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Step 4: Focus on Profitability Every catalyst needs to examine and anticipate how it will generate profits. Catalysts have to imagine where profit might come from under different scenarios, depending upon how the business evolves. They have to anticipate moves by competitors and plan how they will respond. And they need to recognize that profit requires constantly offering all the parts of the catalyst community a strong stake in having the entire business thrive.
» For more on focusing on profitability, visit Chapter 6.
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In 1983, Nintendo cracked the catalyst code for video consoles. For its launch, Nintendo still made many of the games itself, including the hit Mario Brothers. That was in part because it initially couldn’t get more than four developers on board. (Access to the Nintendo platform wasn’t free for developers. Nintendo charged game makers a royalty of 20 percent of sales.) Knowing that its game revenues weren’t going to be creamed off by free-riding developers, it sold its console at a loss to get game users on board its platform, and it looked for profits from its game sales and royalties. This strategy ignited a catalytic reaction that was both powerful and profitable. Game developers started flocking to Nintendo, increasing the stock of Nintendo-compatible games and making the console more valuable to consumers. Nintendo had found the right path to profitability helping the video game industry transition from a one-sided to a two-sided, catalytic business model.
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