1. Start with an existing monopoly. Microsoft (MSFT) controls desktop computing. When it ships its Windows XP in October, the product will be included with most personal computers sold.
2. Bundle a new service into your monopoly product. When consumers access the Web from Windows XP, they will be asked to join Passport, a service that packages their name, address, and credit-card numbers into a digital wallet. With Passport, they don't have to type in their vital data each time they go to a Web site.
3. Extend into a new market. By turning most PC users into Passport users, Microsoft hopes to build a large base of consumers using the service. That makes it attractive for more Web-site operators to adopt Passport for authenticating customer data.
4. Cash in. Once a large number of consumers and Web sites are using Passport, the company could be in a position to charge transaction fees for services based on Passport--such as alerts when a traveler's airplane flight is late.