Invisible Engines: How Software Platforms Drive Innovation and Transform Industries

Creative destruction has been a hallmark of economic progress for millennia, but it has proceeded at a glacial pace for most of history. The Industrial Revolution sped this process up. Even so, it took decades for change to filter through the economy following innovations such as the spinning jenny, steam engine, and electric generator. The informa

Bundling decisions by multisided platforms, such as software platforms, are more complex since they must take into account the effect on all customer groups. Multisided businesses must consider both the additional customers they get on one side as a result of including a new feature and the additional customers they will get on the other side from

One is familiar: developers. TiVo is evangelizing its software platform by providing tools and offering prizes for the best applications in several categories, including games, music, and photos.

Bundling makes sense for businesses whenever the cost of adding additional features is lower than the additional sales generated thereby—even if most purchasers do not value or use all the features in a product bundle.

History teaches us that it takes decades for technological changes to work their way through the economy, destroying, creating, and transforming industries. The third industrial revolution got off to a quick start. We suspect that it will continue through at least the first few decades of the twenty-first century and that our invisible engines will

Like all multisided platforms, the pricing structures of the software platforms we have encountered in this book reflect the need to get all unintegrated sides on board: end users, application/game/content developers, and manufacturers of hardware and peripheral equipment. The structures we have examined have three remarkable features. First, all o

As we discussed in Chapter 8, the leading digital media platforms employ markedly different business models. But in all these models, end users are the primary source of variable profit:

Interestingly, we are aware of no examples of software platforms that initially integrated into the applications/games/content that subsequently exited that business entirely. On the other hand, almost all such platforms have adopted a two-sided strategy and made significant investments in attracting third-party suppliers. Partial integration is th

“Oh, ‘tanstaafl.’ Means ‘There ain’t no such thing as a free lunch.’ And isn’t,” I added, pointing to a FREE LUNCH sign across room, “or these drinks would cost half as much. Was reminding her that anything free costs twice as much in the long run or turns out worthless.” —Robert Heinlein