Computer science curricula typically approach software from an engineering rather than a business perspective, thereby leaving computer science graduates poorly equipped to compete with MBAs in product strategization. Books like this should be required reading for students in all computing disciplines. The book makes its lessons so clear that anyone who has not learned them well will be at a significant business disadvantage.

The authors define information to be anything that can be encoded as a series of bits. They argue that the business of information goods simply needs to be analyzed in terms of established economic principles, and analyze they do. Each of the ten chapters explores a strategic theme, and each theme is illustrated by numerous compelling examples from both the past and the present. The authors consider how to maximize prices while stifling competitors. They explain how product versioning, product bundling, customer grouping, and promotional pricing each entice customers to pay more. They discuss copy protection schemes and the tradeoffs between strong controls and increased sales volume. They define lock-in as the high cost of switching to a different technology, such as an operating system or word processor, and offer valuable advice to both buyer and supplier to take advantage of lock-in.

Closely akin to lock-in are network effects, in which consumers are likely to buy a product only if many others have it. Fax machines are a good example. The authors explain how to stimulate network effects, how to effectively define and adapt standards, and how to balance cooperation and competition with complementary producers. They also give detailed consideration to government regulations and antitrust legislation that restrict businesses from taking this book’s guidelines to extremes.

The book is exceptionally well organized and written, with an extensive bibliography and index. Not only is it essential reading for those in business and information technology, it is sure to change every reader’s awareness as a consumer. The authors, who are professors of business and economics, write from the heart of the information world. My only criticism of the book is that in ten years its timely analysis of Microsoft, Netscape, DVD, HDTV, Java, and related subjects will no longer be as eye-opening. This is all the more reason to read it now.