New Book Reveals the Profitability Secrets of Software Platforms

Business Wire, Sept 5, 2006

CAMBRIDGE, Mass. -- Invisible Engines: How Software Platforms Drive Innovation and Transform Industries

"As the power behind every kind of digital device, software platforms truly are the invisible engines of the information age. In their absorbing and comprehensive account of the evolution and economics of platform technologies, Evans, Hagiu, and Schmalensee essentially map out the still-evolving history of the third industrial revolution." -- Craig Mundie, Chief Technical Officer, Microsoft

Authors David S. Evans, Andrei Hagiu, and Richard Schmalensee describe how the most successful software platforms have transcended "cool" to "cash"...

Home security systems with facial recognition, laundry machines that send text messages, telephones that pay for groceries. This is all made possible by the incredible work of software platforms, those invisible engines that power industries as far reaching as PCs, PDAs and video games, mobile phones, digital media and web-based software such as Google and eBay.

But technology is only the half of what makes these engines rev--and in many ways, it is the easier half of it. The harder, much harder, part is figuring out how to actually turn cool into cash. The memory of the dot com bubble and burst just five years ago is still fresh. How many cutting edge ideas--that were genuinely futuristic - dropped off the face of the earth in a matter of months after failing to figure out how to make money?

In their new book, Invisible Engines: How Software Platforms Drive Innovation and Transform Industries (The MIT Press), economists Evans, Hagiu and Schmalensee tell the story of the most vibrant software engines of all times, and how they transcended cool to become profitable fixtures in today's economy.

Inspired entrepreneurs and seasoned executives alike will learn all about the secret sauce that makes invisible engines operate profitably - which is actually rooted in the dismal science of economics, and not part of the typical MBA's toolkit. What all software platforms have in common is the need to interest and engage multiple customer groups at about the same time. Developers only want to write applications for platforms that have lots of customers; and customers won't buy software-platform based products unless there are enough interesting applications. What separates success from failure, it turns out, is cracking the code on the pricing and product design decisions that allow both sides to get on board. Invisible Engines explores a wide range of software platform companies that have made an impact on our economy including: AOL, Apple, Blackberry, Dell, eBay, Electronic Arts, Google, IBM, Microsoft, Nintendo, Nokia, NTT DoCoMo, Motorola, RealNetworks, Samsung, Sony Computer Entertainment, TiVo and many others. Invisible Engines is available through MIT Press (http://mitpress.mit.edu/catalog/item/default.asp?ttype=2&tid=10937), Amazon.com, and BarnesandNoble.com.

About the Authors

David Evans is the Founder of Market Platform Dynamics (MPD, www.marketplatforms.com), Managing Director of LECG's Global Competition Policy Practice and a Visiting Professor at University College London; Andrei Hagiu is a principal at MPD and Assistant Professor at Harvard Business School; Richard Schmalensee is the Dean of MIT's Sloan School and Chairman of MPD.