Building the Value of Next-Generation Platforms: The Paradox of Diminishing Returns
Abstract
Next-generation technology provides users with new, advanced functionality that often renders the past technology obsolete, opening a window of opportunity for challengers. Major benefits can accrue to technology leaders, but for platform technologies that require complementary innovation from external complementors to create value for users, those benefits are limited by the difficulty of securing complements. The focus of this article is on the value users derive from the variety and quality of platform complements and its impact on leaders’ performance over time relative to followers. The article shows that next-generation platform leaders that build in-house complements and encourage broader participation by external complementors can enhance platform value to users at early market stages. Yet, later on, when the market has taken off, continuing to leverage these strategies will negatively affect the variety and quality of their complements, constraining their growth capacity and performance relative to followers. Leaders may thus lock themselves into suboptimal performance patterns and eventually fall behind their followers. The analysis provided herein offers new insights about what drives platform competition by highlighting the challenges platform leaders face, particularly in the growth stage of a platform’s market evolution, and the critical role played by complement quality in shaping platform competition over time.
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Leveraging data for value creation in digital platform ecosystems is relevant for the strategic choices of complementors, such as their multihoming strategy, platform product design decisions regarding software and hardware autonomy, or the type of value capture.
“leveraging data for value creation in digital platform ecosystems is relevant for the strategic choices of complementors (Cennamo, 2018;Chen et al., 2022), such as their multihoming strategy, platform product design decisions (Gregory et al., 2021) regarding software and hardware autonomy (Hein et al., 2020), or the type of value capture of platform participants”
From What role do data network effects play for multihoming complements? An empirical analysis of platform complementors’ strategies for consumer value creation (2025) · cites this paper as Cennamo, 2018
Cites
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“A technological platform is a stable set of technological components that are shared and reused by developers of diverse complements (Baldwin & Woodard, 2009; Gawer, 2014).”
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“Others have pointed to a “vintage effect” (Bohlmann, Golder, & Mitra, 2002) in high-velocity technology environments—the pioneer’s technology becomes obsolete more quickly than that of followers, so that users may suddenly shift toward other new technologies.”
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Towards a theory of ecosystems
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Self-citationCompeting in Digital Markets: A Platform-Based Perspective
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Self-citationGenerativity Tension and Value Creation in Platform Ecosystems
Cennamo, C., & Santaló, J. (2019) · Organization Science · doi:10.1287/orsc.2018.1270 · Cited by 408 · see citing works
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Disruption in Platform‐Based Ecosystems
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Self-citationJacobides, M. G., Cennamo, C., & Gawer, A. (2024) · Research Policy · doi:10.1016/j.respol.2023.104906 · Cited by 220 · see citing works
Self-citationChen, L., Yi, J., Li, S., & Tong, T. W. (2022) · Journal of Management · doi:10.1177/0149206320988337 · Cited by 177 · see citing works
“Platforms coordinate autonomous innovators by standardized interfaces instead of hierarchy or market, such that a vast number of external actors can join the platform ecosystem and create complementary products for platform users (Cennamo, 2018).”
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Self-citationPositive, Negative, and Amplified Network Externalities in Platform Markets
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Digital platform ecosystems in flux: From proprietary digital platforms to wide-spanning ecosystems
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Knorr, C., Erath, M., Saesen, J., Kindermann, B., & Strese, S. (2025) · Electronic Markets · doi:10.1007/s12525-025-00817-4
- Authors
- Cennamo, C.
- Affiliations
- Bocconi University
- Venue
- Journal of Management
- Publisher
- SAGE Publications
- Published
- 2016-07-15
- Volume
- 44
- Issue
- 8
- Pages
- 3038-3069
- ISSN
- 0149-2063
- 1557-1211
- Cited by
- 113
- References
- 4
- Language
- en
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