prices on the operating system they will load onto their PCs. Failure to decide early on between a product or platform strategy can result in dangerous strategic confusion.Achieving platform status requires specific decisions that govern technology evolution,product and system design and business relation- ships within the ecosystem-and they are different decisions than those made when pursuing a product strategy.Another com- mon mistake is that managers can simply overlook the platform potential of their products.For example,Apple Inc.'s Macin- tosh personal computer was the leading product when it was introduced but didn't become the dominant personal computing platform,primarily because Apple did not open the Mac's architecture and software to third-party complementors and licensees. While the benefits of becoming a plat- form seem clear,not every market has to have a platform leader.In some large mar- kets,such as video game consoles or Web portals,several platform companies can persist without one clear winner.For that scenario to occur,it seems important that the market contain enough room for dif- ferentiation in user needs so that multiple companies can persist in specific niches or segments,particularly if it is not too diffi- cult for users to switch among more than one platform.2 Nor can every product become a plat- form.3 To have platform potential,however, research suggests that a product(or a tech- nology or service)must satisfy two and business choices that favor a platform can differ from those prerequisite conditions:(1)It should perform at least one essential that favor a product-creating differing incentives for owners of function within what can be described as a"system of use"or solve industry platforms than for companies that assemble proprietary an essential technological problem within an industry,and(2)it products.In particular,owners of industry platforms benefit from should be easy to connect to or to build upon to expand the system lots of innovation in complementary products as well as from of use as well as to allow new and even unintended end-uses. competition at the overall system level that would bring its price It is possible to test for these conditions.For the first,one can down.Thus,Microsoft Corp.benefits from competition among evaluate whether the overall system could function without the personal computer manufacturers that use its operating system, particular product or technology.If the system cannot operate, but they,in contrast,benefit when customers perceive their prod- then the product does indeed perform an essential function.For ucts as unique and therefore do not want cutthroat competition at example,Microsoft's Windows operating system and Intel's mi- the product or system level at which they compete.PC makers croprocessor were both essential platform components of the would probably rather see Microsoft face tough competition in original IBM and IBM-compatible personal computers.For the computer operating systems so that they could bargain for better second condition,the challenge is to test whether a product or a SLOANREVIEW.MIT.EDU WINTER 2008 MIT SLOAN MANAGEMENT REVIEW 29WINTER 2008 MIT SLOAN MANAGEMENT REVIEW 29 and business choices that favor a platform can differ from those that favor a product — creating differing incentives for owners of industry platforms than for companies that assemble proprietary products. In particular, owners of industry platforms benefit from lots of innovation in complementary products as well as from competition at the overall system level that would bring its price down. Thus, Microsoft Corp. benefits from competition among personal computer manufacturers that use its operating system, but they, in contrast, benefit when customers perceive their prod￾ucts as unique and therefore do not want cutthroat competition at the product or system level at which they compete. PC makers would probably rather see Microsoft face tough competition in computer operating systems so that they could bargain for better prices on the operating system they will load onto their PCs. Failure to decide early on between a product or platform strategy can result in dangerous strategic confusion. Achieving platform status requires specific decisions that govern technology evolution, product and system design and business relation￾ships within the ecosystem — and they are different decisions than those made when pursuing a product strategy. Another com￾mon mistake is that managers can simply overlook the platform potential of their products. For example, Apple Inc.’s Macin￾tosh personal computer was the leading product when it was introduced but didn’t become the dominant personal computing platform, primarily because Apple did not open the Mac’s architecture and software to third-party complementors and licensees. While the benefits of becoming a plat￾form seem clear, not every market has to have a platform leader. In some large mar￾kets, such as video game consoles or Web portals, several platform companies can persist without one clear winner. For that scenario to occur, it seems important that the market contain enough room for dif￾ferentiation in user needs so that multiple companies can persist in specific niches or segments, particularly if it is not too diffi￾cult for users to switch among more than one platform.2 Nor can every product become a plat￾form.3 To have platform potential, however, research suggests that a product (or a tech￾nology or service) must satisfy two prerequisite conditions: (1) It should perform at least one essential function within what can be described as a “system of use” or solve an essential technological problem within an industry, and (2) it should be easy to connect to or to build upon to expand the system of use as well as to allow new and even unintended end-uses. It is possible to test for these conditions. For the first, one can evaluate whether the overall system could function without the particular product or technology. If the system cannot operate, then the product does indeed perform an essential function. For example, Microsoft’s Windows operating system and Intel’s mi￾croprocessor were both essential platform components of the original IBM and IBM-compatible personal computers. For the second condition, the challenge is to test whether a product or a SLOANREVIEW.MIT.EDU