How Platforms Can Orchestrate Innovation

Entrepreneurs and startups are increasingly turning to platforms nowadays—whether it is about creating a new platform, or providing product offerings and soliciting ideas on a platform.  Consider Kickstarter’s platform that features listings of thousands of entrepreneurial projects to connect with the millions of registered backers online, or Apple’s iOS platform hosting millions of mobile apps published by developers and billions of users of iOS devices.  Indeed, platforms are now being seen as “semi-regulated” marketplaces that foster entrepreneurship under the coordination and direction of the platform owner (Kickstarter, Apple). Yet, such coordination is surely easier said than done. Platforms do not own the product offerings (entrepreneurial projects, apps) or have direct control over their partners (entrepreneurs, app developers).  

So what can a platform owner do to orchestrate the value creation activities of autonomous business partners which are critical to the vibrancy and success of a platform?

This question was the focus of a research project carried out by Leeds School’s Strategy & Entrepreneurship professor Tony Tong, in collaboration with two Ph.D. alumni, Yuchen Zhang (currently assistant professor at Tulane University) and Jingjing Li (currently assistant professor at the University of Virginia), who recently presented at the National Bureau of Economic Research in Boston. The researchers argue that platform owners can use what they call “access control” to shape business partners’ activities. Specifically, they looked at how “jailbreaking”—shapes app developers’ activities. Apple’s iOS is well-known for adopting a strict gatekeeping policy that controls for what (apps) or who (app develops) has access to the platform.

The “jailbreak” of the iOS is hacking that exploits loopholes to remove Apple’s built-in restrictions, allowing users to install apps not officially approved by Apple’s App Store. After jailbreaking, many apps that were previously denied by Apple’s App Store can gain access to a sizable number of users with jailbroken iOS devices, and may present competitive pressure to existing iOS developers who profit from app-related sales.

The researchers leveraged the unexpected timing of the jailbreak of iOS 7 in December 2013 to conduct a natural experiment. They compared the posting activity of iOS app developers (which they consider the “treatment group”) and the activity of otherwise comparable Android app developers unaffected by the jailbreak (the “control group”) on StackOverflow.com, an active online forum of software developers. They found that with the jailbreaking, the resulting deficiency in iOS’s gatekeeping—and weakened platform access control—reduced the amount, as well as the quality, of the information being shared by iOS app developers. The findings suggest that increased competitive threat—due to the “unauthorized” entry of imitating products into the platform—dampens app developers’ incentives to share knowledge.

The team’s findings suggest that platform access control, at least in the case of Apple’s iOS, may be beneficial to platform owners.  

Although ecosystem partners often collaborate with each other to create value, this study highlights that opening platform access too widely to partners with substitutive product offerings can significantly shift the dynamics among partners toward a more competitive stance. These dynamics ultimately shape the success of the platform, and thus are worth close attention for entrepreneurs aiming to create a platform or release their product offerings on the platform.  Overall, the findings suggest that while openness may help a platform orchestrate innovation, too much openness—especially to partners with highly similar products or services—may dampen innovation.