Competing with Network Effects

October 04, 2015

Read The Full Prompt

One consequence of the digital transformation of the economy is that many industries today are exhibiting network effects.

For this module please pick ONE company/organization and discuss how networks effects may affect its value creation, value capture and/or operating model and/or how it can take advantage of network effects to grow its business.

Issues you may want to address (feel free to consider other related issues not listed below):

– How to scale up businesses that exhibit Direct Network Effects?

– How to scale up businesses that exhibit Indirect Network Effects?

– How should incumbent firms compete when their industries become susceptible to network effects?

– How can an entrant take over market leadership when competing with an incumbent in a networked industry?

– How can product-centric firms grow into platform-centric firms?
Create an approximately 500-750 word post to make your contribution. Please create appropriate tags for your post. Please also respond to and comment on three other posts per module. Feel free to use graphics, data, videos and links to other sites to corroborate your points.

Note: Since our third module is on crowd-based business models (business models that leverage collective intelligence from a large number of users), please do not pick crowd-based companies such as Kickstarter, Wikipedia, and Threadless for this OK blog post.

Submitted (138)

Tinder: The dark side of network effects
Jennifer B.
Last modified on October 19, 2015 at 5:26 pm
With the proliferation of the internet and smartphones, we live in a world of unlimited options, including those related to romantic possibilities. Due to network effects, there is a new source of value creation and capture in the dating world. [...]
YouTube 1, everyone else 0
Last modified on October 4, 2015 at 5:12 pm
YouTube is the master of both direct and indirect network effects. Take a look...
The currency of Spotify: How it changed the way we discover music
Chrisoula Kapelonis
Last modified on October 4, 2015 at 11:55 pm
Pandora was once the leader by a long shot in the music streaming space. But today, all eyes are on the neon-green world of Spotify as the next heir to the throne. Spotify is currently touting over 75 million users, [...]
Nike – from products to platform
Last modified on October 5, 2015 at 12:45 pm
While I was interning in Seattle this summer, I learned from a friend — who happens to be both a software developer and a fitness enthusiast — that she had applied to “enroll” her startup idea with the Nike+ Accelerator [...] a two sided marketplace for all your care needs
Dani Johnson
Last modified on October 4, 2015 at 8:50 pm's 16.5 Million member base provides huge networks effects for caregivers and families
WeWork is betting on network effects in networking
Last modified on October 4, 2015 at 11:59 pm
WeWork has created network effects in a traditional real estate leasing business model that has allowed it to scale bigger and faster than its competitors.
Netflix – Getting Smarter Everyday
Posted on September 30, 2015 at 1:03 pm
Netflix exhibits both direct and indirect network effects through its recommendation engine, content acquisition process, and enabling devices.
Skype: The ultimate network business
Last modified on October 4, 2015 at 11:35 pm
Skype is the largest VoIP service in the world. Its success has been driven largely by the fact that its user base effectively grows itself. The sheer size of this network provides ample opportunity for value capture.
Ola Cabs: The “Copy-Cat” beating Uber at its own game in India.
Last modified on October 1, 2015 at 4:25 pm
Ola Cabs, which built its business model on Uber’s success in the US, is significantly ahead of Uber in India with estimates suggesting an almost 80% market share to Ola. How could an India based start-up beat a giant like [...]
Apple Music – Locking Customers In Through Network Effects
Last modified on October 4, 2015 at 1:43 pm
For almost 15 years the success of Apple’s devices and iTunes services has been primarily based on indirect network effects. Now the rapid growth of music streaming services shifts the focus towards direct network effects.
Rue La La is declining in ooh la la
Posted on October 4, 2015 at 11:31 pm
Rue La La may come to rue the day it decided the novelty of flash sale sites was enough to create and capture value.
Where Dropbox success is coming from and how they can compete today?
Posted on October 3, 2015 at 5:16 pm
Dropbox is a personal cloud service storage system. It is a place where you can store all your files and they automatically will appear on all your computers, phones and tablets. With Dropbox one can open his documents from anywhere. [...]
Reddit: When bigger isn’t necessarily better
Jon Staff
Posted on October 4, 2015 at 5:35 pm
Reddit has dominated as the result of strong network effects, which also may predict its downfall
BzzAgent: An Effective Management of Network Effects
Last modified on October 4, 2015 at 11:56 pm
Mitigating negative effects of network congestion and a clever monetization of the network participants’ needs leads to a sustainable high-margin business.
Spotify: An Ecosystem Powered by Network Effects
Last modified on October 4, 2015 at 4:16 pm
Spotify's music streaming model leverages growing network effects to (hopefully) save the struggling music industry.
ClassPass: the win-win platform connecting fitness studios with customers for $99/month
Last modified on October 19, 2015 at 5:26 pm
ClassPass, a service that offers unlimited gym classes for $99/month, has used the power of network effects to build an incredibly fast growing platform.
PlayStation: How Sony came to dominate the gaming industry
Last modified on October 4, 2015 at 11:59 am
Game consoles had been around for a while. During the 80’s, Atari and Nintendo dominated the industry and during the first years of the 90’s, Nintendo and Sega were the key players. But it was not until Sony’s entrance to [...]
Apple Watch: Betting on the Apple Ecosystem
Atima Lui
Last modified on October 4, 2015 at 5:52 pm
Why Apple Watch will be the leading platform in wearables
How clever is Clever?
Last modified on October 5, 2015 at 11:08 am
Clever's multi-sided data sharing and learning application platform for K12 school districts
“Fasten” Your Seatbelts – Gunning for Uber Late in the Game
Posted on October 4, 2015 at 10:44 pm
New startup Fasten looks to disrupt Uber's dominance in Boston by eliminating surge pricing and taking fixed $1 cuts from drivers
Get In Ma Belly: How A Little Blue Card Helped Out Mom & Pop
John R
Last modified on October 4, 2015 at 3:46 pm
Chicago-based Belly Card (commonly known as Belly) is rapidly transforming customer loyalty space for SMBs and may soon make store-specific loyalty cards obsolete. Belly’s tremendous growth epitomizes what is possible by leveraging multi-sided, localized network effects, silly name be damned.
Clash of Clans: Network effects and stickiness in mobile gaming
Posted on October 2, 2015 at 1:47 pm
A view of how network effects apply to one of the most popular mobile games.
Bitcoin: can it be a mainstream currency?
Posted on October 4, 2015 at 11:24 pm
Bitcoin is a digital currency based on a peer to per electronic cash system. The rise of Bitcoin well illustrates the power of an ecosystem and the network effect.
UberPOOL: The New and Improved Tinder
Last modified on October 4, 2015 at 8:40 pm
Unlike @Tinder, #UberPOOL actually starts with a conversation #IRL. #modernlove