1. Overview

2. Example

3. References

Many markets are structured as platform ecosystems, where a stable core (such as a smartphone operating system or a music streaming service) mediates the relationship between a wide range of complements (like apps, games or songs) and prospective end-users.^[1]

Overview

The word “ecosystem” comes from biology and is a contraction of “ecological system”; it refers to a system in which entities have some degree of mutual dependence. In a platform ecosystem, the value created by each member influences the value created by others. Because a robust and high-quality ecosystem of complements attracts more customers, complements need each other even though they might also be competing against each other.^[2][3][4]

A platform’s boundaries can be well-defined with a stable set of members dedicated wholly to that platform, or they can be amorphous and changing, with members entering and exiting freely, and participating in multiple platforms simultaneously. For example, consider the difference between the television/movie streaming services HBO on Demand and Amazon Prime. HBO on Demand exists to serve only HBO content up to consumers. The shows available are tightly controlled, and there is limited entry and exit of show producers. The Amazon Prime ecosystem is much more open. In fact, just about any content producer – including individual independent filmmakers—can make their content available on Amazon Prime.

In many platform ecosystems there are switching costs that make it difficult or costly to change ecosystems. Platforms and their complements often make investments in co-specialization or sign exclusivity agreements that bind them into stickier, longer-term relationships than the market contracts used in typical reseller arrangements. A video game that has been made for the Microsoft Xbox, for example, cannot be played on a PlayStation console unless a new version of it is made (and the game producer may have signed a contract with Microsoft that prohibits this). A platform ecosystem is thus characterized by relationships that are neither as independent as arms-length market contracts, nor as dependent as those within a hierarchical organization. It is, in essence, a hybrid organizational form.^[1] It strikes a compromise between the loose coupling of a purely modular system, and the tight coupling of a traditional integrated product.^[5] It enables customers to mix-and-match some components and complements, while still enabling some co-specialization and curation of the complements and components available for the system.

Example

Video game systems are an iconic example of platform ecosystems. Consoles need to launch with high quality games. Since it is difficult to induce game developers to make games for a console that has not yet been widely adopted, most game console producers must produce games themselves (or subsidize their production) to ensure that high quality games are available when the console launches. On the other hand, end users want more games than just those produced by the console producer, so console producers like Microsoft, Sony and Nintendo also license third-party developers to produce games for their consoles. They carefully screen the licensed games for quality and compatibility, and they may require the game developers to sign exclusivity agreements or to customize the games for the console.

References

• Engineering employers federation
• Engineering Employers Federation
• Engineering Equation Solver
• Engineering Ethics
• Engineering Experiment Station
• Engineering fit
• Engineering geologist
• Engineering geologists
• Engineering Geology
• Engineering graphics
• Engineering graph paper
• Engineering Heritage Award
• Engineering Heritage Awards
• Engineering Heritage Hallmark Scheme
• Engineering Index
• Engineering Index Monthly
• Engineering informatics
• Engineering Information Inc
• Engineering in medieval Islam
• Engineering in Russia
• Engineering in Russian Empire
• Engineering in Soviet Union
• Engineering Institute
• Engineering Institute of Canada
• Engineering Institute of Canada Fellows