Source: „Product companies compete by building ever bigger factories to turn out ever cheaper widgets. But a very different sort of economics comes into play when those widgets start to communicate. It’s called the network effect—when each new user of a product makes its value higher. Think of the telephone a century ago. The greater the number of people who used Bell’s invention, the more valuable it became to all of them. The telephone became a platform for countless new businesses its inventor never imagined.
Now that more objects are getting wired up into networks—street lights, wind turbines, automobiles—there are opportunities for new platforms to emerge. That’s why some companies are seeking the advice of Marshall Van Alstyne, a business professor at Boston University who has studied the economics of e-mail spam and social networks.
These days, Van Alstyne studies “platform economics,” or why companies such as Uber, Apple, and Amazon are so successful—and what traditional product makers can do to emulate them. MIT Technology Review’s senior editor for business, Antonio Regalado, visited Van Alstyne at his office in Boston.