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)

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 [...]
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.
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 [...]
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 [...]
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 [...]
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 [...]