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Chapter 2: Building a Catalyst Strategy

Three activities — building, stimulating, and governing — create and sustain most successful catalytic reactions.

Examining how catalysts have successfully — and unsuccessfully — performed these activities and the tactics they have used to do so provides fundamental lessons for how to build, stimulate, and govern a profitable catalytic reaction.

To build communities, catalysts create a value proposition through persuasion, pricing, and product design. To stimulate interactions, they provide information and search methods that help customers connect with each other effectively. And to govern the community, they devise rules and standards that help customers know what is expected of them and limit "bad interactions."

Activity (1). Create a Value Proposition

People, and the businesses they form, are constantly exchanging goods and services and moving them from lower-valued uses to higher-valued ones. Catalysts facilitate these transactions. That is their source of value, their role in the economy, and the fountain from which their profits spring.

Catalysts Discussed: Tsukiji Central Wholesale Market (Tokyo, Japan),, Alibaba (China), Chicago Board of Trade,, shopping malls

Activity (2). Facilitate Search and Provide Information

Catalysts abound because search is hard and information is costly; they assist with the difficult process of search and help provide information to the members of their communities.

Catalysts Discussed: Manheim Auto Auction, Google, AuctionWeb (now eBay), Sotheby's

Activity (3). Devise Rules and Standards

Catalysts create communities, and communities need governance lest they devolve into anarchy. Catalysts enact rules and impose punishments, and they promulgate standards of behavior.

Catalysts Discussed: Payment cards (American Express, MasterCard, Visa), singles' bars (Bungalow 8, 8MinuteDating)