Making digital platforms successful: Insights on how to manage third-party app developers

With the advent of digital technology, organizations increasingly choose for open platform strategies. Platform-based innovation thrives on complementary products/services that are developed by independent third-parties. Through adopting standardized interfaces (APIs) and sharing documentation, a platform owner can invite outsiders to create additional functionality on top of their platform. In contrast to ‘traditional’ open innovation where organizations collaborate closely (e.g. in partnerships), open platforms rely on more distant “arm’s length” contracts. As a result, who the third-parties are exactly is often unknown. To illustrate: the most obvious example are smartphone apps – developers all over the world have, independent of the platform owners such as Apple and Google, developed and released thousands applications for iOS or Android’s platform.

The benefit of such open platform strategy are clear: the creativity as well as the productivity of the crowd is far beyond what an internal innovation team can deliver. As a result the speed of innovation increases dramatically and niche markets are served. Furthermore, such strategy generate powerful network effects: when more functionality in the form of apps become available, the more users become attracted, which in turn makes it more attractive for app developers to produce new functionality (e.g., apps).

My PhD Research on the Philips Hue
Despite these benefits, it does not mean that opening up your system for third-parties involves simply adopting standardized interfaces and sharing the documentation. Instead, it requires careful alignment between internal and external innovation in order to succeed as an open platform. In my PhD research I aimed to understand this coordination challenge and hence I studied the success of the Philips Hue connected light platform and its ecosystem. I was embedded in the organization to gain insight in internal dynamics, and held in-depth interviews with a wide range of third-party app developers to learn about the stories behind their apps. The analysis of my data resulted in a number of insights that are relevant for any organization that considers an open platform strategy and a developer program specifically.

Insight 1: Managing app developers involves both technical and social dimensions
Philips Hue communicates with third-party app developers through an online dedicated portal on which they post API documentation, related updates and software libraries. In addition they provide a forum where developers can post questions and comments. While most content is about the technicalities of reaching out the the Hue system, the social aspects should not be neglected. When I interviewed the developers they were very enthusiastic that they could vent their personal stories. They were proud of what they had created but also insecure about whether the Hue team liked what did. The developers also liked to identify with Philips Hue internal developers, and direct interaction (instead of one-way communication) was valued as a token of appreciation for their work.

Insight 2: Platform long-term success depends on engaged developers
Platform owners like Philips Hue need to secure a certain base of app developers in order to benefit from network effects. Philips Hue choose for low barriers for entry: it is free for developers to register and access the API documentation. Also, Philips Hue organizes events like hackathons where they bring specially designed light bulbs kits for developers to get introduced and experiment with the system. However, as the system reaches maturity, platform owners should also consider how they keep the developers engaged over time. In particular I learnt that developers like to experiment and were often motivated by a specific user need which was so far not addressed. It motivated them to develop and release an app themselves. However, the maintenance of the software, in terms of doing software updates to fix bugs or to ensure interoperability with the platform over time, was considered less fun. Also, other apps (including Philips Hue’ official one) may catch up and making their obsolete. Together, many developers may after some time leave the platform, resulting in so-called “dead” apps on the platform. To support developers who have launched and re-launched an app, the Hue team has created a powerful “apps we like” list, in which they can put new releases in the spotlight. It was found that the order in which the apps were displayed had a huge effect on the number of downloads. Therefore, Philips Hue could encourage developers engagement by the way they promote third-party apps.

Insight 3: User experience and intelligence is out of your hands
Despite the the aforementioned benefits, in an open platform strategy you also need to let go of some control. In the Philips Hue case we learnt that some users become reliant on a third-party app for their use of the system (instead of the official Hue app as provide by Philips). This means that part of the user experience is out of your hands. When everything is working perfectly fine, this is not an issue. However, when something in the system is not working properly, it becomes complicated for end-users to evaluate who is to blame: is it an issue with the Hue bulbs? Or is it the result of a system set up malfunction (e.g. problems with the local WiFi network)? Or is it a bug in the app? In the interviews the developers explained that users often reached out to them with questions and that they were happy to assist to avoid negative app reviews. Thus, developers do quite some customer support. As a by-product, the developers gather quite some useful feedback and that in turn is used to improve their apps – user intelligence that never reaches Philips Hue. As a platform owner, Philips Hue aims to provide a high quality, flawless user experience, but to do so they rely on the third-party developers. It is key to keep developers up-to-date about any changes in the system so that the right information is passed on to user. At the same time, in some cases is makes sense to engage in direct one-to-one collaboration to ensure interoperability.

Want to Know More about Organizing Ecosystems for Digital Innovation?
These insights can help organizations understand the complexities that emerge when engaging in initiatives to set up digital platforms. Digital platforms can become a success when a wide ecosystem of variables is orchestrated appropriately. Want to know more on how to understand and manage these complexities? Get in touch! We like to share our research and offer various in-house masterclasses on Digital Platforms & Ecosystems.

On December 5th, Susan Hilbolling will defend her dissertation titled Organizing Ecosystems for Digital Innovation. Read more about her research.