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 [...]
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 Amazon’s Billion-Dollar Bet on Network Effects in Streaming Video
Sean L
Last modified on October 19, 2015 at 6:10 pm
As their features converge, Twitch and YouTube Gaming will continue to coexist in an untipped market unless one platform can utilize network effects to its advantage and lock in users through high switching and multi-homing costs.
Twitter: A network potentially losing its effects
Last modified on October 4, 2015 at 7:33 pm
Twitter's ability to capture users quickly led to its early rapid growth, but recent slowing in active users and the rise of competing social platforms questions the strength of their direct network effects, and could potentially have lasting consequences on [...]
Swing-by-swing: Network Effects Drive Success for(e) this Golf App
Drew O.
Posted on October 4, 2015 at 10:50 pm
Swing-by-swing (SBS) is a GPS enabled golf application (app) that gives players precise yardage estimates based on where they are standing on a given golf course. SBS also provides a digital scorecard so players can keep track of their scores, [...]
China’s Taxi Wars: Winner-take-all or lose-lose for Uber and its rivals?
Posted on October 5, 2015 at 3:08 pm
Rival taxi-hailing and ride-sharing apps are sustaining heavy losses in the battle for market share. Can a differentiated competitor win in the end? 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 [...]