DISCUSSION Dynamics of Platform Competition and Complementor Mobility: - PowerPoint Presentation

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DISCUSSIONDynamics of Platform Competition and Complementor Mobility: Why Do App Developers Move from Apple to Google?f.k.a. Competing Across Platforms: Antecedents Of Platform MobilityYongzhi Wang, Nandini Rajagopalan, and Lori Qingyuan Yue

Andy Wu (HBS), Discussant

Platform Strategy Research Symposium

Boston University

July 18, 2018Slide2

SummaryJuly 2018Andy Wu (Harvard)2

Quality-based vs. quantity-based platform governance strategy for incumbents vs.

entrants

Theory

Phenomenon

Complementor

(app developers) choice of competing platforms, as revealed by their movement

Empirics

iOS

vs. Android in 2008–2014, focusing on period of Android entry against iOS incumbencySlide3

Quality vs. Quantity: Productivity FrontierJuly 2018Andy Wu (Harvard)3

Differentiation

Relative Cost Position

Low

High

Low

High

Competitive Positioning

Choosing a unique point

on the frontier.

Operational Effectiveness

Achieving best practice.Slide4

Google/Android is fundamentally a (search) advertising business.July 2018Andy Wu (Harvard)4

Google 2015 Annual Report. Graphics by http

://www.bbc.co.uk/guides/z9x6bk7Slide5

Apple is fundamentally an iPhone business.July 2018Andy Wu (Harvard)5

Estimated gross profit in FY2014. https

://www.statista.com/chart/1994/apples-gross-profit-by-product/Slide6

Overall Trends in Applications and Developers by PlatformJuly 2018Andy Wu (Harvard)6Source: App Figures. https://blog.appfigures.com/app-stores-growth-accelerates-in-2014/ Slide7

General question of interest to strategy scholarsPlatform competition (e.g., Zhu and Iansiti, 2012)Industry evaluation (e.g., Abrahamson and Rosenkopf, 1993)Clear theoretical motivation and baseline mechanismsTheoretical StrengthsJuly 2018Andy Wu (Harvard)

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Perspective. Smooth out transition between perspective of the complementor and perspective of platform owner E.g., when building out hypotheses, the arguments need to be from the perspective of the complementorDimensions of quality. Distinguish carefully between vertical differentiation vs. horizontal differentiation. Clarify language, particularly when contextualizing theory in the settingRational vs. behavioral arguments. Are behavioral arguments necessary to motivate complementor migration patterns?E.g. “anxiety”Judo economics. Price umbrella concept may apply to entrant strategy

Theoretical Opportunities

July 2018

Andy Wu (Harvard)

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Specificity of differentiation. Opportunity to delve into transaction-specific vs. generic differentiationE.g., as iOS apps tend overtime to adopt Android and become saturated with Android, the remaining apps on only iOS are those most tailored specifically for the iOS customer base (as revealed by top-ranked developers moving less to Android, and paid apps moving less to Android when Android is dominant)Theoretical OpportunitiesJuly 2018Andy Wu (Harvard)

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Competitive Advantage

Lower Cost

Differentiation

Competitive Scope

Broad

Cost Leadership

Differentiation

Narrow

Cost Focus

Differentiation

Focus

Generic Competitive Strategies

July 2018

Andy Wu (Harvard)

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(Porter, 1980)Slide11

Switching vs. multi-homing costs. Both are relevant when analyzing dynamics of competition between platform incumbents and entrants. Predictive value skews from multi-homing costs for new market vs. switching costs in established marketsTheoretical OpportunitiesJuly 2018Andy Wu (Harvard)11

Mono-homing

: 1 Setup Cost + 1 Ongoing Cost

Switching

: 2 Setup Costs + 1 Termination Cost + 1 Ongoing Cost

Multi-homing

: 2 Setup Costs + 2 Ongoing Cost

(may be smaller than 2x mono-home)

(Eisenmann, 2007)Slide12

Switching cost (out-of-pocket expenses and inconveniences incurred by network users when users abandon one platform in favor of another Network effects are distinct Homing costs are platform-specific investments, out-of-pocket expenses, and inconveniences borne by network users due to affiliation with a platform: upfront, ongoing, and termination costsMulti-homing costs are critical for predicting the structure of a new networked market. Switching costs are more salient when analyzing user decisions in established marketsHigh Multi-Homing Cost ⇒ High Switching CostBut not vice versaSwitching vs. multi-homing costsJuly 2018

Andy Wu (Harvard)

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Huge matching process across platforms, resulting in massive datasetExcellent job working within constraints of dataEffect sizesExtensive battery of robustness checksMedia coverage Surpassing eventsCompetition on AndroidTime confounding effectMulti-homing costs changing over timeComplementor capabilities Empirical StrengthsJuly 2018

Andy Wu (Harvard)

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Omitted variables bias. Anything correlated with both Android-iOS market share gap (benefit-cost to end customer of adopting platform) and complementor transition event from Android to iOS (benefit – cost of developer adopting platform), e.g., general quality of hardwareIdeally would have instrument for Android-iOS market share gap meeting exclusion restriction: something that affects consumer adoption but not developer adoption except through consumer adoption1st Stage:

2

nd

Stage:

where i: developers, t: time (month),

: developer fixed-effects,

and

are usual error

terms

,

is a vector of developers’ characteristics (time-varying).

Empirical Opportunities

July 2018

Andy Wu (Harvard)

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Measurement error: free vs. in-app payment. Data limitation, but ideally would have proxy dummy to separate these and strengthen results. One way is to have dummies for apps that are platforms themselves (e.g., social media, dating apps)Empirical OpportunitiesJuly 2018Andy Wu (Harvard)15Slide16

Interaction term vs. inverted U. As in robustness check, proxy average platform profitability (for a complementor) and including interaction term with market shareSwitching vs. multi-homing. Separate out multi-homing events (complementor adopts one platform, while staying on original platform) from switching events (complementor adopt one platform, abandons apps on other platform)Empirical OpportunitiesJuly 2018Andy Wu (Harvard)

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Footnote superscript number should go after commas and periods,5 not beforeX-axis of Android-iOS installed-base gap in smartphone shipment in graphs should be rounded to nearest 10th (i.e., 0.01, 0.02, etc.)Rescale variable 11 (i.e., Avg. Size of the Developer’s…) by dividing by 1000 or 100,000Split summary table and correlation table into two tables or turn the big table horizontalVariables 8–13 should have more concise variable labelsIn tables, show base independent variable before corresponding interaction term(s), e.g., Top-ranked & Portfolio’s % of Paid Apps on iOSAppendix: Minor Details

July 2018

Andy Wu (Harvard)

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Difference-in-difference should be Difference-in-differencesTable 2: (2)(3) The sample includesTable 2: , and (b) iOS stayers.Table 3, 4, and 6: Some of the notes should end with period (.) instead of comma (,)Table 5: Remove hyphen between installed-base and gapTable 7: Remove extra period after in parentheses. Appendix: Minor Details

July 2018

Andy Wu (Harvard)

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Thank you!awu@hbs.edu@andywuandywuDisclaimer: Andy Wu is a Android user and developer.July 2018Andy Wu (Harvard)19Slide20

Theory. Quality-based vs. quantity-based platform governance strategy for incumbents vs. entrantsPhenomenon. Complementor (app developers) choice of competing platforms, as revealed by their movementEmpirics. iOS vs. Android in 2008–2014, focusing on period of Android entry against iOS incumbencySummaryJuly 2018Andy Wu (Harvard)

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