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)

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.
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
DoorDash is Leveraging Network Effects to Fight Hangriness
Last modified on October 5, 2015 at 10:00 am
DoorDash is attempting to disrupt the food delivery market with a service that enables users to order in from almost any restaurant in their area. The key to their success is network effects, but one question remains: can they do [...]
The Fitbit Fad?
Posted on October 4, 2015 at 8:32 pm
Fitbit owes its success to strong direct network effects, but its survival depends on the establishment of a strong indirect network.
The Knot : Maximizing Value in an Evergreen Industry
Last modified on October 19, 2015 at 6:10 pm
“Amazing news! Congrats! Where do you want to get married? Have you thought about destination wedding? Are you thinking Spring or Fall wedding? What color will your bridesmaids will wear??” – My future mother-in-law…30 minutes after my fiancé proposed. Planning [...]
Eventbrite: Transforming from a Ticketing Provider to an Event Discovery Platform
Last modified on October 19, 2015 at 5:26 pm
In less than 10 years Eventbrite has established itself as a major force in the ticketing industry. Longer term, the company’s ultimate goal is to become not just a technology provider for individual ticket sellers, but rather a robust discovery [...]
TripAdvisor: A Network for Vacation Bliss
Last modified on October 3, 2015 at 10:49 pm
TripAdvisor has started to dominate the online vacation ecosystem with its large user base and acquisitive business model.
OpenTable: A New Reservation Every Two Seconds
Last modified on October 19, 2015 at 5:26 pm
Open-Table was the first mover into the online and mobile restaurant reservation space and is still the industry leader. The space is strongly influenced by network effects, which OpenTable is hoping to leverage to capture even more value and cement [...]