Thomas R. Eisenmann

Managing Proprietary and Shared Platforms

In a platform-mediated network, users rely on a common platform (provided by one or more intermediaries) that encompasses infrastructure and rules required by users to transact with each other. A fundamental design decision for firms that aspire to develop platform-mediated networks is whether to preserve proprietary control or share their platform with rivals. A proprietary platform has a single provider that solely controls its technology (for example, Federal Express, Apple Macintosh, or Google). With a shared platform such as Visa, DVD, or Linux, multiple firms collaborate in developing the platforms technology and then compete in offering users different but compatible versions of the platform. This article examines factors that favor proprietary versus shared models when designing platforms and then explains how management challenges differ for proprietary and shared platform providers when mobilizing new networks.

The U.S. Cable Television Industry, 1948–1995: Managerial Capitalism in Eclipse

Alfred D. Chandler, Jr., observed that under managerial capitalism, salaried managers tended to pursue policies that promoted the long-term stability and growth of their enterprises. The U.S. cable television industry provides a case study of how managers responded when stability and growth were mutually consistent objectives, and when they were mutually exclusive. From the late 1950s through the early 1980s, agent-led newspaper publishers and television broadcasters invested aggressively in the cable business. Beginning in the mid-1980s, however, investing in cable implied a tradeoff between stability and growth objectives. As a wave of mergers swept the cable industry, agent-led companies avoided acquisitions that might dilute earnings and depress stock prices. Confronting an increasingly turbulent competitive environment during the first half of the 1990s, agent-led companies were much more likely to divest cable assets than owner-managed firms. In agent-led companies, managers believed that their cable units would require massive capital investments, and they were reluctant to “bet the company” on a business facing so much competitive, technological, and regulatory uncertainty. Owner-managers, emotionally attached to the cable industry and to the firms they had built, and often harboring dynastic ambitions, were more reluctant to sell: they were willing to gamble on growth.