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Platform Leadership: Chapter Two: Intel’s Rise to Platform Leadership (Gawer and Cusumano, 2002)

Platform Leadership: Chapter Two: Intel’s Rise to Platform Leadership (Gawer and Cusumano, 2002)

Intel (microprocessors) and Microsoft (operating system) are platform leaders in the PC industry, and as such greatly influence PC industry evolution. Intel has (possibly) directed more thought and resources towards platform issues than any other company – increasing ‘the pie’ for everyone, while maintaining leadership.

Intel’s Problems:
How Intel’s microprocessors perform (and thus appear to the user) is dependent on a complex architecture of interdependent (non-Intel) products. A key challenge for Intel is to ensure continued demand for its product (which is continually evolving) in this context of interdependency. Without an architecture which facilitates Intel’s technology, and the end users of such technology, Intel will cease to grow.
The company (and end user) would be better off if all complementary firms innovated in alignment. But ensuring this is a difficult proposition.
In the early 1990’s, there were two main reasons for the slow growth of demand for the PC – (1) obsolete architecture, and (2) lack of industry leadership to advance the PC system.

(1) Obsolete Architecture
Architecture: A partitioned system of components which are functionally and physically related through interfaces. The design of component functions and relationships is determined by the architecture.
The IBM PC-compatible business evolved and eventually became the standard in part because IBM did not make exclusive agreements to control the microprocessor and OS components. This resulted in open system interfaces which drove worldwide PC production, commercialisation and adoption – which led to a shift in power from vertically integrated companies (IBM, DEC, WANG) to specialist hardware and software providers (Intel, Microsoft, Motorola).
However, while standardisation drove growth in sales volume, it also led to a ‘freezing’ of PC architecture. This meant that Intel performance increases were hidden or limited by outdated/inappropriate architecture.

(2) Lack of Industry Leadership
The lack of industry leadership in an ‘open’ environment limited the system-level innovation that was present in the early stages of the industry, when leaders (IBM, Compaq) took responsibility for progress. In the ‘open’ stage, however, no supplier could single-handedly evolve the whole system.

Creation of the Intel Architecture Lab:
The Intel Architecture Lab (IAL) was introduced to address the challenges posed by the above. It was recognised that the problems were not only architectural, but that new uses for the PC could drive demand for Intel’s product (more powerful chips). However, obstacles such as the slow development of software and peripherals were preventing people from developing such new uses for the PC. Thus, the role of IAL was to “provide enabling technologies and grow the market for microprocessors by finding new users and new uses for PCs” – and to do this in a way that would make clear to the end-user the benefit of having a next-generation processor.

Expansion of the Mission
During the mid-90’s the role of the IAL expanded to being a “catalyst for innovation in the industry” – “to establish the technologies, standards, and products necessary to grow demand for the extended PC through the creation of new computing experiences.” Thus, IAL became involved in (1) driving PC architecture progress, (2) stimulating and facilitating innovation on complementary products, and (3) coordinating outside firms’ innovations in an attempt to drive the development of new system capabilities.

The PCI Bus Initiative:
A critical part of the architecture is the ‘bus’, which controls the performance of the links between components (i.e. transmits data between them). The development and industry adoption of the PCI bus was the IAL’S first project in 1991. The success of this led to Intel becoming the platform leader – from a ‘supplier to a complex architecture’ to the ‘architect of the industry.’ This was the point where Intel realised that it could influence its environment, and the direction of innovation within it.
As opposed to IBM, which favoured the development of a proprietary bus, Intel made sure that their PCI specification was free and open. In this way, they hoped to ward off fragmentation in the PC system interconnection market – thus stabilising development and production of complements.
As opposed to other developers, Intel designed the PCI so that future generations of microprocessors would not require the redesign of anything else in the architecture. This meant that Intel’s chips could evolve independently of (no approval from, coordination with or reliance on) other actors in the industry – thus ‘decoupling Intel’s zone of innovation from the rest of the computer.’
This approach – solving a common problem in a way which facilitates one’s goals – is a critical concept in platform leadership.
To encourage adoption, Intel had to work hard. Large PC makers (Compaq) were worried that Intel’s move would prevent them from being able to develop distinctive products. Small PC makers, on the other hand, welcomed this move, as it presented them with and opportunity to compete on an equal footing. Intel’s own indecision did not help speed industry adoption, but its field engineers helped to create a perception that Intel was, in fact, 100% behind the PCI.

Intel Decides to Make the PCI Chip Set
In order to convince other firms to adopt PCI, Intel showed their commitment by starting to mass-produce PCI chip sets (the ‘most strategic interface’ in the PC). IBM and Compaq went along with Intel because they both wanted to be able to take advantage of Intel’s microprocessor development and found that developing proprietary PC systems on their own was too complicated and expensive.
Because chip set manufacturers were often not able to develop products that matched Intel’s processors in a timely fashion, Intel began (1) giving them technical and volume information ahead of time and (2) building the chip sets themselves, so that the sets would not limit their core business. Intel eventually became a major producer in its own right.

PCI: Template for Further Evolution:
The strategic significance of the PCI initiative lies in the way that it shifted the balance of power among the players involved in the evolution of the PC platform. It provided credibility and a model for success for Intel to follow when working with other firms.

Original Text: Gawer, A. and Cusumano, M.A. (2002). Platform leadership: how Intel, Microsft, and Cisco drive industry innovation. Harvard Business School Press: Mass
Platform Leadership: How Intel, Microsoft, and Cisco Drive Industry Innovation

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