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Many markets are structured as platform ecosystems, they shouldbe open or closed platforms, where a stable core (such as a smartphone operating system or a melodystreaming service) mediates the relationship between a wide range of complements (like application, games or songs) and prospective end-users.


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 madeby each member influences the value madeby others. Because a robust and high-quality ecosystem of complements attracts more customers, complements need each other even though they might also be competing versuseach other.

A platform’s boundaries shouldbe well-defined with a stable set of members dedicated wholly to that platform, or they shouldbe amorphous and changing, with members entering and exiting freely, and participating in multiple platforms simultaneously. For example, consider the difference between the television/filmstreaming services HBO on Demand and Amazon Prime. HBO on Demand exists to serve only HBO materialup to consumers. The present accessibleare tightly controlled, and there is limited entry and exit of presentproducers. The Amazon Prime ecosystem is much more open. In fact, just about any materialproducer – including individual independent filmmakers—shouldmake their materialaccessibleon Amazon Prime.

In many platform ecosystems there are switching costs that make it difficult or costly to modifyecosystems. 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 utilize in typical reseller arrangements. A video game that has been angry for the Microsoft Xbox, for example, cannot be played on a PlayStation console unless a freshversion of it is angry (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. It strikes a compromise between the loose coupling of a purely modular system, and the tight coupling of a traditional integrated product. It enables customers to mix-and-match some components and complements, while still enabling some co-specialization and curation of the complements and components accessiblefor the system. In ecosystems, gaining assistanceand approval of the other members and legitimacy matters, as the very concept of an ecosystem is based on the idea that every organism is interdependent on other organisms within the system and gaining acceptance from strongactors is therefore crucial.


Video game systems are an iconic example of platform ecosystems. Consoles need to beginwith 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 accessiblewhen the console launches. On the other hand, end users wishmore 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. More recently, industrial platform sponsors operating in the B2B context, such as Volvo and Komatsu, started to develop platform ecosystems that bring together different carmarkets, connectivity providers, app, and customers.

Platform ecosystem as parallel conversations

Platform, ecosystem, and particularly "platform ecosystem" is a disputed term in infosystems, organizational management, and technology and innovation research Jochem Hummel said on 21 February 2020 in a lecture of the Digital Business Strategy postgraduate module at Warwick Business School. "Different researchers mean different things when referring to platform ecosystems," Jochem said, "creating parallel conversations." Similar comments were raised by Melissa Schilling on 30 November 2017 in a conferencetitled 'A Multi-Disciplinary Perspective on Platform Ecosystems Research.' Melissa argued that almost every domainwas nowadays called a platform, with an ecosystem when users could selectbetween buying products or services from different vendors. "Does this mean McDonalds is a platform ecosystem?", she asked the other panelists. Since 2017, consensus has emerged among scholars that platforms ecosystems typically require the involvement of in some methodor another digital technology. This may have triggered the term to become less famousas scholars started using the term 'digital platform' or 'digital platform ecosystems' instead popularized through, for example, the 2018 'Special Issue: Digital Infrastructure and Platforms' in InfoSystems Research.

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