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date: 10 December 2024

Digital Platform Innovation and Opportunitieslocked

Digital Platform Innovation and Opportunitieslocked

  • Tammy L. MadsenTammy L. MadsenManagement Department, Leavey School of Business, Santa Clara University

Summary

Multi-sided digital platform (MSDP) business models have enabled the reorganization of industries and are fundamentally changing the way firms innovate and grow. Fueled by advances in digital technology, digital platform firms such as Apple, Alibaba, Amazon, Google, Tencent, and ByteDance have gained prominence around the globe. MSDPs create value by facilitating interconnections of products, services, or systems generated by a variety of external actors, thereby enabling them to interact in ways that otherwise might be elusive. Theoretical and empirical work on digital platforms also has accelerated in recent decades. Scholars have explored a variety of topics such as platform competition, network effects and their implications, platforms and corporate scope (i.e., vertical integration into complementary offerings), platform types, complementor heterogeneity, and platform governance and ecosystem orchestration. Much of the empirical literature directs attention to the economics of platforms at the exclusion of analyzing how differences in strategic objectives and choices contribute to unique MSDP positions within an ecosystem.

Heterogeneity in strategic objectives contributes to variation in platform scope, governance practices, and potential externalities and thus influences the strategic and organizational benefits accruing to participating actors and the platform itself. It follows that analyzing platforms from a strategic view can help to identify innovations in MSDPs and their governance.

In one novel MSDP model, the co-innovation platform, the primary strategic objective is accelerating innovation and ecosystem growth by enabling collaboration among a wide array of diverse external actors. Aligned with a focus on the quality of collaborations, one of a co-innovation MSDP’s distinguishing value creation features is its hands-on approach to the formation and execution of co-innovation partnerships. This hands-on approach relies on different governance choices and yields a different mix of strategic and organizational benefits for partners and the platform relative to the hands-off approach employed by most MSDPs. Many opportunities exist for advancing theory and empirical work on the implications of platform heterogeneity.

Subjects

  • Business Policy and Strategy
  • Information Systems
  • Organization Theory
  • Technology and Innovation Management

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