Building a Platform of Increasing Value of Adoption (PIVA) with a critical mass of end customer Adopters and a vibrant ecosystem of Complementors connected through your Platform, as Apple has done with the AppStore, is an extreme challenge to accomplish, but the rewards are equally extreme. And as hard as it is to build the Platform and its ecosystem, maintaining them are equally daunting. The Platform owner (Apple in this case) must manage a careful balance between providing enough degrees of freedom for ecosystem Complementors (app developers) to innovate and profit from those innovations which also bring value to the Adopters of the Platform (Apple iPhone users), yet they must also maintain enough measures of control to protect both the integrity of the Platform and their ability to monetize it.
Stricter technical or policy controls imposed by the Platform owner will tend to limit the innovation or value capture potential of the Complementor Ecosystem, resulting in their frustration and potentially decreasing their investment in the Platform in favor of alternative Platforms or alternative means of serving their customers. However, loose policies and technical controls, while appreciated by the Complementor ecosystem, may undermine the ability of the Platform owner to maintain control over the Platform, its perceived value and attractiveness to its Adopters (the end customers), and their ability to monetize it.
Epic v. Apple – Spotlight on Platform Control
The current high-profile court battle between Apple and Epic highlights these challenges well. Through the mandatory and exclusive coupling of the AppStore to the hugely popular iPhone, Apple has turned the iPhone/AppStore combination into one of the most successful Platform strategies of all time, with billions of end user adopters, tens of thousands of app developers, and billions in high margin revenue per quarter. With that much revenue going to Apple coming from its cut of the developer revenue, it's not surprising that disputes about the equity their respective shares have emerged.
The Apples iPhone/AppStore Platform is so strong, that even though 3rd party research cited in the court case indicates that 39% of AppStore developers are unhappy with the platform and Apple's policies, none of them alone have significant enough reach and influence over the end customer Adopters to have an impact on the ecosystem momentum or have such a significant dependency on the Platform for their existence, that they are unwilling to rock the boat. Epic, and a few other developers that are both big enough and have enough alternative or cross-Platform reach, felt that they could risk taking a stand. It's a high stakes gamble for Epic and it has and will cost them, but they also recognize that successfully managed Platform strategies are like black holes and tend to just get bigger and more powerful. Unlike black holes, Platform strategies are ultimately governed by the laws of the countries in which they operate, not the laws of physics.
Epic claims that Apple's cut is too much, and their policies limit their potential to innovate and bring value and convenience to their customers. Apple claims they need their cut to cover their costs of operating the Platform and their policies are required to protect its integrity for their customers. There is probably some truth to both of those claims, but the core of the issue is about money from and control over access to shared customers. Platform operators and their Complementor ecosystem are a symbiote vying to serve their shared customers, but it is not a symmetric relationship. The Platform Operator (Apple) has far more power and control then a single app developer.
Summary
It's anybody's guess what the short and medium-term outcome of this case will be, but it does serve to highlight both the challenge and importance of maintaining a healthy balance between openness and control in a Platform strategy. Apple is facing some increased pressure from both developers and competing Platforms making greater concessions to developers, but also have a tremendously strong and loyal customer base. They will likely end up making some concessions to developers, but there's also some risk that the spotlight being shown of the scale and magnitude of economic influence they wield makes them a target for antitrust regulators, which could have significant consequences for all parties, and other significant Platform operators. If you’re interested in learning more, or how we can help you with your own Platform strategy design, analysis, or development, just click on the button below to contact us.
