The Openness of Smartphone Software Platforms

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1 Fakultät für Betriebswirtschaft Munich School of Management The Openness of Smartphone Software Platforms A Framework and Preliminary Empirical Findings from the Developers Perspective Daniel Hilkert, Alexander Benlian & Thomas Hess Institut für Wirtschaftsinformatik und Neue Medien

2 Agenda 1 Motivation and Research Question(s) 2 Theoretical Background 3 Step 1 Qualitative Approach 4 Step 2 Quantitative Approach 5 Summary and Outlook 1

3 Smartphone Software Platforms Core of Complex Ecosystems Source: VisionMobile (2011) 2

4 % marekt share smartphone OS Das Management von Komplementären in Branchenplattformen Managing Complementors - Why Platform Providers need App Developers % of developers plan to use % of developers plan to abandon 60,00% 50,00% 40,00% 30,00% 20,00% 10,00% Symbian Android RIM ios Microsoft Other 0,00% Source: VisionMobile (2011), Gartner (2011)

5 Research Question(s) How does the platform s degree of openness influence third-party developers (complementors) actions and descision within industry platforms? Complementor s Perspective Research Questions: What are the motivational drivers to develop complementary applications? How do individual motivational drivers influence the developer s actions and decisions? Openness as Management Lever Research Questions: What is platform openness from the perspective of third party developers? Which facets of platform openness constrain or advance the work of developers? 4

6 Agenda 1 Motivation and Research Question(s) 2 Theoretical Background 3 Step 1 Qualitative Approach 4 Step 2 Quantitative Approach 5 Summary and Outlook 5

7 Theoretical Foundation: Multi-Sided Industry Platforms Platforms: Systems composed of a stable core and complementary (software-) modules that build on it Two-Sided Value Creation Complementors and endusers both contribute to the platform s value creation Indirect Network Effects For both sides of the platform, the platform s attractiveness raises and falls with the existence of the other side Complementors Indirect Network Effects End-Users Module Module Module Module Module Module Industry Platform Quellen: Gawer (2009); Rochet & Tirol (2003); Eisenmann et al. (2006); Yoffie/Kwak (2006); 6

8 Classification: Product Platforms and Industry Platforms Plattform Typ Product Platform Industry Platform Participants Goals End-use of the final product Design rules Key questions One firm or several firms within a supply chain Increase the productive efficiency of the firm Produce variety at lower costs Achieve mass customization Enhance flexibility in the design of new products YES, end-use is known in advance and defined by the firm(s) Re-use of modular components Stability of system architecture Standardization and reconcile of low cost and variety within a firm Several firms of an industry ecosystem Platform providers: Stimulate and capture value from external, complementary innovation Complementors: Increase revenues NO, variety of end-uses results from the combination of the platform and its complementary products Interfaces around the platform allow plugging-in of, and innovation on, complements Stimulate complementary innovation Solution of the chicken-egg problem Quellen: Gawer (2009), Buxmann et al (2011) 7

9 Platform Openness: Definition and Classification Definition of Platform Openness: A software-based platform should be considered open if the contribution, the development, the usage, and the commercialization is not restricted, or if all existing restrictions are reasonable and equally applied to all participants. Type of openness Horizontal Licensing the platform to competitors, or integrating (further) platform sponsors vs. Vertical Granting external developers access to the market of complementary applications Pros Adoption Opening a platform encourages wider adoption of the system by reducing consumers fears of being locked into a single vendor Diversity An open system benefits from the input, ideas, and knowledge of a broader pool of contributors Cons Appropriability open strategy reduces the innovator s share of profits by lowering entry barriers and introducing intrasystem competition Control The platform provider might lose (some) control over the development of the platform Sources: Boudreau (2010); Eisenmann et al. (2009); West (2003) 8

10 Agenda 1 Motivation and Research Question(s) 2 Theoretical Background 3 Step 1 Qualitative Approach 4 Step 2 Quantitative Approach 5 Summary and Outlook 9

11 Overview: Methodological Approach 1. Step: Qualitative Investigation 2. Step: Quantitative Ranking Further Research Exploratory Interviews Open-ended exploratory interviews with 9 ios and Android app developers Investigation of the complementors' general perception of openness and identification of concrete openness-related facets Card-Sorting Procedure Assessment of content validity Evaluation of the aspect assignments (9 ios and Android app developers) Focus group discussion 7 experts on mobile software and researchers Assessment of content validity Screening out of overlapping facets In sum: 22 participants Sources: Gläser and Laudel (2006); Krippendorf (2004); Bühner, M.; Ziegler, M Online Survey Instrument Developers were asked to mark all openness-facets that had an impact on their platform-related development activities Pre-Test 5 application developers and 2 researchers Refinement of several openness statements to eliminate possible misunderstandings Sample 4,978 Android application developers invited 254 valid responses Statistical Evaluation Ranking by the percentage of respondents that nominated the respective facet for having an impact Segmentation into professional developers, amateurs, and entrepreneurs; one way ANOVA followed by Turkey HSD test 1. Further differentiation of the perceived openness framework 2. Formal scale development process 3. Relating platform openness with complementors loyalty 10

12 Result of Step 1: Aspects of Platform-Openness Technical Platform Exchange among complementors Technical documentation Technical support by provider Learnability of technical standards Availability of development tools Technical interoperability Functional range Technical performance Distribution Channel Transparency of terms and conditions Restrictive terms and conditions Transparency of rules on content Restrictive rules on content Transparency of market mechanisms Communication with end-user Financial entry barriers Availability of distribution channel Quellen: West (2003); West & O Mahony (2008); Tiwana et al. (2010); Schlagwein et al. (2010) 11

13 Agenda 1 Motivation and Research Question(s) 2 Theoretical Background 3 Step 1 Qualitative Approach 4 Step 2 Quantitative Approach 5 Summary and Outlook 12

14 Overview: Methodological Approach 1. Step: Qualitative Investigation 2. Step: Quantitative Ranking Further Research Exploratory Interviews Open-ended exploratory interviews with 9 ios and Android app developers Investigation of the complementors' general perception of openness and identification of concrete openness-related facets Card-Sorting Procedure Assessment of content validity Evaluation of the aspect assignments (6 ios and Android app developers) Focus group discussion 7 experts on mobile software and researchers Assessment of content validity Screening out of overlapping facets In sum: 22 participants Sources: Gläser and Laudel (2006); Krippendorf (2004); Bühner, M.; Ziegler, M Online Survey Instrument Developers were asked to mark all openness-facets that had an impact on their platform-related development activities Pre-Test 5 application developers and 2 researchers Refinement of several openness statements to eliminate possible misunderstandings Sample 4,978 Android application developers invited 254 valid responses Statistical Evaluation Ranking by the percentage of respondents that nominated the respective facet for having an impact Segmentation into professional developers, amateurs, and entrepreneurs; one way ANOVA followed by Turkey HSD test 1. Further differentiation of the perceived openness framework 2. Formal scale development process 3. Relating platform openness with complementors loyalty 13

15 Sample: N = 254 I primary develop smartphone apps as... Amateur 109 Entrepreneur 71 Professional 74 14

16 Result of Step 2: Ranking of Technical Openness Facets This aspect of the Android platform has an impact on my platform-related work (yes/no): Technical documentation Availability of development-tools Learnability of technical standards Functional range Technical performance Technical interoperability Exchange among complementors Technical support by provider 0% 5% 10% 15% 20% 25% 30% 15

17 Result of Step 2: Technical Openness Facets by Group This aspect of the Android platform has an impact on my platform-related work (yes/no): Technical documentation Availability of development-tools Learnability of technical standards Functional range Technical performance Technical interoperability Exchange among complementors Technical support by provider 0% 5% 10% 15% 20% 25% 30% 35% 40% Entrepreneur (N=71) % Professional (N=74) % Amateur (N=109) % 16

18 Result of Step 2: Relevance Ranking of Distribution Channel Openness Facets This aspect of the Android platform has an impact on my platform-related work (yes/no): Communication with end-users Availability of distribution channel Financial entry barriers Transparency of market mechanisms Restrictive terms and conditions Restrictive rules on the content Communication of rules on content Transparency of terms and conditions 0% 5% 10% 15% 20% 25% 30% 17

19 Result of Step 2: Technical Openness Facets by Group This aspect of the Android platform has an impact on my platform-related work (yes/no): Communication with end- users Availability of distribution channel Financial entry barriers Transparency of market mechanisms Restrictive terms and conditions Restrictive rules on the content Communication of rules on content Transparency of terms and conditions 0% 5% 10% 15% 20% 25% 30% 35% Entrepreneur (N=71) % Professional (N=74) % Amateur (N=109) % 18

20 Agenda 1 Background 2 Motivation and Research Question(s) 3 Step 1 Qualitative Approach 4 Step 2 Quantitative Approach 5 Summary and Outlook 19

21 Overview: Methodological Approach 1. Step: Qualitative Investigation 2. Step: Quantitative Ranking Further Research Exploratory Interviews Open-ended exploratory interviews with 9 ios and Android app developers Investigation of the complementors' general perception of openness and identification of concrete openness-related facets Card-Sorting Procedure Assessment of content validity Evaluation of the aspect assignments (9 ios and Android app developers) Focus group discussion 7 experts on mobile software and researchers Assessment of content validity Screening out of overlapping facets In sum: 22 participants Sources: Gläser and Laudel (2006); Krippendorf (2004); Bühner, M.; Ziegler, M Online Survey Instrument Developers were asked to mark all openness-facets that had an impact on their platform-related development activities Pre-Test 5 application developers and 2 researchers Refinement of several openness statements to eliminate possible misunderstandings Sample 4,978 Android application developers invited 254 valid responses Statistical Evaluation Ranking by the percentage of respondents that nominated the respective facet for having an impact Segmentation into professional developers, amateurs, and entrepreneurs; one way ANOVA followed by Turkey HSD test 1. Further differentiation of the perceived openness framework 2. Formal scale development process 3. Relating platform openness with complementors loyalty 20

22 Framework: Aspects of Perceived Platform Openness (PPO) Transparency Accessibility Technical Platform Exchange among complementors Technical documentation Technical support by provider Learnability of technical standards Availability of development tools Technical interoperability Functional range Technical performance Cost of required technical equipment Distribution Channel Communication of content rules Transparency of terms and conditions Information on distribution channel Transparency of market mechanisms Communication with end-users Financial entry barriers Restrictive terms and conditions Availability of distribution channel Quellen: West (2003); West & O Mahony (2008); Tiwana et al. (2010); Schlagwein et al. (2010) 21

23 Empirical Results of Instrument Validation Exchange among complementors Technical documentation Technical support by provider Learnability of technical standards Availability of development-tools Technical interoperability Functional range Technical performance Cost of required technical equipment Communication of rules on content Transparency of terms and conditions Information on distribution channel Transparency of market mechanisms Communication with end-users Financial entry barriers Restrictive terms and conditions Availability of distribution channel 0.20** 0.26*** 0.16** 0.15** 0.15** 0.26*** 0.22*** 0.12** *** 0.21*** 0.19** 0.29*** 0.19*** *** 0.17*** TechTrans (TechTrans) R² = 0.37 (TechAccess) R² = TechAccess1 DistTrans DistAccess1 (DistTrans) R² = 0.58 TechTrans2 TechAccess2 DistTrans2 (DistAccess) R² = *** 0.76*** 0.72*** 0.98*** DistAccess2 0.22** 0.55*** 0.23*** 0.45*** OR1 (PPO) R² = *** 0.79*** OR1 OR1 0.8*** Sat1 (Satisfaction) R² = *** 0.78*** Sat2 Sat3 Gobal Model Fit: χ²=768.04, d.f.=323, RMSEA=0.068, NFI=0.9, CFI=0.94 * p<0.05; ** p<0.01; *** p< *** Sat4 22

24 Managing Complementors: Platform-Openness as Key-Lever TechTrans TechAccess DistTrans DistAccess 0.236*** 0.281*** 0.120** 0.213*** PPO Exp-Conf R² = *** 0.538*** Perceived Usefulness R² = *** Satisfaction R² = *** 0.419*** Continuance Intention R² = 0.32 N = 626; * = p<0.1; ** = p<0.05; *** p<0.001 Results 1) 4-dimensional openness framework (empirically) works in an extended nomological context 2) Openness is the key lever for increasing developers loyalty 23

25 Discussion THANK YOU FOR YOUR ATTENTION! 24

26 BACKUP 25

27 Ergebnisse III: ios (Apple) vs. Android (Google) TechTrans TechAccess DistTrans DistAccess 0.207** 0.212*** 0.269*** 0.251*** 0.261*** ns 0.179*** 0.247*** PPO Exp-Conf R² =0.53 / *** 0.552*** 0.534*** 0.483*** Perceived Usefulness R² = 0.35 / *** 0.289*** Satisfaction R² = 0.62 / *** 0.073* 0.340*** 0.467*** Continuance Intention R² = 0.26 / 0.26 jeweils ios (oben, N=235) vs. Android (unten, N=369); * = p<0.1; ** = p<0.05; *** p<0.001 Ergebnisse 1) Deutliche Gruppenunterschiede in der Offenheits-Wahrnehmung 2) Deutliche Gruppenunterschiede des Einflusses von Nützlichkeit und Zufriedenheit 26

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