Saturday, September 7, 2019

REPOST: The force that Porter forgot

Preston McAfee was the first to realize that Michael Porter's famous industry analysis leaves out one crucial force: cooperation from complements. A new article, How Companies Become Platform Leaders, offers a framework for thinking about strategy in industries like telecommunications where success requires creating an "ecosystem" of complementary products.

A company must first decide whether to pursue a "product" or a "platform" strategy:
Put simply, a product is largely proprietary and under one company’s control, whereas an industry platform ... requires complementary innovations to be useful, and vice versa. An industry platform, therefore, is no longer under the full control of the originator, even though it may contain certain proprietary elements.

One of the biggest mistakes a company can make is to pursue a product strategy and fail to recognize the platform value of their product. The best example of this is perhaps Macintosh computer which, due to its early technological lead, could have become the dominant platform for personal computing. Instead they priced high, failed to encourage complementary innovotion, and let Microsoft become the dominant platform.

If you decide on a platform strategy, then the authors recommend one of two strategies, coring or tipping.
"Coring" is using a set of techniques to create a platform by making a technology "core" to a particular technological system and market. ... Examples of successful coring include Google Inc. in Internet search and Qualcomm Inc. in wireless technology.

"Tipping" is the set of activities that helps a company "tip" a market toward its platform rather than some other potential one. Examples of tipping include Linux's growth in the market for Web server operating systems


  1. The advent of the internet has given raise to the ease in the flow of information and knowledge sharing, as such, the landscape of business and society are changing rapidly. Porters five forces of industry competition can be now used as basis for business solvency and relevance. If growth is to be gained or sustained, businesses must revolutionize their product and services offerings to encompass complementary products or by any other means that gain increased value to their products. This is evident with Apple and the numerous applications that support their products.
    Dave Delwyn

  2. I have always felt that the analyses commonly used by business analysts do not neatly apply to small nonprofit organizations. Your post about the missing force of “cooperation from complements” helps to make Porter’s Five Forces model be more applicable to small nonprofit organizations. In looking at small human services nonprofits, it becomes very obvious that these organizations will not survive without the support of complementing organizations. For example, let’s take the problem of homelessness. One small nonprofit organization in an area may offer emergency housing for the homeless. But these shelters only allow 60-90 day stays, which means that clients will be back on the streets and then back in the shelter. Most of these nonprofits have examined the issue of homeless and determined the factors that lead to homelessness: domestic violence, drug and alcohol abuse, unemployment, etc. so they partner with complementing organizations that specialize in these issues.