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)

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.
Yoga Panda – introducing network effects to the yoga industry
Pinky and the Brain
Last modified on October 19, 2015 at 5:26 pm
Yoga Panda, though a small, Seattle-based start-up, has introduced network effects into the yoga industry.
Calling All Babysitters & Nannies
Last modified on October 4, 2015 at 8:57 pm is a two-sided marketplace that matches caregivers to people seeking care. Think babysitters, nannies and more. They have managed to become the world’s largest online care destination servicing 9.5 million members in 16 countries. How they scaled When [...]
Coursera: using network effects to build access to education
Posted on September 30, 2015 at 5:54 pm
Coursera is leveraging network effects to expand both its user base as well as the quantity and quality of content on its platform.
Amazon – how one controversial decision ignited massive growth
Posted on October 4, 2015 at 11:26 am
People often think that Amazon’s success is all about economies of scale, when actually it is the controversial customer review system that fueled Amazon’s massive growth.
Craigslist: The dawn of the pioneer in network effects?
Andrea MF
Last modified on October 3, 2015 at 9:19 pm
Craigslist has been offering a low quality service for twenty years, though it has huge network effects. It is now losing its dominance to smaller niche players. It was about time.
Redfin: The more users, the more roofs over people’s heads
Carina Rutgers
Posted on October 4, 2015 at 9:29 pm
This innovative real estate company harnesses network effects so effectively, even the competition can’t resist
Lending Club – a network effect that could change the way we bank.
H Li
Last modified on October 4, 2015 at 9:39 pm
Lending Club is a peer-to-peer lending online platform where individuals can seek or provide capital to others on the platform. This platform grows as more credit-worthy borrowers and lenders are brought to the platform and poses a serious threat to [...]
PatientsLikeMe: unquestionably successful, but only one misstep from disaster
HC Watcher
Last modified on October 4, 2015 at 9:11 pm
No one can deny that PatientsLikeMe is a success story. From its humble beginnings as an online community for patients living with ALS, PatientsLikeMe has grown to be the largest social network and patient community online. The numbers recorded for [...]
Airbnb: Reinventing hospitality with network effects
Elizabeth H
Posted on September 30, 2015 at 10:42 pm
In 2008 Airbnb’s founders were having difficulty raising funds for their new idea and were turned down by many Silicon Valley investors when trying to raise a mere $150,000. No doubt part of investor skepticism revolved around the difficulty inherent [...]
Chicago Mercantile Exchange: The Benefits of a Closed Platform
Posted on October 5, 2015 at 12:09 pm
CME: a centuries old business that continues to benefit from compounding network effects by operating a closed platform.
Goodreads: What are your friends reading?
Marissa Henry
Posted on October 4, 2015 at 9:52 pm
Goodreads entered a market full of incumbents as varied as local libraries, Amazon reviews, and conversations between friends, and used network effects to create value for users, authors, Amazon, and more.
Pandora: The More You Listen, The Better It Gets
Asaf Lifshitz
Posted on October 3, 2015 at 3:37 pm
Whenever a user likes a new song, Pandora’s playlist choices improve for ALL uses
WhatsApp — Network effects worth $19 billion?
Last modified on October 19, 2015 at 5:26 pm
WhatsApp has the potential to leverage extremely sticky network effects for untapped revenue potential
EdX – learning for anyone, anytime, anywhere
Jenny Chiu
Posted on October 4, 2015 at 6:50 pm
How they help global learners to increase access to some of the best learning contents in the world
BlackBerry: Too Reliant on Network Effects in the Face of Better Products
Jason Preston
Posted on October 3, 2015 at 10:21 am
Network effects don't defend against significantly better products (or: you still have to create value for the user).
TripAdvisor: Book the Perfect Trip
Last modified on October 4, 2015 at 8:54 pm
TripAdvisor is the largest travel site in the world, with a mission to help people plan and book the perfect trip. TripAdvisor accomplishes its goal by offering users a platform that aggregates user-generated reviews and opinions about accommodations, destinations, activities [...]
Luxe – On-demand valet service anywhere you want*
Posted on October 4, 2015 at 9:56 pm
Never search for parking again! Luxe provides an easy to use on-demand valet service that will change the way you park in major cities.
Napster – The Start of Something Big
Last modified on October 5, 2015 at 12:13 am
On June 1, 1999, Shawn Fanning launched Napster, a service that allowed computer owners to easily share music files across the internet.  Within a few months of its launch, 4 million songs were in circulation and in less than a [...]
Apple Pay: Living up to the Hype?
Mike Maley
Last modified on October 19, 2015 at 6:10 pm
Explores network effects in Apple Pay and why adoption to date has been lower than expected.
Easy Taxi: “Disrupting minimizing the disruption”
Mati G
Posted on October 3, 2015 at 3:48 pm
Easy Taxi has grow successfully in emerging countries, primarily in Latin America. They have created a disrupted business model that adapts to local reality