Shapiro, Carl, and Hal Varian. Information Rules: A Strategic Guide to the Network Economy. Boston: Harvard Business School Press, 1999.

Shapiro and Varian apply economic principles to the arena of information goods. An information good is anything that can be "encoded as a stream of bits." Such goods have some distinct characteristics:

They are "costly to produce but cheap to reproduce."
It is usually an "experience good," meaning consumers must experience it before they can determine its value.
Since the volume of such goods is so huge, the attention of customers becomes a valuable and scarce resource.
Considerations of interoperability are vital, since a good that is technically compatible with others goods is much more valuable. Conversely, switching to incompatible products is difficult, so customers can get "locked in" once they have made an investment in information goods based on a given technology.
Being first to market and establishing one's name as the dominant brand of a given type of information good can result in market dominance, since customers want to pick the product that will ultimately win out in the market (e.g. picking VHS instead of Beta in the 1980s). This effect tends to result in "positive feedback" and self-fulfilling prophesies, with the company that is perceived as the leader tending to become the leader.

Shrewd businesses in this economy can do several things to promote their influence and profit:

Create distinct versions of products that vary in things like timeliness and relative quality, so that price discrimination can be maximized. This often involves creating the highest quality version first, then putting additional work into purposely delaying or degrading other versions to sell them at a lower price. The "value-subtracted" versions often even cost more to produce than the higher quality ones, but they allow for sales to customers who would not be willing to pay the higher price.
Control intellectual property enough to maximize its value but not so much that it stifles use.
Exploit branding and reputation to demand higher prices.
Sell and trade the attention of customers with other companies.
Collaborate with other companies to offer complimentary goods, resulting in much more profit than would be possible by offering the goods separately.
Create barriers to switching to other products, thus locking in customers.
Time product announcements so that other products will be less likely to compete with them.
Promote industry standards for products that ones will take over the market quickly as a commodity, but promote one's own controlled proprietary approach (i.e. resist industry standards) when it is more important and likely to be the sole dominant player in a particular market.

Implications:

As a potential consumer of various types of ICT products, Shapiro and Varian provide a number of important lessons for the Kellogg Foundation:

Be on the look-out for vendors' attempts to lock customers into their products. Establishing dependency on a specific vendor can be very risky, since that vendor could go out of business or demand upgrades to prohibitively expensive future releases. "Lock-in can be a source of enormous headaches, or substantial profits, depending on whether you are the one stuck in the locked room or the one in possession of the key to the door." There is no way to eliminate switching costs entirely, but some options are much more restrictive than others. In some cases, you may at least be able to "seek an initial 'sweetener,' to compensate you for anticipated lock-in, if you can see it coming.
"Remain conscious of potential complementary products and alliances between companies. Committing to a product that does not work well with other popular products is always more risky.
Be wary of "vaporware." Just because a company claims it will soon be releasing a product with a given set of features does not mean it will do so on time or even at all. Such claims can be part of the market posturing vendors use to scoop the competition, and using them as a basis for decision making can lead to problems.
Think in terms of the business model of your suppliers. How are they planning to make money from you? If some component of a system seems unreasonably inexpensive this may indicate a vendor's plans to charge later for some complementary product.

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