How might Netscape have maintained its early lead and pre- times be hard to convince others to follow a particular direction, vented the market from tipping toward Microsoft?For one thing, for example,when an industry is undergoing transition and its Netscape managers misunderstood how to keep a market from contours are ill-defined,or when technology is evolving too rap- tipping in a different direction.Once a comparable product is idly.But these are the very conditions when companies that want free,competitors have little choice but to reduce their prices to to become platform leaders can stand out-precisely because zero and find other ways to make money,such as through ser- they are so badly needed. vices or advertising.Netscape made the mistake of continuing to charge customers such as Dell Inc.and AOL as well as corporate REFERENCES users for the Navigator browser even after Microsoft began bun- 1.Since we published our work on platform leadership in 2002,a num- dling a competitive browser for free.Netscape was also late to see ber of students at MIT and elsewhere have inspired us to continue this that it could generate enormous advertising revenues from its research and,in particular,to investigate market or business factors that highly popular Web site. help platform-leader wannabes succeed.In particular,we would like to thank Ray Fung for his master's thesis,"Networking Vendor Strategy and But perhaps Netscape's greatest mistake was to challenge Mi- Competition and Their Impact on Enterprise Network Design and Imple crosoft too directly and present the browser as an alternative mentation"(MIT System Design and Management Program,2006)and computing platform before it had enough of a user base and Makoto Ishii for his master's thesis,"A Strategic Method to Establish Sustainable Platform Businesses for Next-Generation Home-Network ecosystem of complementors (Web site designers,Web applica- Environments"(MIT Sloan Fellows Program,2006). tion developers and Internet service providers,as well as PC 2.For an insightful exposition of drivers of platform emergence in the con- assemblers who were licensing Navigator)to sustain its posi- text of computing,see S.Greenstein,"Industrial Economics and Strategy: tion.14 Navigator initially was a wonderful complementary Computing Platforms,"IEEE Micro 18,no.3(May-June 1998):43-53;and T.Eisenmann,G.Parker and M.Van Alstyne,"Strategies for Two-Sided application to Windows and might have remained so,at least for Markets,"Harvard Business Review 84(October 2006):92-101 several more years.In retrospect,Netscape managers should have 3.We thus disagree with J.Sviokla and A.Paoni,"Every Product's a Plat- thought more carefully about how their early lead could quickly form,"Harvard Business Review 83(October 2005):17-18. erode with a competitor such as Microsoft,which shipped hun- 4."Search Market Share Update:Google Rises,MSN Falls,Yahoo Hov- dreds of millions of copies of Windows each year. ers,"May 24,2007,www.seroundtable.com/archives/013595.html. 5.This discussion of Qualcomm is based primarily on D.Yoffie,P.Yin Platform Leadership and Company Size and L.Kind,"Qualcomm Inc.2004,"Harvard Business School case no. 9-705-401(Boston:Harvard Business School Publishing,2005).See As the Microsoft-Netscape example suggests,size can some- also Qualcomm Inc.,"Qualcomm Business Model:A Formula for Innova- times be an advantage for companies seeking to tip a market. tion and Choice"(San Diego,California:Qualcomm,2007). In fact,one issue that has surfaced in discussions with manag- 6.Qualcomm Inc.,"Annual Report 2006"(San Diego,Califoria:Qual- comm,2006). ers is the question of whether small or medium-sized companies 7.See J.Saghbini,"Standards in the Data Storage Industry:Emergence can truly become platform leaders,or whether platform lead- Sustainability,and the Battle for Platform Leadership"(Master's thesis, ership is only an option for large companies like Microsoft, MIT System Design and Management,June 2005). Intel or Cisco.We believe that coring is a possible option for 8.See C.Shapiro and H.Varian,"Information Rules:AStrategic Guide to any company because technology and architectural leadership the Network Economy"(Boston:Harvard Business School Press,1998) do not directly depend on the size of the company.Qualcomm, 9.See A.Gawer and M.Cusumano,"Platform Leadership:How Intel,Mi- crosoft,and Cisco Drive Industry Innovation"(Boston:Harvard Business for example,was little more than a startup company when it School Press,2002). introduced its technology for wireless devices.JVC and even 10.See Eisenmann,"Strategies." Microsoft and Intel were small companies when they first be- 11.DM Review Editorial Staff,"Industry Research:Linux Vs.Windows came platform leaders.And Linux was the product,at least -Is the Gap Narrowing?,"June 2005,www.dmreview.com/article_sub initially,of a lone graduate student working in a remote corner cfm?articleld=1030321;and "Comparison of Windows and Linux,May of Europe.At the same time,though,smaller companies are 29,2007,www.wikipedia.com. likely to have a harder time negotiating with large enterprise 12.See,for example,G.Moody,"Rebel Code:Inside Linux and the Open Source Revolution"(Cambridge,Massachusetts:Perseus,2001);and customers.They may also find it difficult to tip markets on Gawer,"Platform Leadership." their own and generally will need to establish ecosystem part- 13.See M.Cusumano and D.Yoffie,"Competing on Internet Time:Les- nerships or coalitions of providers and users-as JVC, sons From Netscape and Its Battle with Microsoft"(New York:Free Microsoft,Intel and Linux have done. Press,1998) In general,becoming a platform leader requires a compelling 14.Cusumano,"Competing." vision of the future as well as the ability to create a vibrant eco- system by evangelizing a business model that works both for the Reprint 49201. platform-leader wannabe and potential partners.It can some- Copyright Massachusetts Institute of Technology,2008.All rights reserved. SLOANREVIEW.MIT.EDU WINTER 2008 MIT SLOAN MANAGEMENT REVIEW 35SLOANREVIEW.MIT.EDU WINTER 2008 MIT SLOAN MANAGEMENT REVIEW 35 How might Netscape have maintained its early lead and pre￾vented the market from tipping toward Microsoft? For one thing, Netscape managers misunderstood how to keep a market from tipping in a different direction. Once a comparable product is free, competitors have little choice but to reduce their prices to zero and find other ways to make money, such as through ser￾vices or advertising. Netscape made the mistake of continuing to charge customers such as Dell Inc. and AOL as well as corporate users for the Navigator browser even after Microsoft began bun￾dling a competitive browser for free. Netscape was also late to see that it could generate enormous advertising revenues from its highly popular Web site. But perhaps Netscape’s greatest mistake was to challenge Mi￾crosoft too directly and present the browser as an alternative computing platform before it had enough of a user base and ecosystem of complementors (Web site designers, Web applica￾tion developers and Internet service providers, as well as PC assemblers who were licensing Navigator) to sustain its posi￾tion.14 Navigator initially was a wonderful complementary application to Windows and might have remained so, at least for several more years. In retrospect, Netscape managers should have thought more carefully about how their early lead could quickly erode with a competitor such as Microsoft, which shipped hun￾dreds of millions of copies of Windows each year. Platform Leadership and Company Size As the Microsoft-Netscape example suggests, size can some￾times be an advantage for companies seeking to tip a market. In fact, one issue that has surfaced in discussions with manag￾ers is the question of whether small or medium-sized companies can truly become platform leaders, or whether platform lead￾ership is only an option for large companies like Microsoft, Intel or Cisco. We believe that coring is a possible option for any company because technology and architectural leadership do not directly depend on the size of the company. Qualcomm, for example, was little more than a startup company when it introduced its technology for wireless devices. JVC and even Microsoft and Intel were small companies when they first be￾came platform leaders. And Linux was the product, at least initially, of a lone graduate student working in a remote corner of Europe. At the same time, though, smaller companies are likely to have a harder time negotiating with large enterprise customers. They may also find it difficult to tip markets on their own and generally will need to establish ecosystem part￾nerships or coalitions of providers and users — as JVC, Microsoft, Intel and Linux have done. In general, becoming a platform leader requires a compelling vision of the future as well as the ability to create a vibrant eco￾system by evangelizing a business model that works both for the platform-leader wannabe and potential partners. It can some￾times be hard to convince others to follow a particular direction, for example, when an industry is undergoing transition and its contours are ill-defined, or when technology is evolving too rap￾idly. But these are the very conditions when companies that want to become platform leaders can stand out — precisely because they are so badly needed. REFERENCES 1. Since we published our work on platform leadership in 2002, a num￾ber of students at MIT and elsewhere have inspired us to continue this research and, in particular, to investigate market or business factors that help platform-leader wannabes succeed. In particular, we would like to thank Ray Fung for his master’s thesis, “Networking Vendor Strategy and Competition and Their Impact on Enterprise Network Design and Imple￾mentation” (MIT System Design and Management Program, 2006) and Makoto Ishii for his master’s thesis, “A Strategic Method to Establish Sustainable Platform Businesses for Next-Generation Home-Network Environments” (MIT Sloan Fellows Program, 2006). 2. For an insightful exposition of drivers of platform emergence in the con￾text of computing, see S. Greenstein, “Industrial Economics and Strategy: Computing Platforms,” IEEE Micro 18, no. 3 (May-June 1998): 43-53; and T. Eisenmann, G. Parker and M. Van Alstyne, “Strategies for Two-Sided Markets,” Harvard Business Review 84 (October 2006): 92-101. 3. We thus disagree with J. Sviokla and A. Paoni, “Every Product’s a Plat￾form,” Harvard Business Review 83 (October 2005): 17-18. 4. “Search Market Share Update: Google Rises, MSN Falls, Yahoo Hov￾ers,” May 24, 2007, www.seroundtable.com/archives/013595.html. 5. This discussion of Qualcomm is based primarily on D. Yoffie, P. Yin and L. Kind, “Qualcomm Inc. 2004,” Harvard Business School case no. 9-705-401 (Boston: Harvard Business School Publishing, 2005). See also Qualcomm Inc., “Qualcomm Business Model: A Formula for Innova￾tion and Choice” (San Diego, California: Qualcomm, 2007). 6. Qualcomm Inc., “Annual Report 2006” (San Diego, California: Qual￾comm, 2006). 7. See J. Saghbini, “Standards in the Data Storage Industry: Emergence, Sustainability, and the Battle for Platform Leadership” (Master’s thesis, MIT System Design and Management, June 2005). 8. See C. Shapiro and H. Varian, “Information Rules: A Strategic Guide to the Network Economy” (Boston: Harvard Business School Press, 1998). 9. See A. Gawer and M. Cusumano, “Platform Leadership: How Intel, Mi￾crosoft, and Cisco Drive Industry Innovation” (Boston: Harvard Business School Press, 2002). 10. See Eisenmann, “Strategies.” 11. DM Review Editorial Staff, “Industry Research: Linux Vs. Windows — Is the Gap Narrowing?,” June 2005, www.dmreview.com/article_sub. cfm?articleId=1030321; and “Comparison of Windows and Linux,” May 29, 2007, www.wikipedia.com. 12. See, for example, G. Moody, “Rebel Code: Inside Linux and the Open Source Revolution” (Cambridge, Massachusetts: Perseus, 2001); and Gawer, “Platform Leadership.” 13. See M. Cusumano and D. Yoffie, “Competing on Internet Time: Les￾sons From Netscape and Its Battle with Microsoft” (New York: Free Press, 1998). 14. Cusumano, “Competing.” Reprint 49201. Copyright © Massachusetts Institute of Technology, 2008. All rights reserved