The Business of Catalysts

If you have a credit card, have ever "Googled," been to a shopping mall, or read the newspaper you have engaged with the business strategy that is the focus of Catalyst Code: The Strategies Behind the World's Most Dynamic Companies. Each of these businesses helps bring together customers who need each other. And in doing so, the platform -- or catalyst -- unleashes tremendous value by getting members of these customer groups to interact and exchange value.

Catalysts have been around for millennia. They range from the ancient village matchmaker to the Roman Forum and the timeless Lloyds of London. But back then no one knew they were catalysts. No one understood that they all followed the same business model in spite of being vastly different businesses, and no one really appreciated the complexity of their profit-making.

A catalyst is a species of business that was discovered a few years ago by two economists -- Jean Tirole and Jean-Charles Rochet. Their simple yet path-breaking insight was that businesses as diverse as American Express(AXP Quote) and Microsoft(MSFT Quote), and newspapers such as The Wall Street Journal share a common business model: They create value by enabling two or more groups of customers who need each other to meet on a single platform. And they discovered that a new economics was needed to understand these catalysts and the industries they control.

You won't get very far as an economist if you try to use textbook theory to understand catalysts. Much of economics focuses on one-sided businesses -- catalysts are multisided businesses. And you won't get very far as a catalyst if you rely on standard business strategies. Much of the typical business school curriculum is about businesses that live in a one-dimensional, linear world. Catalysts live in a multidimensional, nonlinear world.