Cambridge, Mass. — As they waited in long holiday lines to buy that latest game console, few shoppers realized that the most important element of that Xbox — as well as of their cell phones, PDAs, web-based software such as eBay and far more — is something they cannot even see. But a new book co-authored by MIT Sloan School of Management Dean Richard Schmalensee tells the important story of how invisible but powerful software platforms are driving not only today's technology, but tomorrow's innovations and economy.
“Though they are little appreciated, software platforms reach far beyond technology alone,” said Schmalensee. “Because platforms can transform existing industries and help create new ones, their economic importance is growing explosively. At the most basic level, software platforms enable smart people to be creative in ways that also lets them make a nickel — often many millions of nickels.“
In Invisible Engines: How Software Platforms Drive Innovation and Transform Industries (MIT Press), Schmalensee and co-authors David S. Evans and Andrei Hagiu recount the growth, development and marketing of software platforms, which have turned devices such as Sony's PlayStation and Apple's iPod into household names and tools for everyday life.
Because software platforms can be used by independent companies or developers to offer a wide range of products and services, the authors note, they function as “invisible engines that have created, touched, or transformed nearly every major industry for the past quarter century.“
In their early manifestations, software platforms such as DOS “enabled creative people to come up with very smart things to do with a personal computer,“ Schmalensee said. “When the first IBM PCs came out, what could you do with them? Just a few short years later, people were able to do everything in the world with PCs, and not because of what IBM or even Microsoft did. It was because of what other people were able to do with the software platform, which offers a stable interface from which you can easily improve things piecemeal or add whole new functions.“
The software platforms of today's gaming consoles create a win-win-win outcome not only for the console makers, but for independent software developers and consumers.
“Software platforms make it very simple to modify a device and add applications,“ Schmalensee said. “Gaming companies want to make good platforms to sell games to make their products more attractive, developers use the platforms as a home for their individual applications, and consumers end up with more and more uses out of the same product.“
Schmalensee sees a role for software platforms far beyond cell phones and game devices, however. Platforms could even revive sectors as traditional and troubled as the automobile industry, he says.
“Because platforms make it very simple to modify or add applications, you don't have to reengineer an entire product to improve it. Right now, you have different people and software writing different programs to control stability and this and that function of a car. But a platform can serve as a simple but well-specified interface to which people can write and provide new applications. It simplifies the process and adds enormous flexibility. Platforms offer a way to let other smart people make your car better in a way that benefits both you and them — and the eventual purchaser of the better car that results.“