Envelopment lessons to manage digital platforms: The cases of Google and Yahoo

• Author: Ivanka Visnjic,Björn Kijl,Christopher Nicolas Müller
• Date: 01 March 2018
• DOI: http://doi.org/10.1002/jsc.2189
• Published date: 01 March 2018

RESEARCH ARTICLE

DOI: 10.1002/jsc.2189

Strategic Change. 2018;27(2):139–149. wileyonlinelibrary.com/journal/jsc © 2018 John Wiley & Sons, Ltd. 139

Abstract

Envelopment is a form of business model innovaon where companies add new funconality to

their plaorms to outcompete rivals. The two large internet corporaons analyzed in this study,

Google and Yahoo, employed diverging envelopment strategies. Google added related funcon-

ality to their inial plaorm and then expanded into funconally disnct plaorms. Yahoo, on the

other hand, expanded directly into funconally disnct plaorms.

1 

|

 INTRODUCTION

In today’s digital economy large plaorm companies frequently

aempt to enter each other’s market in order to grow and protect their

revenues. An example is Apple’s decision to build proprietary maps

and a voice based search engine soon aer Google moved into mobile

operang systems by purchasing Android (Visnjic & Cennamo, 2013).

Apple, Google, Amazon, and Facebook used to operate in separate

markets (hardware, search, online stores, and social media, respec-

vely) and now these individual markets have ceased to exist and

these companies compete in what has been labeled a supra‐plaorm

digital market (Visnjic & Cennamo, 2013). But how do these compa-

nies assume a posion in this supra‐plaorm market?

Guidance on how plaorm companies can assume and sustain

intra‐plaorm leadership starts with work by Gawer and Cusumano

(2002, 2008, 2013) who idenfy “coring” and “pping” as two prin-

cipal strategies to become a plaorm leader in your inial plaorm

market (IPM). Coring represents a set of taccs that help to establish a

new plaorm where one has not existed before by oering a technol-

ogy, product, or service that solves a technical problem aecng larger

parts of a market or ecosystem and hence oers funconality for a

large group of users, for example, Google’s coring in Internet search.

Tipping is a corresponding set of taccs that help plaorm players

compete against other plaorms in the same market. While pping

covers a range of acvies, from a business model perspecve, “p-

ping across markets” aims to strengthen a rm’s compeve posion

by integrang technical features from another market into its plat-

form. An example of pping is Google’s entry in the browser market

introducing Chrome.

The work of Eisenmann, Parker, and Van Alstyne (2006, 2011)

takes our understanding of plaorm market strategies even further

by considering how plaorm players compete beyond plaorm mar-

ket boundaries. They introduce the concept of envelopment which

represents a strategy whereby one plaorm provider combines the

funconality of its plaorm with the funconality of another plat-

form (e.g. newly created plaorm), to form a mulplaorm bundle

(Eisenmann, Parker, & Van Alstyne, 2011). While the noon of envel-

opment claries how and why digital plaorm companies enter each

other’s markets, it remains unclear how this process unfolds, when

plaorm players start with envelopment, which markets they choose

to envelop in and at what pace.

In this arcle, we intend to shed light on these quesons by exam-

ining the process of envelopment of Google and Yahoo using new

product introducons as a proxy for their envelopment moves. More

specically, relying on the content analysis of press releases related

to new product introducons over the period from 2006 to 2011, as

well as work from Rindova, Yeow, Marns, and Faraj (2012) covering

the rms’ growth trajectories before 2006, we learn that the two com-

panies had strikingly diverging approaches to envelopment. We nd

that Google’s inially focused approach to envelopment resulted in

Envelopment lessons to manage digital plaorms:

The cases of Google and Yahoo*

Christopher Nicolas Müller1 | Björn Kijl2 | Ivanka Visnjic3

1 Copenhagen Business School,

Department of Management, Society and

Communicaon, Copenhagen, Denmark

2 University of Twente, Faculty of

Behavioural, Management and Social

Sciences, Enschede, The Netherlands

3 ESADE Business School, Department of

Operaons, Innovaon and Data Sciences,

Barcelona, Spain

Correspondence

Björn Kijl, University of Twente, P.O. Box

217, 7500 AE, Enschede, The Netherlands.

Email: b.kijl@utwente.nl

* JEL classicaon codes: L10.