Distributed Product Development

Companies have traditionally been protective of the innovation activities they use in product and process development, seeing the activities as part of their crown jewels. That thinking, however, is starting to change. The increase in outsourcing, offshoring and alliance building has resulted in innovation efforts that often require the orchestration of multiple organizations separated by cultural, geographic and legal boundaries.

Outsourcing and offshoring complex product and service development work — also known as distributed product development or DPD — subjects companies to significant uncertainty. Companies can make perfectly reasonable decisions and still find themselves needing to make expensive changes, ranging into the millions or even billions of dollars. By anticipating some of these changes, managers can reduce risk and, ultimately, cost.

For more on our perspectives on this topic, see:

• "Putting It Together: How to Succeed in Distributed Product Development," MIT Sloan Management Review, Winter 2011, Jason Amaral, Edward G. Anderson Jr. and Geoffrey G. Parker.
• "Prevent Disasters in Design Outsourcing," Harvard Business Review, September 2008, Jason Amaral and Geoffrey Parker.

Contact us to learn about how to apply the best practices of distributed product development at your company.

Platform Strategy

If you listed the blockbuster offerings that have redefined the global business landscape, you’d find that many tie together two distinct groups of users. Credit cards link consumers and merchants. Operating systems connect computer users and application developers. HMOs link patients to health-care providers. Search engines join Web surfers and advertisers.

When successful, these platforms catalyze a virtuous cycle: More demand from one user group spurs more from the other. For example, the more video games developers (one user group) create for the Microsoft X-Box platform, the more players (the other user group) snap up the latest X-Box. Meanwhile, the more players who use X-Box, the more developers willing to pay Microsoft a licensing fee to produce new games.

But managing platforms is tricky: Strategies that make traditional offerings successful won’t work in these two-sided markets. To capture the advantages that platforms promise, you must address three strategic challenges. First, you must get pricing right, subsidizing some users while deriving profits from others. Second, you must cope with winner-take-all competition — a dynamic that has defined many platform battles. Third, you must avoid envelopment by another platform that serves the same customer base with a related offering. 

For more on our perspectives on this topic, see for:

• "Platform Envelopment," Strategic Management Journal, 2011, T. Eisenmann, G. Parker, and M. Van Alstyne.
• "Strategies for Two-Sided Markets," Harvard Business Review, 2006, with T. Eisenmann, G. Parker, and M. Van Alstyne.

Contact us to learn about how to apply the best practices of platform strategy at your company.