not just people and objects. That creates a more challenging problem domain, but also creates more opportunity for break-out value.
Brown says “a real experience culture is a culture of spontaneity” because great experiences cannot be scripted nor can they be documented via a process. Narrative and storytelling become important here because the essence of the experience is the journey that the customer takes. Connecting and understanding the emotional elements of an experience are essential for the design team to create a new and more satisfying one.
In the video below, Tim Brown talks about “moving from design to design thinking” and touches on many of the themes from Change by Design.
Based on his early experiences designing objects that quickly became obsolete, Brown says the impact of design has been diminished because it has transformed from “systems thinkers who are reinventing the world to a priesthood of folks in black turtlenecks and designer glasses who are working on small things.” He observes that over time “design became a profession and focused on an ever smaller canvas until it came to stand for aesthetics, image, and fashion” rather than working on transformative issues such as global warming, education, healthcare, security, and clean water. Brown observes that “maybe what passed for design wasn’t all that important–making things more attractive, easier to use, and more marketable.” For him, design thinking is the path towards solving much larger, longer lasting, and more valuable problems. Brown says “design has its greatest impact when it is taken out of the hands of designers and put into the hands of everyone”.
Although most businesses aspire to enter high growth categories, go-to-market considerations often conflict with portfolio management and result in resource allocation to low-growth, but highly material, products and services. The priority of current period revenue makes next generation offerings a lower priority in enterprise budgeting and planning processes. In Escape Velocity, Geoffrey Moore provides several frameworks for diagnosing this situation and recommends specific remedies to ensure future high-growth businesses can be funded and supported.
Introduced by Mehrdad Baghai, Steve Coley, David White and Stephen Coley in the The Alchemy of Growth, the Three Horizons Model (requires free account) is a framework for understanding and managing a portfolio of businesses or products to most effectively allocate resources and choose appropriate strategies.
Horizon 1 offerings are current businesses which are expected to be profitable and sustainable. Horizon 3 offerings are research & development efforts meant to deliver prototypes to early adopters. Horizon 2 provides the bridge from the current state to the future. Examples Moore gives for each horizon in the book are: flat panel TVs (horizon 1), internet service enabled TVs (horizon 2), and 3D TVs (horizon 3).
Each horizon has different success metrics: Horizon 1 success is measured by standard financial metrics (revenue vs plan, contribution margin) in the current fiscal cycle; Horizon 2 is measured by key performance indicators such as target accounts, sales velocity and deal size; Horizon 3 is measured by marquee customers, deal size and market awareness.
Being able to enter new categories and exit old ones is fundamental to freeing your company’s future from the pull of the past–but it not that easy.
Geoffrey Moore starts off the book with a business challenge: global competition has changed the rules of the game and US businesses no longer have the “home field advantage”. To combat this situation, they must innovate and grow their businesses outside current offerings. The key to success, writes Moore, is to create an “outside-in, market-centric perspective” and decide what the world wants the company to be. The barrier to achieving this goal is ”the pull of the past [operating plan]” which manifests as internal budget and turf dynamics that prevent investments in forward-looking offerings. This situation is also described by Clayton Christensen’s The Innovator’s Dilemma.
To achieve “escape velocity” requires activating the Hierarchy of Powers, Moore’s strategic framework comprised of Category Power (are you in a growth market category?), Company Power (what is your market share relative to your competitive set?, what are your crown jewels?), Market Power (what is your market share within a specific market segment?), Offer Power (what is the demand for your offering?), and Execution Power (can you outperform your competitive set?). Each of the powers is a lever that can wrench a company loose from entrenched business practices and stagnant investment decisions.
Category power is a function of the demand for a given class of products or services relative to all other classes.
A fundamental characteristic of market categories is their lifecycle: emergence, growth, stability, decline, and end of life. Each phase requires a different set of strategies for effective innovation. Portfolio management involves allocating resources and offerings across these lifecycle phases with the goal of increasing the growth category.
Moore suggests that a category is material if it represents between 5 and 10 percent of either revenue or profit. He points out that most portfolios are heavily weighted towards low-growth, high-materiality offerings (which is representative of the escape velocity problem he identifies in the book) because today’s cash flow is frequently valued higher than a potential cash flow tomorrow. Of course, the ideal scenario is to invest in high-growth, high-materiality offerings, but that is often difficult to achieve due to the dynamics of the resource allocation process.
The barrier to investment in higher growth categories stems from the conflict between funding core business initiatives (horizon 1) and potential growth initiatives (horizon 2). The goal is to leap the Horizon 2 gap by “escaping the pull of the past” and create a break-out product or service which is a 10x improvement over current market offerings. The primary challenge in crossing this chasm is that organizations will typically allocate funding to Horizon 1 efforts over Horizon 2 efforts. Because they are distant and speculative, Horizon 3 efforts do not usually draw funding away from Horizon 1; however, Horizon 2 competes for the same funding as Horizon 1.
Additionally, it takes more resources to generate a dollar of revenue in Horizon 2 than in Horizon 1. Horizon 2 products ship today, so they require today’s marketing dollars and sales resources. Horizon 2 products also tend to be incomplete and immature so they require professional services to implement and support.
Because each horizon has a different financial payoff model, there is a conflict between near-term and mid-term returns. Financial and corporate performance incentives will prioritize investments in Horizon 1 and thereby exert the drag that results in the classic disruptive innovation as described by Clayton Christensen.
To break free of this legacy mindset, Moore recommends four remedies:
- Use metrics appropriate to the time horizon, like sales to key accounts within a niche, to evaluate Horizon 2 products and services.
- Separate Horizon 1 from Horizon 2 budgets so that Horizon 2 initiatives don’t have to compete with Horizon 1 for dollars.
- Create temporary, virtually organized business units to own Horizon 2 initiatives instead of matrix efforts which reach into Horizon 1 businesses.
- Find M&A targets that will move Horizon 2 businesses into material revenue ranges.
Platform leadership is much sought after, but comes with a specific set of risks, tensions, and strategies. Platform strategies work best when products and services are interdependent and there are broad opportunities for innovation outside a core technology. In addition to innovating internally on their core technologies, platform leaders must stimulate and support innovation in the entire value chain. Using Intel, Microsoft, and Cisco as examples, Gawer and Cusumano describe the strategic choices that drive platform development. The authors portray strategic tension as a creative force which focuses decisions and moves platform leaders forward.
Becoming a platform leader is like winning the Holy Grail: Many seek it, but few achieve it. By definition, platform leaders who succeed can exert a strong influence over the direction of innovation in their industries and thus over the network of firms and customers–the “ecosystem”–that produces and uses complements.
But not all industries are suitable for platform leadership strategies.
The dynamics that make it possible occur only under certain conditions.
A fundamental condition is that the firm’s product has limited value when used alone but gains in value when used along with complements.
The realization that demand for one’s core product depends on an array of complements–and, therefore, that one’s destiny depends on the decisions and actions of others–is the starting point for thinking like a platform leader.
The increasing interdependence of high-tech products and services and the innovation being driven by more and more players create an environment in which platform leadership becomes an opportunity. As a result, companies must ask: who will be in charge of the platform and how will its technical integrity be maintained?; what mechanisms will the leader use to develop the platform?; and, how will the leader achieve or preserve market leadership? The overall strategy is to increase the pie for everyone, especially in cases where the platform leader owns a majority of market share and cannot grow substantively with single digit percentage points. A significant characteristic of platform strategy is the presence of a modular design for the product which allows innovation to occur at multiple levels of the architecture without threatening the overall integrity of the system. This provides opportunities for many companies to participate in advancing components and overall design. As each component gets better, the entire platform gets better. Sometimes a single component is the bottleneck and holds back the performance or functionality of the entire platform. Successful platform leadership requires an industry-wide vision and view that extends far beyond a single company.
In Platform Leadership, Annabelle Gawer and Michael A. Cusumano outline four sets of strategic choices that are part of platform leadership:
- Determine the scope of the firm: Is it better to create product complements internally or let someone else do it? How far into the technology value chain should a firm extend?
- Design the product with strategic intent: What degree of modularity is appropriate? Should product interfaces be open or closed? What information should be disclosed to other companies?
- Shape relationships with external complementors: How can the company balance competition and collaboration with outside players? What’s the best way to create and sustain relationships with complementary product providers?
- Optimize internal organizational structures: What processes and systems will allow the company to manage internal and external conflicts of interest most effectively? What’s the right way to resolve the tensions between industry players?
Scope of the firm
The decision of what complements to make inside and what to leave outsiders external firms is probably the single most important issue that platform leaders must decide–and keep deciding.
The decision encompasses choosing appropriate levels of investment in venture capital activities or acquisitions aimed at evolving the platform or helping the complements business
This strategic component involves deciding where in the technology stack you want to provide value. Being a platform leader requires supporting and stimulating innovation outside your core product. One challenge to achieving this goal is convincing other industry players that they should take your lead. Many firms are asked by the platform leader to develop products in advance of market readiness and knowledge about demand because the platform leader has not yet introduced their own products. Timing is often critical because smaller component providers likely have shorter ROI horizons than the platform leader who is frequently looking several years ahead.
The authors describe the evolution Intel went through as they moved from 100% focus on processor development to expanded leadership of the PC platform. When Intel developed their vision for the PC platform that supported their long term processor development, they increased the scope of their activities to peripherals and software systems that were previously outside their domain. At Intel, there was a “Job 1″ (sell the main product line) and a “Job 2″ (profit from complementary businesses) which created a frequent opposition of forces and interests. Frequently, the platform leader both defines and participates in the platform.
Strategic product design
The technical direction of the platform can be guided by a single firm or a group of firms operating as a standards body or consortium. Because no single company can provide the entirety of complementary functions required for a broad platform, complex ecosystems frequently evolve. The authors document Intel’s involvement in the development of two key standards USB and PCI bus and lessons learned along the way. One key consideration in this strategic area is the definition of the interface(s) between the platform leader’s core product and complementary products. As the interfaces expand and change, so too do the priorities and investments of the platform leader. There may be specific parts of the technology stack that are bottlenecks and hold back the entire platform from moving forward. In the case, the platform leader must often step in to develop, or invest in the development of, that component or area. Interface design and the level of modularity that the platform leaders includes in the platform architecture are key factors in how the ecosystem must be managed.
Relationships with complementors
In many cases, the demand for complementary products is uncertain and the platform leader must manage expectations and rationalize investments by third parties. Managing and cultivating platform provider relationships includes weaving collaborative relationships between competitive third parties, convincing complementors that your company is not a threat and has a viable vision, and deciding how much competition is healthy and safe. In order to maintain a healthy ecosystem, there must be profit at every stage in the ecosystem, and that goal must be orchestrated by the platform leader(s).
As part of platform development, it is necessary to reveal various proprietary details among a group of competitors. Handling this exchange of information and establishing trust is a critical task for platform leaders. Each company profiled in the book took a different approach to disclosing information and creating partnerships with third parties. Intellectual property management and licensing are key considerations in platform strategy. The authors describe this lever as balancing the opposing poles of control and consensus–to be an effective platform leader requires blending both approaches to evolve the platform over time. Maintaining the right set of incentives for complementary product providers is a critical goal for platform leaders.
This book is about platform strategy and the tensions and tradeoffs that go along with choosing to be a platform leader. Although the authors sing the praises of Intel, Microsoft, and Cisco, they vividly illustrate the difficulties, complexities, and mistakes each of these companies made in their pursuit of the platform leadership goal. The quotes from managers and leaders provide a detailed view of the decision making process and how strategies were implemented. The book illustrates that platform leadership is a double-edged sword–although there is great market power involved, the interdependencies are also daunting. Platform Leadership is a rich book with many relevant examples that provide details about strategic choices made by several major technology companies along with their stumbles and challenges.
In the video below, Michael A. Cusumano talks about his other book, The Business of Software: