Catalyst Code: The Strategies Behind the World's Most Dynamic Companies

by David S. Evans, Richard Schmalensee

More and more traditional businesses have developed the characteristics of what the authors call platform businesses that operate in multi-sided markets. A multi-sided market is one in which two or more distinct parties need each other and benefit by interacting with each other. A platform business is one that facilitates these interactions safely and securely by serving as a match maker such as a dating website that introduces and brings the distinct parties together and is paid for these matchmaking services, or a cost cutter like an auctioneer or a credit card company that expedites such interactions with great speed and efficiency, or a crowd pleaser like a magazine or a rock band that amasses large audiences of desirable customers whom other businesses want to reach. This concept of a business model - one where there is one seller and at least two buyers - differs significantly from the traditional one buyer-one seller market model, particularly in terms of pricing structures and participant incentives. Yet, most potential platform businesses set prices and incentives as if they were one-sided, thereby leaching profits and losing customers. American Express and Microsoft live by what the authors call the catalyst code consisting of five behavioral insights with practical implications. They argue that companies like HBSPCo could improve growth rates and overall profitability by applying the code systematically. This book helps managers to analyze their own operations, identify areas of business that could exploit catalyst opportunities, and map out a plan for transforming their pricing practices, incentive plans, and organizational structures to maximize the power of the three aforementioned catalyst business models.

Genres: Management, Business

228 pages, Hardcover

First published January 1, 2007

About the author

Evans is an economist whose work on platform businesses, the digital economy, financial services, and antitrust economics is widely cited. He is the author of nine books and more than 150 articles on those and other economic topics. His most recent book, Matchmakers: The New Economics of Multisided Businesses, won the 2017 Axiom best economics book award, and was featured in the New York Times, Wall Street Journal, and Economist. Evans is frequently asked to speak to global audiences on the digital transformation, platforms business, and antitrust.

Evans uses his research to advise companies, from early-stage firms to the largest global digital businesses and has consulted for many of the prominent digital platform companies based in the US and China. Evans has also applied his expertise for testimony before courts, legislatures, and regulators in the US and abroad. The U.S. Supreme Court cited his work on platform economics and payment cards extensively in its American Express decision.

Evans has had a long career in academia. Between 2004 and 2022 he was a visiting professor at University College London (UCL) where he taught intensive courses on the digital economy and multisided platforms, and their application to competition policies, which were streamed to antitrust authorities globally. He was a Lecturer at the University of Chicago Law School between 2006 and 2016 where he taught an advanced seminar on antitrust economics. Previously he was a professor at the Fordham University Department of Economics and at Fordham Law School.

Reviews

[Barry Engelhardt · Rating 4 out of 5]

Catalyst – A substance that increases the rate of a chemical reaction without itself undergoing any permanent chemical change. A person or thing that precipitates an event.

Written in 2007, its only become more relevant due to the explosion of social media. The Catalyst Code analyzes the strengths, weakness & complexities of two sided businesses, which act as intermediaries, bringing together buyers & sellers (or differing groups) in a mutually beneficial manner. Some examples include video game consoles, credit cards, satellite radio, singles bars & travel agencies.

While the book focuses on successful operations, touching on structures, strategy & pricing, the implications for the ‘Internet of things,’ is far more intriguing. Social media platforms, like television, newspapers & magazines prior, need to bring together two groups (with at least one group paying the bills). In this case, the consumer (reader or watcher) and the advertiser. When usage is often free, the user becomes the product. Their eye balls, time & data are the commodity that is bought and sold.

This is also the premise of the documentary, The Social Dilemma.

[Nick · Rating 3 out of 5]

My company's bible. Recommended casual B-school reading.

[Jinyong Chung · Rating 4 out of 5]

It's interesting

[Steve Van · Rating 4 out of 5]

A very good book explaining the success behind companies are multi-sided, like Google.

[Khalid Almoghrabi · Rating 4 out of 5]

Excellent book for knowing how you can lunch a product and be strategic