6. Resources, Platforms, and Sustainable Competitive Advantage: How to Win and Keep on Winning

When competing in any area, it’s helpful to have valuable stuff that opponents don’t have. If you want to fight a war, it helps to have better fighter aircraft and better tanks. This pattern is called resource-based sustainable competitive advantage. Resource-based sustainable competitive advantage is surprisingly difficult to achieve in an information-based business because software can be copied. However, sometimes the resources the firm owns or its skill base cannot be fully duplicated. These resources and skills can be sources of sustainable competitive advantage when leveraged through software, even if the software itself can be copied. Platform envelopment is a form of resource-based sustainable competitive advantage. In platform envelopment, the firm creates the resources that it later combines and uses to protect and defend its sustainable competitive advantage. Each app that’s included in the platform creates super-additive value; the value of the platform is far greater than sum of the values of each part. To compete with a complete platform, it is usually necessary to have an equally attractive complete platform of your own. Google has a platform envelopment strategy. Amazon, Apple, Facebook, and Uber pursue their own. Platform envelopment strategies create monopoly power, delighting consumers but virtually destroying competition.