Network Externalities
lIncreasing Returns to Installed Base
Installed Base
of Wintel PCs
Supply of Wintel
Software
Consumer
Demand
Software
Developers
(+)
(+)
(+)
(+)
So the strategic issue becomes how do you jump start that cycle.
We saw in the video game industry that it was done by running a loss leader on the hardware and money made on the software
We saw Intel license to set the standard then close it down
What you’re trying to build here is the bandwagon effect.
This circle can also work in the opposite direction
Once the ball starts rolling against you you’re in real trouble.
If you don’t get platform support you’re lost.
With the result that Apple by 1990 was on the glide path to history.