Differentiation is a standard concept for analyzing competition. It describes a common situation, where one firm develops the ability to serve one type of customer in a market—say, buyers who will pay a lot to save time—while a competing firm serves another—say, budget-conscious buyers who are patient.
Differentiation can describe common competitive behavior in technology markets. A chip firm might develop particular attributes—say, faster, energy-hungry electronics for a particular purpose—while their rival might specialize in slower chips that use little energy. This differentiation can earn each firm loyalty from buyers with different preferences.
That motivates today’s question: Can platforms differentiate? Platforms have played an increasingly important role in technology markets in the last decade—in mobile devices, in web services, you name it. A mix of standards composes a platform, complementing many other firms who build services upon the standards.
At first blush the answer appears to be yes. Think of attributes associated with common platforms, such as Windows, Android, Linux, Facebook, or the iPhone. These platforms differ from one another in the marketplace and set themselves apart from near rivals, in ways that earn the loyalty of particular users.
That first impression makes it worth a deeper look. There is more here than meets the eye, and smart firms shape their strategies with subtle thoughtfulness. (more…)