Department of Informatics Platform Thinking Considerations for establishing third-party developer- centric ecosystems Master thesis 15 HEC, course INFM10 in Information Systems Authors: Björn Arvesen Sylvia Karanja Supervisor: Bo Andersson Examiners: Odd Steen Miranda Kajtazi Platform Thinking Arvesen and Karanja Platform Thinking: Considerations for establishing third-party developer-centric ecosystems AUTHORS: Björn Arvesen and Sylvia Karanja PUBLISHER: Department of Informatics, Lund School of Economics and Management, Lund University PRESENTED: June, 2018 DOCUMENT TYPE: Master Thesis NUMBER OF PAGES: 120 KEY WORDS: platform business models; boundary resources; third-party developers; platform governance; developer marketing; external innovators; lean communication; complementors; integrators; organizational identity. ABSTRACT: There has been a dramatic growth in organizations aiming to leverage the power of platform business models and capture the vast amounts of value stemming from external innovation. Thus, actors are required to open up their innovation processes to third-party developers, and make sure these external resources are incentivized to both enter and remain in the ecosystem. So far, there has been a limited understanding of what considerations have to be made to create an optimal developer environment, with research being limited to specific aspects of platform establishment. By applying a process perspective, this study has identified the three high level phases of such platform establishment as (1) Understanding Developers, (2) Platform Design and (3) Governance and Control, which all come with certain considerations. The process has been examined through six interviews with different experts in the field, to create a comprehen- sive list of the key considerations for each phase. Using diffusion of innovation theory, the study does not only list various factors, but also explains their impact on platform diffusion. Key findings highlight discrepancies between literature and empiricism, with addressable market and brand equity of a firm being the primary motivations for third-party developers. Addition- ally, the study identifies strategic partnerships as an impactful factor in all phases and a neces- sity for successful platform establishment. – I – Platform Thinking Arvesen and Karanja Acknowledgements We wish to thank all participating organizations and informants for taking part in our study. Your insights have been invaluable for this study and we truly appreciate you taking the time to talk to us. Our sincere gratitude as well and many thanks to our supervisor Bo Andersson, who with excellent support, encouragement and guidance even when unwell made the creation and completion of this thesis possible. Throughout our research, Bo provided us with rewarding discussions and constructive criticisms that challenged us to produce our best. Thank You! Special Thanks First, I would like to thank God for good health and His mercies always. To the Swedish Insti- tute Study Scholarship for the financial support of my studies. Sincere thanks to my family and especially my mom, dad and sisters for their love, encouragement and guidance. Special grati- tude to my friends; Sharon, Eva, Ray & Roger for their continuous support during this journey. Always and Forever! Sylvia Charlene Karanja An expression of gratitude to my family and friends for their support throughout my studies. Additionally, I would like to give a special thanks to program coordinator for the Bachelor’s program in informatics, Viktoria Svenby. Her guidance through the application process for courses in informatics, both at Lund’s university and other universities, was invaluable for my process of becoming eligible for the Master’s program in Information Systems. Björn Arvesen – II – Platform Thinking Arvesen and Karanja Content 1 Introduction ......................................................................................................................... 1 1.1 Background .................................................................................................................. 1 1.2 Problem Area and Research Question ......................................................................... 2 1.3 Purpose ........................................................................................................................ 3 1.4 Delimitation ................................................................................................................. 3 1.5 Definitions ................................................................................................................... 4 2 Theoretical Background ...................................................................................................... 6 2.1 Diffusion of Innovation Theory ................................................................................... 6 2.2 The Process Perspective .............................................................................................. 7 2.3 Understanding Developers .......................................................................................... 9 2.3.1 Third-party Developer Roles ................................................................................ 9 2.3.2 Third-party Developer Motivations for Platform Adoption ............................... 10 2.4 Platform Design ......................................................................................................... 11 2.4.1 Boundary Resources ........................................................................................... 12 2.4.2 Critical Mass ...................................................................................................... 13 2.4.3 Organizational Identity and Differentiation ....................................................... 14 2.5 Governance and Control ............................................................................................ 15 2.5.1 Teachings from OSS .......................................................................................... 15 2.5.2 Platform Rules .................................................................................................... 16 2.5.3 Balancing Creative Freedom and Control .......................................................... 17 2.6 Research Framework ................................................................................................. 18 3 Methodology ..................................................................................................................... 20 3.1 Research Strategy ...................................................................................................... 20 3.2 Data Collection .......................................................................................................... 20 3.2.1 Argument for Case / Informant Selection .......................................................... 21 3.2.2 Interview Guide Design ..................................................................................... 23 3.2.3 Interviews ........................................................................................................... 24 3.3 Data Analysis ............................................................................................................. 25 3.4 Research Quality ........................................................................................................ 28 3.4.1 Reliability & Validity ......................................................................................... 28 3.4.2 Ethics .................................................................................................................. 29 4 Empirical Results .............................................................................................................. 30 4.1 Understanding Developers ........................................................................................ 30 4.1.1 Developer Motivations in Platform Adoption .................................................... 30 – III – Platform Thinking Arvesen and Karanja 4.2 Platform Design Strategies ........................................................................................ 34 4.2.1 Boundary Resources ........................................................................................... 34 4.2.2 Critical Mass ...................................................................................................... 36 4.2.3 Organizational Identity and Differentiation ....................................................... 37 4.3 Governance and Control ............................................................................................ 39 4.3.1 Platform Rules .................................................................................................... 39 4.3.2 Balancing Creative Freedom and Control .......................................................... 40 4.3.3 Communication Structures and Leadership ....................................................... 41 5 Discussion ......................................................................................................................... 43 5.1 Developer Motivations for Platform Adoption ......................................................... 43 5.2 Platform Design ......................................................................................................... 45 5.2.1 Boundary Resources ........................................................................................... 45 5.2.2 Critical Mass .....................................................................................................