Resource Transformation in Platform Envelopment

Product developing organizations rapidly increase their investments in digital platforms to capture value from external ecosystems. This enforces a shift in attention from up-front development of enduser functions to generic resources, providing design capability in those ecosystems. However, to cultivate a prosperous ecosystem around its platform firms also need to invest in building an initial installed base to kick-start network effects. Since strong network effects tend to foster winner-take-all competition platform entrants have to carefully consider how to avoid fighting to the death for increased installed base. In this research in progress we explore how firms may develop platform strategies through envelopment. As an organization exercises envelopment it seeks to enter an existing platform market by bundling its own platform resources with a target platform. We report on an action research design initiative where a global automaker engages in the transformation of existing organizational and technological resources into new platforms resources when seeking to enter the ecosystem around Google’s Android. Drawing on the resource-based view of the firm we engage in an analysis of our preliminary data, indicating that such resource transformation has to be anchored in a careful and structured assessment of how different resources may provide competitive advantage in existing value chains and in the upcoming ecosystem respectively.