Platforms and Ecosystems: Enabling and Orchestrating a Continuous Flow of Innovation in a Creative Economy

Enrico Viceconte, 2023

Abstract:

In a strategy course focused on Dynamic Capabilities, the concepts of “platform” and “ecosystem” were explored, emphasizing their role in facilitating strategies based on a continuous flow of innovations. Case studies from the automotive and entertainment industries were analyzed to showcase how designing platforms enable the exploitation of internal static capabilities while also fostering the dynamic exploration of new opportunities through external capabilities. The “ambidexterity” achieved through platform strategies has the potential to benefit various industrial sectors, as it leverages global imagination and talent in an economy driven by creativity. The concept of an “ecosystem” inherently encompasses the idea of “generativity”. By showcasing a completed educational journey, we can emphasize how an economy rooted in creativity is discovering fresh solutions to bring imagination to the market, generating new products and services, and overcoming bottlenecks in the flow of innovation.

1) Teaching Dynamic Capabilities for Continuous Innovation

In the course “ Resources, Competences, Dynamic Capabilities and Competitive Advantage” that I teach at the Master in Entrepreneurship and Innovation Management (MEIM) of the Parthenope University in Napoli and the Sloan School of Management of MIT, I discussed platforms and ecosystems. I had the privilege of meeting the students right after a lesson by Michael Cusumano of MIT, who is one of the world’s leading experts on the sources of competitive advantage of platform businesses.

For a few decades we have entered an era in which some of the strategic wisdom principles of companies of the last century are fading. For example, the wisdom of focusing only on what you do best. For example, that a company can pursue either a generic cost strategy OR a generic differentiation strategy, and that one strategy excludes the other. But also, that it is suitable to compete on scale OR on personalisation, on the global OR local scene, etc. Low-complexity industries such as commerce have been pioneers, thanks to the possibility of multiplying franchise outlets (all the same) around the world while maintaining a flat and lean organizational structure and containing coordination costs, also thanks to ICT. These have been joined by “sharing economy” business models such as Uber and Airbnb, in which platforms bring together global giants and individual local businesses. Renting a furnished room or a car with a driver was not a business for global companies and now it is with sharing platforms. We have assumed that franchise and sharing economy platforms enable infinite scalability by incorporating new, standardized delivery units that cater to local and evolving needs.

Throughout the lessons, we chose to focus on different kinds of platforms, particularly those ecosystems that facilitate multiple sources of innovation, allowing them to scale and reach the market.

These kinds of platforms allow the imagination or intuition of a new feature that could appeal to the market to become a product and reach customers without waiting for the structures, processes, and capabilities to mature in order to scale up and last as a company. A platform allows for a greater degree of flexibility and agility, as it can be quickly adapted to changing market conditions. This makes platforms an ideal tool for startups and small businesses, which often lack the resources to develop and maintain their own infrastructure. Platforms can also help larger companies to innovate more quickly and efficiently, by providing them with access to a wider range of resources and expertise.

As an engineer, I am not surprised by the emergence of the platform economy. There’s nothing new under the sun. Engineering has always channeled creativity to the market through the principle of creating a synergetic standardization, enabling the construction of systems composed of subsystems and components. Among the components or subsystems of a system, and therefore a platform, there are users and developers, with their habits and processes that benefit from standardization.

Examples of standards that create innovation platforms include distributing electricity at a standard voltage, sizing pipes with standard diameters, determining the width of railway tracks and tunnels, watching a movie or downloading software from a medium compatible with the device being used, using the same programming code, and adding third-party plugins with specific new functionalities to software, and so on. In short, platforms have always existed. The novelty lies in the fact that this fundamental concept of engineering and innovation has become part of the fundamental concepts of strategic management. The fact that Lego bricks have a certain size and shape, allowing for infinite creative combinations, effectively creates a “platform effect.” The format of classical theater, which is essentially standardized, has allowed for centuries of dramaturgical creativity to flow to the audience. Just as the combination of the cinematic format and projection theaters has been a platform that has allowed us to enjoy the creativity of filmmakers for over a century, streaming platforms are following the same path. Generative artificial intelligence will continue this trend by introducing new standards, formats, and fictional universes.

A platform (or, in other words, an ecosystem) shows “dynamic” characteristics by leveraging virtually limitless external sources of product/service innovation. This model gives an evident advantage in markets that require dynamism, where the necessary flow of innovation from closed, hierarchical, and centralized environments has become critical. A notable example that I emphasized is the Apple ecosystem in the cover image, where a substantial number of developers can thrive and contribute to the continuous flow of innovation.

In the two days of lessons, I tried to show that a platform strategy can solve the problem of a bottleneck that hinders widespread creativity from reaching the market with new solutions. It is a strategy and a model that can activate, enable, and support crowds of creative minds by channeling their imagination and talent into the platform.

During my lessons, in December 2022, I highlighted the collaboration between Apple and the Federico II University, specifically the Apple iOS Developer Academy project in Napoli, as an exemplary case. This collaboration aimed at boosting the number of application developers within the local market who engage with the Apple ecosystem. The larger the developer community within the ecosystem, the greater the likelihood of successful applications that contribute to the platform’s value. The Academy project nurtures an environment where numerous creative “seeds” can take root, much like fertile soil. If these seeds are nurtured with talent, creativity, a keen understanding of market preferences, and a touch of luck, they have the potential to thrive as successful products. This analogy can be likened to a wide-mouthed funnel that consistently and energetically brings forth a continuous flow of innovations to the ever-evolving market.

The creation of “apps” within the ecosystem engages a vast network of micro-developers spread across the globe. As a result, the risks of failure and opportunities for success are distributed among an expanding number of contributors and projects. In contrast, the launch of a new ecosystem (a feat attainable for mega-corporations) represents a large-scale mega-project that entails significant risks and opportunities.

2) Platforms and Ambidexterity: Balancing Exploitation and Exploration

In essence, the process of creating and launching a new iOS application entails risks and opportunities, but these are significantly smaller in scale compared to that of creation a new platform. Consequently, the entire ecosystem demonstrates greater tolerance towards failures, is more “agile,” and possesses an “anti-fragile” nature. Platform businesses strive to achieve “ambidexterity” by striking a balance between long-term “exploitation” capabilities that sustain a competitive advantage within an oligopolistic competition (creating a built to last platform) and a swift, adaptable, and responsive “exploration” of new opportunities through decentralized risk-taking and widespread creativity (multiple small app projects built to change ad to adapt).

The organizational solution of “platforms” in orchestrating innovation processes stands out as one of the most crucial management innovations of this century, bridging the gap between “hierarchy” and “market selection” in the coordination of supply chains.

As you can see in the Figure 1 D and Figure 1 E, we have adapted a traditional SWOT matrix to represent platform strategies, and I believe that the students have gained a good understanding of it.

Figure 1 A

Figure 1 B

Figure 1 C

Figure 1 D

Figure 1 E

3) Platforms and Ecosystems: Emerging Business Models across Industries. The Automotive Industry’s Shift Towards a De-maturity Stage

During the 2021–2022 course at MEIM, we applied the innovation platform business model to the mature automotive industry. Within this context, we focused on the interiors components sector, where a notable shift occurred in the integration responsibility from Original Equipment Manufacturers (OEMs) like Volkswagen, Ford, and BMW, to component suppliers, like seating manufacturers. These interior components manufacturers being transformed from sub-systems assemblers ad producers into providers of holistic solutions, aiming to deliver the optimal experience of safety, comfort, and entertainment for both drivers and passengers. Seats for cars are produced by a small number of globally concentrated manufacturers, with their operations strategically located near car assembly plants of various OEM brands. These manufacturers supply seating systems to the assembly lines just in time. The strategy of functioning as a subsystem assembler is driven by the advantages of scale and the utilization of static capabilities rooted in a Total Quality Management and Lean Production approach. On the other hand, a strategy to be a creative solution provider for the automotive industry would be built upon dynamic capabilities, about continuous innovation and adaptation of design to meet evolving market needs.

This was the perspective of a producer of automotive subsystems. In the traditional value chain of car interiors there is a bottleneck in the development of creative solutions for car seats when the responsibility of transforming market needs into solutions and specifications for a supplier working on detailed designs is concentrated solely in an “integrator” (OEM).

Traditionally, due to bargaining power considerations, each OEM aims to have as many excellent suppliers of the same type of components integrated into their supply chain. Conversely, each component supplier aspires to have as many possible OEMs whose supply chain can channel their components to the market. The integrator, directly connected to the end market, tends to closely oversee and control the bottleneck it occupies. This control is exerted through the role of identifying customer needs, conceptualizing a solution, defining component requirements, and setting the scope for the supplier. As we will see, platform strategies alter this bottleneck by introducing a new approach to orchestrating the contribution of suppliers to the product’s success.

Figure 2

When the problem of creative solutions is examined from the perspective of a traditional car OEM, platform strategies offer significant advantages in terms of reducing the time and costs associated with developing new vehicles. In the modern automotive industry, the competitive advantage lies in the creation of innovative product platforms, rather than just focusing on the design and launch of new cars. Projects of this nature, initiated by OEMs, are expected to alleviate the integrator’s bottleneck in the innovation process. These projects align with the initiatives of component and subsystem suppliers, such as in the case of car seatings, transitioning from working on OEM designs and specifications to providing solutions tailored to their own technical and market expertise.

These two strategies align, forward along the value chain, mutually benefiting each other in creating successful cars.

Porsche Engineering serves as a noteworthy example of expertise in platform development, providing comprehensive support throughout the entire product lifecycle, from the initial concept idea to the production-ready vehicle. This approach enables the exploitation of the potential of enduring platforms that are strategically positioned to explore and adapt to meet the evolving demands of the future. In the modern automotive industry, which has entered a phase of “de-maturity”, partly due to the advent of electric propulsion, platform strategies have the potential to transform an OEM into an Innovation Platform. This strategic shift provides traditional manufacturers with a compelling motivation to enter the ecosystem created by these platforms.

The idea is not new, and it has been around for some time. A traditional platform strategy has been implemented for many years for combustion-engine cars, enabling the development of a wide array of models and derivatives while streamlining series production with reasonable time and cost investments. By utilizing a single platform for multiple vehicle models, economies of scale are achieved during production. This approach reduces component costs and ensures high product quality using fewer components in larger volumes. Volkswagen played a pioneering role in adopting a consistent platform strategy, which has served as a shared foundation for numerous projects and programs involving new models with gasoline or diesel engines since 2012. Across the Group, over 32 million vehicles based on this platform have been manufactured. Volkswagen swiftly applied platform principles to electric vehicles as well. In the strategic design of platforms. the system’s very first drafts already should account for scalability and flexibility. As the demand for new features in next-generation vehicles continues to rise, the importance of scalable and flexible automotive design becomes increasingly evident. Each design project should be capable of accommodating additional features without compromising performance or reliability, all while adhering to stringent time and cost constraints. The ability to easily upgrade designs enables the seamless addition of new features as required, eliminating the need for complete subsystem replacements. Moreover, automotive designs should possess a certain level of inherent flexibility, enabling them to adapt to evolving conditions such as emerging technologies or regulatory changes without necessitating a complete redesign. This flexibility also aids in reducing development costs by allowing designers to leverage existing components instead of starting from scratch whenever modifications are needed. Shifting the perspective of a design project from delivering a singular product to creating a long-lasting platform that serves the strategies of multiple actors can facilitate a continuous flow of innovation in the market.

The introduction of the new Premium Platform Electric (PPE), jointly developed by Audi and Porsche, further expands the application scope of the electric vehicle platform concept. This development gives numerous opportunities for Porsche in terms of designing and launching new models of cars with advanced technical standards, ultimately advancing the electrification efforts to a new level while maintaining profitability. An automotive platform developed by an OEM can be also exploited by other companies for new car or subsystem development, thanks to its efficiency, modularity, potential for collaboration, and opportunities for licensing and technology transfer. Indeed, the development of an automotive platform creates an ecosystem of companies and research centers that operate within the same innovation platform. This ecosystem fosters cost and time savings, scalability, and flexibility, enabling collaboration and partnership with other companies. The result is a continuous flow of product and service innovation that is brought to the market. (Source: Newsroom Porsche https://newsroom.porsche.com/en/2023/innovation/porsche-one-for-all-engineering-31610.html).

For Porsche, this is a strategic advancement in the value creation system, as it shifts from being an integrator of sub-systems to becoming a creator of an innovation generative ecosystem: a platform where traditional integrators and developers can showcase their innovative projects, leveraging the collaborative and supportive environment fostered by Porsche for mutual benefit.

A shared platform like the one proposed by Porsche is supported by advanced virtualization. This involves enabling all those who wish to collaborate on the platform to interact with a shared “digital twin” of the platform-based vehicle.

Today, cars have become intricate systems that incorporate diverse technologies and interact with other devices. The development of a platform facilitates a system architecting and a systems engineering appoach, empowering the extended project team to progressively work towards the final configuration. This step-by-step process begins with validating the concept with stakeholders and then proceeds to verify and validate subsystems and gradually integrate components into the car design. By enabling early verification and validation of inventive solutions, a platform nurtures a continuous stream of innovations that will be integrated into the overall vehicle design.

The revolution brought about in the first two decades of this century by the development model of the vehicle enabled by a digital platform is of the same significance as Ford’s revolution in automobile assembly in the first two decades of the last century. If the last century witnessed a leap forward in production productivity, the present century will be remembered for a leap forward in design productivity. A productivity that encompasses not only the ability to automate design and engineering activities and processes but also the capacity to overcome the bottlenecks that block the journey of imagination towards the market.

Figure 3

4) The Role of Ecosystems in Driving the entertainment Industry’s Growth

In a creative economy, the sectors within the entertainment industry are particularly in need of activating, enabling, nurturing, and channeling imagination and talent to the market.

During the 2022–2023 edition of the course at MEIM, we applied the ecosystem model to the expanding entertainment industry. By analyzing business platforms like Netflix and Disney-Marvel, along with the ecosystem of creators such as filmmakers, illustrators, musicians, set and costume designers, game designers, we aimed to understand the dynamics of this vast, complex, and rapidly changing industry.

Figure 4

It is a business based on creating fictional worlds (that are narrative ecosystems) and continuously supplying them with new content.

Using that model in a forward-thinking approach we have explored the potential disruptions that could arise in the future, especially with the advent of decentralized and “democratic” organizational models like Web3 and Decentralized Autonomous Organizations (DAO) enabled by blockchain technology.

During the MEIM lessons, students had the opportunity to analyze the role of generative artificial intelligence in creative processes through discussions with Luigi Forlai, a producer and entrepreneur in the entertainment content business. The integration of generative artificial intelligence capabilities is indeed expected to bring about significant transformative changes in this industry.

The case study of Forlai’s upcoming “Cinematic Universe” project, developed on a Decentralized Autonomous Organization (DAO), offers students a valuable and relevant learning opportunity. It serves as a compelling case history to analyze how Forlai could potentially compete with well-established cinematic universes like Marvel’s. This examination provides insights into strategic approaches and potential challenges in the ever-evolving entertainment industry.

A “narrative universe” is indeed akin to a saga or a fictional world that serves as a narrative generative platform. It can continuously generate new stories, characters, and content that all exist within the same created “universe”. Examples of narrative universes from the past include the War of Troy and the Chanson de Geste. Walt Disney has created a narrative universe: an ecosystem where talking mice and ducks have been living for a hundred years. The stories of these characters, continuously generated by different authors, have fueled a highly successful business. With the acquisition of Marvel, new universes have been added to the Disney ecosystem.

These captivating worlds, with their unique settings and heroes, have provided abundant inspiration for numerous storytellers to create their own narratives. In the process, they have introduced fresh characters, locations, and storylines, thus enhancing, and broadening the original narrative universe. This allows for ongoing expansion and enrichment of the narrative, providing a fertile ground for creators to explore and develop new ideas, products, and experiences within the established universe. It creates a dynamic ecosystem that can sustain the interest of audiences and consumers over time, fostering engagement and loyalty within the narrative universe.

Where is, in the entertainment industry, the “integrator’s bottleneck” in the creative value chain? One notable example discussed in the class is the case of streaming platforms like Netflix. These platforms serve as integrators by governing, financing, curating, and distributing a wide range of content to their subscribers. The ability to consistently offer compelling and diverse content is crucial for streaming platforms to attract and retain subscribers, making content generation a critical aspect of their operations.

While I’m writing this post on July 17, 2023, after Los Angeles and London, Milan has been transformed with pink decorations, campers, dollhouses, and a pink carpet to celebrate the launch of a movie based on the world of Barbie, a fictional universe that forms Mattel’s Barbie ecosystem. The example of the Mattel platform was presented to students, illustrating how a platform can be an excellent space to explore “extensions” into new business areas. Barbie’s world offers a unique opportunity to capture and channel the creative energy flowing from the film industry into the platform created by a company in the toys industry.

5) The Apple Ecosystem’s Strategy on the Emerging AR-VR Industry

The definition of an “ecosystem,” which can be extended to many platforms in manufacturing industries such as automotive or aerospace, fits well in the case of Apple. As presented in the Apple Magazine (https://applemagazine.com/the-apple-ecosystem/36702), an ecosystem is essentially “a biological community of interacting organisms”. The Apple ecosystem is based on a product platform (shared hardware, operating system, and “touch and feel”) that forms a collaborative network of devices and software, with approximately 2 billion active devices worldwide, including 1 billion iPhones. In this case, the platform strategy is based on the systemic principle that in complex systems, such as those that deliver a flow of new technological solutions, the whole can work better than the sum of its parts. These technological solutions, i.e., products, aim to better satisfy customers’ needs.

Apple intentionally creates an ecosystem to leverage the significant competitive advantages associated with its technical and brand capabilities. Apple’s strategy revolves around an enormous yet closed ecosystem. Third-party products are typically not compatible with Apple products, and all Apple products aim to be extremely compatible and synergistic with each other. Within the Apple ecosystem, cross-selling and upselling to customers across the portfolio of solutions is seamless.

The Apple ecosystem integrates and shares across the entire range of products and services:

· The brand perception associated with creativity, advanced technology, cool design, and “status”, which encourages customers to continuously upgrade their devices, similar to the fashion industry.

· Flawless functionality, especially when connected to other Apple products and services.

· The presence of an Apple ID that registers all Apple devices and services.

However, Apple’s closed ecosystem also presents weaknesses. Entrapping customers within a closed system, no matter how well-functioning, can be perceived as being held hostage in a gilded cage. Living within the ecosystem has its drawbacks, including being submitted to the ecosystem owner’s governance, limited facility to switch to alternative products and solutions once inside, and the increasing cost of staying within this technological paradise. “Being submitted” to the ecosystem owner’s centralized governance means that Apple holds the authority to decide what is included or excluded from its ecosystem, determining what is considered cool and what is not, in other words, what is considered good or bad for the user. However, this approach may not be accepted by an increasing number of customers (1).

To counterbalance these disadvantages, Apple has a vital need to ensure a constant flow of new and highly desirable applications that can run on its platform. This brings us to the topic of the flow of creativity and “coolness” that a platform business must be able to deliver, as seen in the cases of Porsche and Netflix.

We will delve into this introducing the Apple’s VisionPro project.

Figure 5

The emergence of Apple’s VisionPro in the augmented or virtual reality market offers a captivating chance to search into the dynamics of the entertainment industry. This evolving situation is particularly intriguing as Apple’s project is expected to contend with major players like META-Facebook, resulting in a battle of industry titans. For Apple, the success of the VisionPro project could open new “metaverse-like” markets, including those of interactive entertainment.

Analyzing Apple’s static and dynamic capabilities in relation to potential competitors in this brand-new sector is critical. Apple’s strengths could lie in its established brand loyalty, design excellence, and hardware integration, which have been key factors in its past successes. On the other hand, its weaknesses might involve the need to develop a robust ecosystem for augmented/virtual reality, given that it’s relatively new territory for the company and for the market.

Regarding dynamic capabilities, Apple has shown proficiency in software development, product iteration, and developer partnerships, which can be advantageous in the rapidly evolving AR/VR space. However, it might face challenges in adapting to the variable market demands and navigating the complexities of a developing ecosystem.

Opportunities for Apple lie in leveraging its existing customer base and ecosystem to build a seamless AR/VR experience and capitalize on its user-centered approach to product development. On the other hand, threats could arise from other major players, such as META-Facebook, which has already invested heavily in virtual reality technologies.

The VisionPro project appears to be following a closed ecosystem model like that of developing new applications for computers and iPhones. Given this, and while anticipating the outcome of Apple’s headset launch in 2024, I suggest soliciting the students’ assessment of the project’s potential for success. It is anticipated that the responses may vary, as personal affinity or dislike for the Apple brand often influences individuals’ perspectives.

To conduct a comprehensive assessment of the VisionPro project’s potential and risks, it is essential to go deeper into Apple’s implementation strategy. In the following section, we will thoroughly examine various aspects, including software and content development, hardware advancements, and supply chain management. This multidimensional analysis will provide a more comprehensive understanding of the project’s overall prospects.

6) How Platforms Foster Ambidexterity in the AR-VR Industry. Design challenges

To be more “ambidextrous” than its competitors, Apple would need to strike a delicate balance between exploiting its existing strengths while exploring and rapidly adapting to new opportunities. This involves embracing new technologies, fostering partnerships with developers and content creators, and staying ahead in software advancements while maintaining its hardware excellence.

Given the uncertainty and potential for disruption in this emerging sector, the case study on Apple’s VisionPro project and its positioning against competitors like META-Facebook is indeed exciting. As the story is still unfolding, it allows for critical analysis and strategic thinking, making it a valuable learning experience for the students.

The Apple VisionPro headset’s planned launch in 2024 at a price of $3,500 presents an interesting case study for exploring how Apple can create a successful ecosystem around the product. In the new world of products and ecosystems, a mere focus on the product itself is no longer sufficient. Instead, a robust “built to last” ecosystem must be designed, created, and sustained over time to ensure adoption and continued growth.

To establish a thriving ecosystem around the VisionPro headset, Apple needs to consider the following key elements:

Content Suppliers: Apple must attract and partner with a wide range of content creators, including filmmakers, game developers, educational content producers, and more. A diverse library of engaging and high-quality content will be essential to entice users and keep them immersed in the AR/VR experience.

Application Developers: Encouraging developers to create innovative applications that utilize the headset as an interface with users is crucial. Providing developer tools, support, and incentives can help foster a vital app ecosystem, enriching the user experience and unlocking new possibilities for the headset’s adoption.

Hardware Advancements and Supply Chain Optimization: In line with technological advancements, Apple’s investment in enhancing headset hardware performance, reducing production costs, and improving the capabilities, capacity, and flexibility of the supply chain becomes crucial.

These endeavors are essential for maintaining a competitive edge, attracting a larger customer base, and potentially expanding market reach by making the price point more accessible to a wider audience.

Building and sustaining an ecosystem around the VisionPro headset is not a one-time event; it demands continuous investment in developer partnerships, content acquisition, and hardware upgrades. The long-term success of the ecosystem will heavily depend on fostering both user and developer engagement and satisfaction, which will create a virtuous cycle of adoption and content creation. This ongoing commitment is crucial to ensure the ecosystem remains dynamic, energetic, and competitive in the rapidly evolving market of augmented and virtual reality.

To ensure success and competitiveness, Apple should demonstrate “ambidexterity” in its approach by balancing exploitation of its current strengths with the exploration of new opportunities. While leveraging its existing loyal customer base, design expertise, and software development capabilities, Apple should also actively explore partnerships, invest in research, and embrace new technological advancements to stay at the forefront of the AR/VR ecosystem.

a. The Challenge of Content Supply and App Development

The case study on Apple’s VisionPro headset presents an exciting opportunity to analyze the complexities of building and sustaining a successful ecosystem in the rapidly evolving AR/VR industry. By delving into this case, students can gain valuable insights into the strategic decisions and challenges faced by a tech giant as it navigates this dynamic market.

The content suppliers and application developers play a critical role in the success of the VisionPro ecosystem and must exhibit a high degree of imagination and creativity. They are responsible for creating captivating and innovative experiences that leverage the capabilities of the headset to engage users.

On the other hand, the third type of supplier, such as those involved in developing OLED matrices or lenses, must focus on advanced technological capabilities. Their primary objective is to deliver high-performance components at an optimal cost while ensuring a reliable and uninterrupted supply chain. The risk of bottlenecks or disruptions in the production and distribution process should be minimized to maintain the seamless availability of the headset.

Apple’s ambidextrous strategy for the VisionPro ecosystem should strike a balance between exploitation and exploration. Exploitation involves leveraging existing strengths, such as brand loyalty, design excellence, and software development expertise, to maximize the performance and adoption of the headset. At the same time, exploration entails actively seeking new opportunities, such as partnerships, technological advancements, and market trends, to drive innovation and stay ahead of competitors.

Indeed, maintaining a strategic balance between exploitation and exploration is crucial for ensuring the long-term success and sustainability of the VisionPro ecosystem. The Figure1, representing the Type A and Type B innovation management strategies, emphasizes the significance of this ambidextrous approach, where effectively managing both aspects (A and B) plays a pivotal role in the ecosystem’s development and growth. By continuously exploiting existing strengths and opportunities while exploring new possibilities and innovations, Apple can navigate the evolving landscape of augmented and virtual reality, staying competitive and relevant in the industry.

It’s important for students to understand how Apple’s overall strategy combines these two elements, as it provides valuable insights into the challenges and considerations involved in creating and maintaining a thriving ecosystem in a dynamic market.

Apple’s approach to creating a favorable environment for developers in the VisionPro ecosystem is both innovative and strategic. By introducing the development environment, VisionOS, centered around the creative developer, Apple empowers them with a vast “three-dimensional” canvas to unleash their creativity. This approach emphasizes a shift from traditional coding to a “design thinking” mindset, encouraging developers to deeply empathize with end users and focus on delivering engaging and immersive experiences.

The developer is granted the freedom to “explore, experiment, and play” within VisionOS, fostering an atmosphere of creativity and innovation. This environment allows developers to envision and design unique AR experiences that can resonate with users seeking interactive experiences or complete immersion in artificial worlds.

The concept of a “digital twin” as a shared simulacrum for collaboration extends to the world of VisionPro in the virtual 3D space where experiences can be created and tested. Instead of a digital vehicle model, as in the case of Porsche, the focus is on a virtual constructed space, whether it is referred to as a “metaverse” or by another name of a twin artificial world.

To support developers in this creation of new worlds, Apple’s Software Development Kit (SDK) offers a suite of powerful tools dedicated to augmented reality viewers. Some of the key components include:

ARKit: ARKit is a framework that enables developers to create cutting-edge augmented reality experiences. It provides tools for motion tracking, scene understanding, and lighting estimation, allowing developers to seamlessly integrate virtual objects into the real world.

RealityKit: RealityKit simplifies the creation of AR content by offering a high-level abstraction for rendering and animation. It streamlines the process of building interactive AR scenes and provides a range of pre-built components to enhance the overall user experience.

SwiftUI: SwiftUI is Apple’s user interface toolkit, designed to enable developers to create dynamic and interactive user interfaces across all Apple platforms, including AR applications. Its declarative syntax and live previews facilitate rapid prototyping and development.

By equipping developers with these advanced tools and frameworks, Apple aims to empower them to unbridle their creativity and create immersive experiences that engage and captivate users. The emphasis on design thinking encourages developers to put themselves in the shoes of the end user, ultimately resulting in AR applications that are user-centric, engaging, and intuitive.

This developer-centric approach combined with powerful SDK tools is likely to foster a vital developer community within the VisionPro ecosystem. It aligns with Apple’s successful past experiences with iOS development and reflects their commitment to creating a thriving and innovative AR platform.

The characteristics of the development environment, VisionOS, reflect Apple’s commitment to providing a fluid, agile, and iterative process for developers and users. The environment’s similarity to a Mac desktop ensures a familiar and user-friendly interface, allowing developers to easily experiment and create within the three-dimensional canvas. The distinctive touch and feel experience provided by Apple, enjoyed by both developers and users, stands out as a defining attribute across the entire ecosystem. This experience effortlessly extends to every product and development tool that is crafted, effectively bridging the gap between creators and users.

Given that the actual VisionPro headset is not yet on the market, developers can still start playing and exploring immersive experiences through the released Software Development Kit (SDK) and the Vision Pro simulator. The SDK offers a set of powerful tools and resources that allow developers to begin building and testing AR applications on their Mac computers.

The Vision Pro simulator provides a virtual environment that emulates the experience of interacting with the VisionPro headset. Developers can use this simulator to get a sense of how their applications will work within the AR environment. While it may not fully replicate the actual user experience of wearing the headset, it allows for initial testing, refinement, and creativity.

Additionally, selected developers will have the exclusive opportunity to try their creations directly with the actual headsets in the AVP Developer laboratories located in different countries. This hands-on testing with the physical headset will provide invaluable insights and feedback to developers, enabling them to fine-tune their applications and ensure they are optimized for the VisionPro ecosystem.

This approach of releasing the SDK and simulator before the headset’s official launch demonstrates Apple’s commitment to fostering a thriving developer community and encouraging early exploration and experimentation. By providing tools and opportunities to test applications even before the physical headset is available, developers can start building their immersive experiences and be prepared to offer innovative applications once the VisionPro is accessible to the market.

This strategy aligns with Apple’s past efforts in creating successful ecosystems, where early engagement with developers and iterative development processes have played crucial roles in building a rich and lively app ecosystem. As a result, when the headset eventually launches at its premium price, developers will be well-prepared to offer compelling experiences that leverage the full potential of the VisionPro ecosystem.

Exactly, Apple’s ecosystem strategy for the VisionPro headset involves early engagement with developers to populate the ecosystem with creative and effective applications well before the 2024 release. By providing developers with the Software Development Kit (SDK) and Vision Pro simulator, Apple encourages them to start exploring and experimenting with immersive experiences early on, even before the physical headset is available to the market.

This approach allows developers to gain valuable experience, validate their ideas, and refine their projects, ensuring that they are well-prepared to offer compelling applications once the VisionPro is officially launched. The sandbox environment enables developers to test and iterate their creations, fostering a design thinking culture and continuous improvement within the ecosystem.

As developers play and create in that sandbox, social media platforms are likely to be flooded with discussions, demos, and tutorials showcasing the potential of upcoming VisionOS applications. This organic growth of community-generated content helps build excitement and awareness around the ecosystem, driving interest and anticipation among potential users.

Apple’s dedicated site for VisionOS developers will serve as an official space for discussions and resources related to the development process. Additionally, independent, generalist environments, and specialized platforms like Codemotion, may also become hubs for discussions and interactions among developers, providing a diverse range of perspectives and insights into the ecosystem’s potential.

By encouraging and supporting this dynamic developer community, Apple aims to foster a thriving ecosystem of innovative and engaging applications for the VisionPro headset. This strategy leverages the power of community engagement, word-of-mouth marketing, and user-generated content to build anticipation and interest in the ecosystem, setting the stage for a successful launch and long-term growth.

Launching more training projects and academies in various regions, like the Federico II and Apple IOS Academy in Napoli, will indeed be vital in nurturing a pool of skilled and talented future developers to support and contribute to the VisionPro ecosystem. These specialized academies can focus on providing education and training in areas relevant to augmented and virtual reality, 3D development, and creative thinking, enabling students to acquire the necessary knowledge and skills to excel within the ecosystem.

By offering targeted training and fostering a learning environment that encourages innovation and creativity, these academies can produce a workforce of competent developers ready to contribute to the growth and advancement of the VisionPro ecosystem. Moreover, these academies can serve as catalysts for regional economic growth, attracting investments and opportunities related to the emerging augmented and virtual reality industry.

Ultimately, investing in education and training through academies will be instrumental in ensuring the success and longevity of the VisionPro ecosystem, as it cultivates a diverse and proficient community of developers, pushing the boundaries of what the ecosystem can achieve.

By fostering a diverse and well-prepared developer community across different regions, Apple can tap into a wide range of perspectives and ideas, fostering innovation and creativity within the ecosystem. Moreover, these academies can act as hubs for networking, collaboration, and idea exchange among aspiring developers, further enhancing the ecosystem’s growth and potential.

Overall, investing in the education and development of future developers through academies will be a critical step in ensuring the VisionPro ecosystem’s vitality and success on a global scale.

Indeed, in the context of fostering a successful ecosystem for the VisionPro headset, the interactions, and discussions among developers on various web2 and web3 platforms will play a crucial role. These platforms, such as Twitter, YouTube, Reddit, and Discord servers, provide spaces for passionate individuals, experts, and creators of different specializations to come together, collaborate, and showcase their talents. Here’s how these interactions can contribute to the ecosystem’s success:

Exchange ideas and opinions among peers: Developers can share their experiences, ask questions, and offer advice to each other. This open exchange of ideas fosters a collaborative environment where developers can learn from one another and collectively enhance their understanding of VisionPro development.

Share resources: Web2 and web3 platforms allow developers to share valuable resources such as links to tutorials, guides, code examples, and other materials essential for learning and developing applications for VisionPro. This sharing of knowledge accelerates the learning process and promotes a culture of continuous improvement.

Showcase projects and collaborate: Developers can showcase their projects on these platforms, inviting feedback from the community. This collaborative feedback loop helps refine and improve their applications while encouraging collaboration on new ideas and initiatives among peers.

Stay up to date on technology: Given the fast-paced nature of technology, staying updated on the latest advancements is crucial for developers. Web2 and web3 platforms facilitate the dissemination of relevant news and updates, ensuring that developers can make the most of the VisionPro’s capabilities.

Apple’s approach of fostering an environment where developers can freely explore and compete with their ideas aligns with the principles of natural selection and fertile ground. By providing the necessary tools and resources, Apple allows developers to innovate and refine their applications, creating a diverse and thriving ecosystem where the most promising and creative ideas flourish.

Ultimately, the success of the VisionPro ecosystem relies on the passion and initiative of the developer community, as they interact and collaborate to unlock the full potential of the platform. Apple’s role as a facilitator and enabler in this process allows for organic growth and the emergence of groundbreaking applications that will shape the future of augmented reality.

b. Design Challenges for the VisionPro hardware and its supply chain

Based on an article from Wired (03/07/2023) titled “Apple halves the production plans of its viewer” let’s delve into the following questions:

· What will be the growth trajectory of the product life cycle after its launch in 2024, taking into consideration factors such as the headset’s price and the technology adoption curve, which is influenced by the value provided by the ecosystem in terms of abundance and quality of content and applications?

· Will the supply chain’s capacity, capability, and risk management be sufficient to support such growth?

· When the product reaches the maturity stage of its life cycle, what will be the carrying capacity of the supply chain? How many headsets will be purchased and produced when the ecosystem is fully operational, and where will the components and subsystems be sourced from?

Encouraging the active participation of new hardware developers and manufacturers in the platform is instrumental in fostering collaboration and driving innovation within the ecosystem. By embracing and involving third-party contributors, the platform can leverage a diverse range of creative inputs, resulting in a more dynamic and thriving ecosystem. The challenges associated with sourcing hardware, creative content and apps align with those encountered in the Porsche platform for cars, further emphasizing the importance of addressing them to create a vibrant and successful ecosystem.

The challenge about the hardware integration and about the supply chain management, is indeed a critical aspect of executing an ecosystem strategy for a complex product like the VisionPro headset. Integrating various components and subsystems to meet performance, cost, and regulatory requirements, while mitigating supply chain risks, is essential for the success of the product. Here are some key considerations for hardware integration and supply chain management:

Performance Requirements in a Systems Engineering approach: Ensuring that the final product meets the desired performance levels, such as image resolution, processing speed, and battery life, is crucial for a positive user experience. Rigorous testing and validation at each level of integration are essential to meet these performance requirements.

Cost Requirements: Apple aims to launch the VisionPro headset at a specific target price of $3,500. This necessitates careful consideration of the costs associated with each component, subsystem, and the overall assembly process. Optimizing costs without compromising on quality is a challenging but essential task.

Product Life: As a technology company, Apple must also consider the longevity of the product. Planning for future upgrades, replacements, and potential new iterations of the headset ensures long-term sustainability and customer satisfaction.

Regulatory Compliance: The VisionPro headset must meet various regulatory standards and industry-specific requirements. Ensuring compliance with these regulations is necessary to avoid legal issues and market entry barriers.

Supply Chain Risks: Mitigating supply chain risks involves identifying critical components and their suppliers, assessing their capabilities, and developing contingency plans to address potential interruptions. Diversifying suppliers and having clear communication channels can help reduce risks.

Supplier Relationships: Maintaining a balanced supplier relationship is crucial to avoid giving too much bargaining power to a single supplier. Apple needs to foster healthy partnerships with suppliers, ensuring fair terms and avoiding dependency on a single source. A balanced sharing and allocation of responsibilities, resources, knowledge, risks, and profits between the integrator and the supplier must be pursued.

Geopolitical Considerations: Concentrating sourcing in specific countries may expose the product to geopolitical risks, such as trade disputes or disruptions in the supply chain due to political events. Diversifying suppliers across regions can mitigate these risks.

Throughout the development cycle, rigorous testing, prototyping, and validation processes will be essential to ensure that the integrated product meets all the necessary requirements. Collaborative efforts between hardware designers, engineers, and suppliers will play a crucial role in achieving a successful hardware integration that aligns with the overall vision of the VisionPro ecosystem.

The growth curve of the product life cycle for the VisionPro headset after its launch in 2024 will depend on various factors, including the price of the headset, technology adoption rate, and the success of the ecosystem in providing valuable content and applications.

Price of the Headset: The high launch price of $3,500 may initially limit the adoption of the VisionPro headset to a niche market of early adopters and enthusiasts. As the product gains traction and potentially becomes more affordable over time, the price could become a less significant barrier, leading to broader market adoption.

Technology Adoption Curve: The rate at which consumers adopt the VisionPro headset will depend on its perceived value, user experience, and how well it meets their needs. The early adopters and enthusiasts will likely be the first to embrace the technology, followed by a more mainstream audience as the ecosystem matures and offers compelling content and applications.

Supply Chain Capacity, Flexibility and Capability: Adequate supply chain capacity and capability are crucial for meeting demand, especially during the early stages of product launch when demand might exceed supply. Apple will need to ensure that its supply chain can ramp up production and meet demand without major disruptions or bottlenecks.

Risks in the Supply Chain: The supply chain must be prepared to address potential risks, such as shortages of critical components, geopolitical issues affecting sourcing, and any other unforeseen interruptions. A robust risk mitigation plan should be in place to handle such challenges.

As the ecosystem becomes fully operational and gains momentum, the demand for VisionPro headsets and related components is likely to increase. The carrying capacity of the supply chain will need to be assessed and expanded to meet this growing demand. Apple will have to balance in-house production with external sourcing to ensure an agile and responsive supply chain.

As the product reaches lifecycle maturity, the volume of headsets purchased and produced will depend on the market saturation and demand patterns. It is possible that the demand for new units might stabilize, and a larger portion of production may shift to replacement units or upgrades. At this stage, the supply chain’s focus may shift more towards ensuring a steady flow of components for replacement.

The components and subsystems for the VisionPro headset will likely come from various suppliers and manufacturing facilities globally. Apple will need to continue fostering strong relationships with these suppliers and have contingency plans in place to manage any disruptions in the supply chain.

Overall, the success of the VisionPro ecosystem and its growth curve will be heavily influenced by Apple’s ability to balance innovation and operational excellence, manage supply chain risks, and continuously deliver value to consumers through the platform.

The information and the insights provided by the mentioned Wired article shed light on the challenges Apple is currently encountering in the production and launch of the Vision Pro headset. Specifically, limitations in production capacity, particularly in China, are presenting significant risks to the initial release of the product.

The problems with Luxshare, the assembler of the viewer, and the Chinese suppliers of critical components, such as lenses and micro-OLED displays, could impact the volume of units that can be manufactured and shipped. If these suppliers are unable to meet the demand for the lenses and for the high-resolution micro-OLED displays, it could severely constrain the production of the Vision Pro headset.

Moreover, the high price point of $3,500 per headset may discourage potential customers from booking or purchasing the product, leading to lower-than-expected demand and sales. A steep price might limit the initial market reach to a niche audience of early adopters and enthusiasts, making it harder for the ecosystem to gain momentum and attract developers to create content and applications for the platform.

These challenges could indeed lead to a potential project failure if not adequately addressed. Apple will need to carefully strategize to mitigate the supply chain risks and overcome the production constraints. This may involve finding alternative suppliers, optimizing production processes, and negotiating with existing suppliers to increase their production capacity.

Overall, the success of the VisionPro viewer and its ecosystem will heavily depend on Apple’s ability to address these supply chain challenges, adjust its production plans accordingly, and find ways to attract consumers and developers despite the initial hurdles. Flexibility and adaptability will be key for Apple to achieve the desired ambidextrous strategy and create a thriving ecosystem around the VisionPro platform.

In short, orchestrating an ecosystem strategy, leaving important static and dynamic capabilities outside the integrating company is not a simple matter. And from the deficiencies in the strategy, implementation and execution of Apple’s ecosystem strategies, some competitors could take advantage.

Relying on a few or on a single supplier and sourcing critical components from a single country can indeed expose a company like Apple to significant risks, especially considering geopolitical factors and potential disruptions in the supply chain. In the case of the Vision Pro headset, the limitations in production capacity and the challenges with Chinese suppliers underscore the importance of diversifying the supply chain and exploring alternative options.

If Apple faces delays or difficulties in securing enough of the necessary components, it may lead to a slower product launch or even a potential loss of market share to competitors who can bring similar products to market more quickly. Moreover, if the price of the headset remains prohibitively high due to supply constraints, it may deter potential customers and hinder the ecosystem’s growth and success.

Exploring alternative technologies and suppliers, such as Samsung and LG, for components like displays could be a viable strategy to mitigate supply chain risks and enhance the company’s ability to meet demand. Adopting a more diversified approach to sourcing critical components could provide Apple with greater flexibility, reduce dependency on specific suppliers or countries, and improve the overall anti-fragility and resilience of the ecosystem.

Creating and maintaining a successful ecosystem requires careful consideration of the entire value chain: content and applications production, hardware and software development, supply chain management, marketing, and user adoption. It’s a complex and iterative process that requires constant adaptation and improvement. While Apple’s position as a market leader and its existing capabilities offer significant advantages, any shortcomings or deficiencies in its ecosystem strategy could indeed provide opportunities for competitors to gain an edge.

To remain competitive and succeed in the long term, Apple must continuously assess and adjust its ecosystem strategy, invest in innovation, and foster strong relationships with a diverse network of suppliers and developers. By doing so, the company can strengthen its position, increase resilience to external challenges, and maintain its status as a leader in the rapidly evolving landscape of augmented and virtual reality-based ecosystems.

Conclusions of the course

In the examples given, drawing on the concept from Cusumano’s lesson, it was emphasized that a platform or ecosystem business, if successful, has the potential to capture practically the entire market because its strength lies in the vastness of the network it creates. To win the entire stake, it is essential for the expansion of the network to occur at a faster and more effective pace than that of a competing platform. This effect was discussed in the context of an automotive project (like Porsche’s), Apple’s ecosystem, and the entertainment industry where Netflix operates.

The conclusion of the course on platforms and ecosystems inevitably leads to reflecting on the role that an all-encompassing online store like Amazon will play as a game changer across various businesses. During the course, an example was given of IKEA as a platform that originated from the backward integration of a retail business. From IKEA’s physical stores, which have established a global standard in the home furnishing process, a governed flow of new products compatible with the platform and a global supply chain are generated. We mentioned the IKEA case as an example of a somewhat closed ecosystem, utilizing its “static capabilities” such as scale, style, convenience, and the cohesive “total look” it provides for interiors. The IKEA platform does not exhibit a high degree of dynamism, which suggests it may have limited capacity to draw upon a wide array of innovative ideas and creativity from diverse sources.

Likely, the evolution of a digitally-born store like Amazon will be different, as will be the ecosystem that is being created.

Considering that platform strategies converge towards a “store” where an immense quantity of products generated by platform models can be sold, will a digital-store platform take the lead and orchestrate the flows of innovation? The answer remains open, but it is indeed a thought-provoking question.

Enrico Viceconte

Notes

(1) The ecosystem of Apple is built upon the differentiation of its offerings, which is based on a unique ecosystem where users, creators, and developers share and appreciate a distinctive “touch and feel.” It aims to provide an interaction style with applications that is presumed to be the most intuitive, user-friendly, and natural possible. Drawing from my experience as a user of Microsoft’s ecosystem, the learning curve to adapt to the Apple ecosystem is anything but steep. For me and many others, switching between Microsoft and Apple is not easy, just as it is not easy the other way around. The difficulty in switching between different platforms serves as an advantage for those operating in a platform-based industry to protect the investments made in creating the ecosystem. However, it is also an underestimated risk because 1) the learning curve can present a barrier for new customers and 2) being locked into a specific ecosystem is not advantageous or desirable for a significant number of customers.