This work offers a summary of the book “INFORMATION RULES: A Strategic Guide to the Network Economy” by Carl Shapiro and Hal R. Varian.
The assumption that informational goods – such as movies, music, etc – are subject to different economic laws is false, the authors of Information Rules argue persuasively. Hyped new theories and guidelines are at their base, simply reworked versions of principles established in the past. What’s needed, therefore, is an understanding of these proven theories, and how best to apply them to the informational world.
For example, pricing laws still apply: every company needs to know how much their customer is willing to pay, and how they should meet that with their product. Every business should know how to manage their rights, and how to manage “lock-in” (when a customer chooses a brand and becomes very loyal to it). Government policy and feedback loops are still important to information technology companies. Information Rules takes these principles, and explains how best to apply them in a technology context: users of information technologies are especially susceptible to lock-in, for example, as are feedback loops.
Too many new information businesses fail because they are taken in by hype rather than basing strategy on sound, proven business laws. Shapiro and Varian explain how to avoid that trap.