Research Shows "Matchmaker" Businesses Are the New Drivers of Global Economy

Business Wire, May 14, 2007

Renowned Academics Explore the Three Reasons Behind this Business Phenomenon and Describe the Framework Used by These Influential Businesses to Drive Profits

BOSTON -- A flurry of companies - including over half of the world's 25 most profitable enterprises - have become the powerbrokers for Web 2.0 and are transforming the world's global economy, according to David S. Evans, professor at the University of College London and the University of Chicago and Richard Schmalensee, dean of the MIT Sloan School of Management. Their new book, Catalyst Code: The Strategies Behind the World's Most Dynamic Companies (Harvard Business School Press; May 9, 2007; ISBN 978-1-4221-0199-5; $29.95/hardcover), is the first book to outline a six-step framework for success in what they call the "catalyst" business model.

According to the authors, these modern-day business "matchmakers" help different groups of customers - who need each other in some way - to come together on the same platform. That platform - or the catalyst - unleashes tremendous value as a result of enabling interactions that either wouldn't be possible or would be quite costly and inefficient absent the catalyst's intervention.

Using unconventional pricing, product design, and business model strategies, these companies are fashioning today's headlines. Today's catalysts are reinventing the real estate business, contriving new markets for content development and distribution, designing new ways for people to interact online, forcing change to the five-decade old payment industry, and otherwise revolutionizing entire industries and changing the way business is done. For example:

* Microsofts' Bill Gates recently said that within five years Internet-based television will do to broadcast what the Internet has already done to print media.

* Google is quickly destroying the traditional advertising business and becoming a factor in major new content partnerships.

* News Corp. and Thomson are the latest media companies to consider new moves that could lead to major transformations in the way news and financial information is distributed and priced.

* Players in the mobile phone industry, such as NTT DoCoMo in Japan, China Mobile in China, and Disney Mobile in the US, are creating entirely new platforms for mobile phones that attempt to use the "third screen" for both content, advertising and in some cases, payment applications.

As technological advances help catalyst businesses multiply, it's vital to understand the economics behind these companies. Using in-depth analysis of a wide variety of companies, and drawing upon their experiences in working with catalysts around the world, the authors offer executives, entrepreneurs, and analysts a step-by-step framework for launching, sustaining, and growing these dynamic businesses. Some of the leading business schools are now beginning to integrate this newly discovered framework into their curriculum.

"Building and running a catalyst business is really hard, in part because the strategies that make them successful run counter to the way executives have been trained to make decisions about product design, pricing, business models, and incentives," said Evans. "Given the growing importance of catalyst businesses worldwide, we hope that Catalyst Code is a handbook of sorts for doing business in the 21st century."

Evans and Schmalensee are considered among the pioneers of this body of research, building upon the work of their colleagues Jean Tirole and Jean Charles Rochet at the University of Toulouse. Evans is the founder of Market Platform Dynamics and Schmalensee is chairman of Market Platform Dynamics. For more information, please visit the Catalyst Code Web site at http://www.catalystcode.com and visit the authors' blog for commentary on catalyst companies in the news (http://catalystcode.com/theconversation/blog/).