Information Rules: A Strategic Guide to the Network Economy
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Chapter 1 of Information Rules begins with a description of the change brought on by technology at the close of the century--but the century described is not this one, it's the late 1800s. One hundred years ago, it was an emerging telephone and electrical network that was transforming business. Today it's the Internet. The point? While the circumstances of a particular era may be unique, the underlying principles that describe the exchange of goods in a free- market economy are the same. And the authors, Carl Shapiro and Hal Varian, should know. Shapiro is Professor of Business Strategy at the Haas School of Business at the University of California, Berkeley, and has also served as chief economist at the Antitrust Division of the US Justice Department. Varian is the Dean of the School of Information Management and Systems at University of California, Berkeley. Together they offer a deep knowledge of how economic systems work coupled with first-hand experience of today's network economy. They write:
Sure, today's business world is different in a myriad of ways from that of a century ago. But many of today's managers are so focused on the trees of technological change that they fail to see the forest: the underlying economic forces that determine success and failure.Shapiro and Varian go to great lengths to purge this book of the technobabble and forecasting of an electronic "woo-woo land" that's typical in books of this genre. Instead, with their feet on the ground, they consider how to market and distribute goods in the network economy, citing examples from industries as diverse as airlines, software, entertainment and communications. The authors cover issues such as pricing, intellectual property, versioning, lock-in, compatibility, and standards. Clearly written and presented, Information Rules belongs on the bookshelf of anyone who has an interest in today's network economy--entrepreneurs, managers, investors, students. If there was ever a textbook written on how to do business in the information age, this book is it. Highly recommended. --Harry C. Edwards, Amazon.com --This text refers to an out of print or unavailable edition of this title.
From the Publisher
The book is clearly written, and easy to read
If you think you can apply traditional economics to the new information economy, then you are ... right. That is the message from the economist authors of this informative and readable book from Shapiro and Varian.
The book uses a range of products from the network economy to outline strategies for pricing information goods. These range from the obvious (introductory pricing, competitive upgrades, basic versus deluxe) through to more complex strategies such as versioning (producing different versions of a product for different groups of customers - and charging different prices accordingly).
The book is full of examples, ranging from HDTV and railroads through to the computing industry. For me, some of the most interesting examples come from the content side, and this includes Encyclopaedia Britannica's move to supplement its hard copy business with digital delivery.
In fact, there is a lot of overlap in the book between the very different markets of software, hardware and content, and this can make it difficult sometimes to apply the rules to the area in which you are interested (probably "content" if you bought the book after the hype). Also, I'm not convinced that there really is a direct comparison between these very different industries. For instance, there is much talk about network economies and lock-in (with companies using closed standards) which I believe isn't directly applicable to the information content industry as I would define it.
However, all of the examples are suitably analysed and each chapter ends with a summary of the rules learned. This is a good way to make you think about the interesting issues raised.
The book is clearly written, and easy to read with little jargon. Much of this material you will probably have read something about elsewhere (first mover advantage, network effects and externalities, economies of scale, etc.) but it is nice to have it clearly summarised in one place.
This is not, however, a "How to make money by selling information on the Internet" book for Net entrepreneurs. Also, it may not contain much new material for those who already work in the industries covered. However, even though it may tell you some things you already know, it is well worth a read for bringing it all together and getting you thinking about the important issues raised.
FreePint - June 1999 --This text refers to an out of print or unavailable edition of this title.See all Product Description
Top Customer Reviews
I would heartily recommend it -- if you are interested in learning some concepts to help you make sense of the *NEW* economy. The authors do a great job of avoiding the typical economic jargon that makes these sorts of ideas opaque. However, like any academic book, it requires that you take the concepts you learn from it and apply them YOURSELF to the business world around us. Unlike a lot of HYPE TECHNO books, these concepts will not go OUT OF STYLE. They are basic, fundamental and informative, if you're willing to think a little bit about them.
1.Information is costly to produce but inexpensive to reproduce (i.e., has a high fixed cost but a low marginal cost). This translates to a lot of latitude, challenges and opportunities in coming up with pricing models and corresponding versions of a product to create both the maximum revenue opportunities and establish the largest number of members of the product's network of users. Also, given the low cost of reproduction, it stands to reason that protecting intellectual property is a key determinant of information good's economic success. 2.Information is an "Experience Good," which is to say that customers must use and experience the product to put value on it. One only has to think about Netscape's initial success giving away the browser to see the value of leveraging the "experience" factor. 3.Products that can achieve "lock-in" will benefit from the "switching costs" that preclude customers from switching-over to competing (even superior) solutions. In other words, products that get a user to commit time, knowledge and/or resources to them are likely to continue to be used even in the face of superior products given the cost of switching to alternative products.Read more ›
INFORMATION RULES is a valuable guide to thinking through your decisions about information-based businesses.
By using microeconomics, it makes the points clearer to those who are quantitative thinkers, and more familiar to those who already know about this tool. The case histories are well done, and are varied in a way that is helpful.
Do buy, read, enjoy, and apply the valuable information in this excellent book.
Information technologies have advanced rapidly but business knowledge has not kept up. That's why I am glad that Shapiro and Varian have taken the time to make the insights from economics more broadly accessible and relevant with this book.
This book should be required reading for business managers working with the Internet or related information technologies. I am including it on the reading lists for my MBA classes MIT.
Most Recent Customer Reviews
I first read Information Rules in 1999-2000, enjoyed it, and kept it on shelf. 8 years later, I am reading it again, it is as fresh as it was then, because it is grounded in solid... Read morePublished on 19 Nov. 2007 by Amazon Customer
An outstanding book which has influenced both academics and practitioners. There is extensive coverage of both firm-level and industry-level issues. Read morePublished on 15 Jan. 2007 by K. Maroukian
You will have to come back to it many times to improve continually your understanding and practices in the network economy... Read morePublished on 23 July 2002 by Amazon Customer
"Technology changes. Economic laws do not." Ignore basic economic principles at your own risk. Read more
An interesting and informative read on network economics. Plenty of examples and the authors have concealed their economic arguments in very simple terms.Published on 9 Aug. 2001 by Ant
A very practical and concise blueprint to the network economy. Read it and understand the differences between the old and the new economy.Published on 25 Jan. 2001 by Marque Pierre Sondergaard
It may to too remedial for industry veterans or any recent graduate from an MBA program. It is, however, an excellent primer for those entering the IT industry. Read morePublished on 3 Sept. 1999