Invisible Engines: How Software Platforms Drive Innovation and Transform Industries [Hardcover]

David S. Evans (Author), Andrei Hagiu (Author), Richard Schmalensee (Author)

Book Description

Publication Date: August 18, 2006

Software platforms are the invisible engines that have created, touched, or transformed nearly every major industry for the past quarter century. They power everything from mobile phones and automobile navigation systems to search engines and web portals. They have been the source of enormous value to consumers and helped some entrepreneurs build great fortunes. And they are likely to drive change that will dwarf the business and technology revolution we have seen to this point. Invisible Engines examines the business dynamics and strategies used by firms that recognize the transformative power unleashed by this new revolution--a revolution that will change both new and old industries.The authors argue that in order to understand the successes of software platforms, we must first understand their role as a technological meeting ground where application developers and end users converge. Apple, Microsoft, and Google, for example, charge developers little or nothing for using their platforms and make most of their money from end users; Sony PlayStation and other game consoles, by contrast, subsidize users and make more money from developers, who pay royalties for access to the code they need to write games. More applications attract more users, and more users attract more applications. And more applications and more users lead to more profits.Invisible Engines explores this story through the lens of the companies that have mastered this platform-balancing act. It offers detailed studies of the personal computer, video game console, personal digital assistant, smart mobile phone, and digital media software platform industries, focusing on the business decisions made by industry players to drive profits and stay a step ahead of the competition. Shorter discussions of Internet-based software platforms provide an important glimpse into a future in which the way we buy, pay, watch, listen, learn, and communicate will change forever. An electronic version of this book is available under a Creative Commons license.

Editorial Reviews

Review

"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

"Google, eBay, mobile phones, and the Xbox have a lot more in common that you might suspect. Invisible Engines builds on recent thinking about two-sided platforms, including the authors' substantial contributions to it. Evans, Hagiu and Schmalensee beautifully blend economics, history, and business analysis to shed light on how businesses and policy makers should design their strategies. This exciting book will be a key resource for practitioners and academics interested in knowing how software platforms work and where information technologies are heading." Jean Tirole , Institut d'Economie Industrielle, University of Toulouse

" Invisible Engines describes the economics of operating systems, those fiendishly complex pieces of software that provide the nervous system for computers, cell phones, game consoles, and a host of other devices. It is a must-read for anyone who wants to understand the economic forces that drive high-tech industries." Hal Varian , Haas School of Business and Department of Economics, University of California, Berkeley

" Invisible Engines is a highly sophisticated yet readable exploration of how companies do, can, and should deliver great value through software platforms. By combining economics and management, the authors deliver deep insights into the multifaceted world of software." David B. Yoffie , Max and Doris Starr Professor of International Business Administration, Harvard Business School

"Most high-tech markets today revolve around software and are 'two-sided'they require end-users as well as producers of complementary products such as software applications or digital content to support one platform over another. Invisible Engines is by far the broadest study of this subject to date. The authors probe expertly into the economics and technology underlying these markets as well as what business models and pricing strategies seem most likely to work. A very impressive book." Michael A. Cusumano , author of The Business of Software and coauthor of Platform Leadership

"The prose is accessible, even engaging. And the shrewd analysisbacked up by a great deal of research and a precise narrative of recent business historymore than makes up for the lack of office politics and entrepreneur heroics. Any executive looking to turn his company's product into an engine of growth will want to consult Invisible Engines." Om Malik Wall Street Journal

"Most high-tech markets today revolve around software and are 'two-sided' ?- they require end-users as well as producers of complementary products such as software applications or digital content to support one platform over another. *Invisible Engines* is by far the broadest study of this subject to date. The authors probe expertly into the economics and technology underlying these markets as well as what business models and pricing strategies seem most likely to work. A very impressive book."--Michael A. Cusumano, Sloan Management Review Distinguished Professor, MIT, author of *The Business of Software* and coauthor of *Platform Leadership*

"*Invisible Engines* is a highly sophisticated yet readable exploration of how companies do, can, and should deliver great value through software platforms. By combining economics and management, the authors deliver deep insights into the multifaceted world of software."--David B. Yoffie, Max and Doris Starr Professor of International Business Administration, Harvard Business School

About the Author

David S. Evans is Managing Director of the Global Competition Policy Practice at LECG LLC and part of Market Platform Dynamics, a management consulting firm that focuses on strategic analysis and product design for platform-based firms.

Richard L. Schmalensee is John C. Head III Dean and Professor of Management and Economics at the MIT Sloan School of Management. He is co-editor of Management: Inventing and Delivering Its Future (MIT Press, 2003).

Product Details

• Hardcover: 408 pages
• Publisher: The MIT Press; 1 edition (August 18, 2006)
• Language: English
• ISBN-10: 0262050854
• ISBN-13: 978-0262050852
• Product Dimensions: 6 x 0.8 x 9 inches
• Shipping Weight: 1.6 pounds (View shipping rates and policies)
• Average Customer Review: 4.2 out of 5 stars  See all reviews (8 customer reviews)
• Amazon Best Sellers Rank: #1,080,002 in Books (See Top 100 in Books)

More About the Author

David S. Evans is an economist with a specialty in the study of high-technology businesses, especially those based on software and the Internet, and in platform-based businesses (also known as two-sided markets) that create value by bringing different groups of customers together. He holds academic appointments at the University of Chicago Law School, where he is a Lecturer, and at the University College London where he is the Executive Director of the Jevons Institute for Competition Law and Economics and Visiting Professor. He has authored or edited seven books and more than 100 articles many of which were published in peer-reviewed journals or books. He is the Editor in Chief of Competition Policy International at www.globalcompetitionpolicy.org and Lombard Street at www.FinReg21.com. David is also a strategic advisor and board member for a number of ventures.

Most Helpful Customer Reviews

5 of 6 people found the following review helpful

3.0 out of 5 stars More historical than insightful.... March 4, 2009

By _LARS_

Format:Paperback

This book isn't terrible, but I was expecting it to be a bit more insightful. Instead I found it to more of a historical description of various industries that are platform based. That in itself was interesting, but I felt the analysis about how platforms work and the important economic factors could have been summarized into one short chapter.

6 of 8 people found the following review helpful

5.0 out of 5 stars Tour de force December 13, 2006

By TK

Format:Hardcover

Ever wondered what iPods, Windows, Xboxes, PDAs and smartphones have in common? This book provides a useful analysis of the successful business practices that cut across all of these industries and have made their pioneers extremely rich and famous. I found it very insightful and surprisingly well-written - there are lots of well-chosen anecdotes which help the reader cope with the complexity of the subject.

3 of 5 people found the following review helpful

5.0 out of 5 stars Emerging markets use technology to take multi-sided markets to new heights November 30, 2006

By Katy Huang

Format:Hardcover

Technology innovation where emerging markets like China can apply at the same rate has taken the traditional multi-sided markets to new heights. Where the environment is more dynamic than mature economies, and cultural preferences differ, platforms like bulletine boards and blogs and online social communities which serve various interested parties, are more ubiquous and trusted than in mature economies where printed info are still accurate. The book is fascinating as it explores how markets are created and enabled by platforms that balance the relative powers of each player and interested parties. Definitely a good read!