• define different types of networked businesses and their characteristics;
• correctly use analytical frameworks and concepts to analyze networked businesses based on the required readings;
• have the ability to generate management-relevant insights into how theories from the required readings can help assess business opportunities and risks but also reflect on their limitations;
• discuss the competitive dynamics in industries with networked businesses.

Google, eBay and Amazon have one thing in common: their business is providing a platform that facilitates users’ interaction. The success and failure of these business models depend to a large degree on the number of people using the platform and the “network effects” between them. Understanding networked businesses, their unique management challenges and competitive dynamics is crucial for students interested in a career in any such industry.

Networked businesses comprise a large and rapidly growing share of the world economy. Such businesses in the computer, consumer electronics, media and internet sector comprise the heart of the so-called “New Economy.” Network effects also have a significant impact on companies in transportation, retailing, financial services and energy. Some of the world’s largest companies earn their revenue from managing networks, including American Express, Microsoft, Cisco, Time Warner and UPS.

Networked businesses face distinctive management challenges, which differ from those found in traditional manufacturing and service industries. Familiar rules for marketing and strategy may not apply. Pricing strategies for example follow different rules and platform providers often price their products and services below cost – or even given them away for free. Traditional barriers to entry may no longer hold. Many of the industries gravitate towards “winner-take-all” competition. They have room for only few large players outperforming all of their competitors, as the spectacular success stories of Microsoft, eBay and Google show. Finally, the course will address the role of governments in shaping networked businesses, looking at the varying and sometimes contradictory goals of public policy.

The course introduces concepts and frameworks to analyze networked business models and provides a foundation for strategic decision making in them. Using the Harvard Business School case study method, students will discuss real-life cases, their successes, failures and options for the future. After completing the course, student will be able to systematically analyze different networked businesses and evaluate the economic, technological and public policy context for the development of such businesses.

Harvard Business School case studies and conceptual notes (to be downloaded)

Eisenmann, Parker & Van Alstyne, “Strategies for Two-Sided Markets.” Harvard Business Review Oct. 2006.

Shapiro & Varian, Information Rules: A Strategic Guide to the Networked Economy. Harvard Business School Press, Boston 1999.

Liebowitz & Margolis, Winners, Losers & Microsoft. Oakland 2001.