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)

Amazon – how one controversial decision ignited massive growth
Oded
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 [...]
Chicago Mercantile Exchange: The Benefits of a Closed Platform
DD1
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.
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.
Waze: Using Network Effects to Improve Your GPS System
CC24
Last modified on October 4, 2015 at 9:30 pm
Waze is a different kind of GPS navigation system. It uses data generated by its users to map cities, provide real time data about traffic patterns, alert users to accidents and police checkpoints, and even identify the cheapest places to [...]
Daimler’s struggle to become a platform player in urban transportation
hawkeye
Last modified on October 19, 2015 at 6:10 pm
Car manufacturer Daimler, who owns the Mercedes brand, has been quite aggressive in pursuing new business opportunities in the evolving context of urban transportation. Along the way the company is shifting from a product-centric business model to a platform approach [...]
Alexa, Amazon and the Beauty of a Platform that Makes No Money
Rob C.
Posted on October 4, 2015 at 2:32 pm
Amazon, Apple, Google, Microsoft are battling it out for dominance of voice as the next UX and for creating a truly intelligent personal assistant. Each has taken a difference approach, which will determine the strength of the network effects at [...]
Is it looking terminal for the Bloomberg Terminal?
SDS
Last modified on October 4, 2015 at 5:01 pm
After decades of dominating the financial data market through strong network effects, the Bloomberg Terminal may be facing some serious competition from its own community of users.
Can Lyft survive as #2 in the car-sharing battle, or is this a winner takes all game?
Ximena
Posted on October 4, 2015 at 1:12 pm
Even though Lyft entered the market before Uber, today it is lagging far behind. While Uber is worth more than $50 billion and has presence in more than 300 cities, Lyft is worth less than $3 billion and has presence [...]
Daily Fantasy Sports Compete Head-to-Head
Becky D
Posted on October 4, 2015 at 3:57 pm
In an industry where a large member base is critical for success, competitors FanDuel and DraftKings battle it out for user dominance using creative customer acquisition techniques.
Two-Sided Network Effects for a Food-Tech Marketplace
David
Last modified on October 4, 2015 at 6:27 pm
CaterCow is a food-tech startup that helps match caterers and restaurants with office managers and other customers looking to order food for meetings or events.  As is typical in a two-sided market, there are both challenges to gaining traction and [...]
Spotify’s Business Model – Competing With Network Effects
jeffzeller
Last modified on October 3, 2015 at 1:50 pm
Spotify leveraged network effects to gain a massive user base, and amass (almost) the entirety of the world's popular music collection. Now the company is seeking to capture value from its users, which as it turns out are the ones [...]
Linux won the servers, but dead on desktop
LC
Last modified on October 5, 2015 at 4:47 pm
Linux is present in very different markets where it has had vastly different results. What explains those differences?
IMG’s three pronged network effect strategy
AlonKremer
Posted on October 4, 2015 at 11:33 pm
IMG is a sports talent agency that uses a three pronged network effect strategy to attract more athletes, agents and advertisers to beat its competitors.
Strava: Social Fitness Veteran
(Wo)Man in the Arena
Posted on October 2, 2015 at 4:25 pm
Strava builds an incredibly loyal and growing community of competitive "everyday cyclists" who are increasingly obsessed with the digital leaderboard.
Is Nextdoor the next big social network?
Yannis
Posted on October 4, 2015 at 8:37 pm
At $1bn valuation, reaching 1/3 of U.S. communities, private social network Nextdoor has come a long a way. The company's targeted, private approach has enabled it to build a tight community of engaged users. The platform has strong network effects [...]
IBETCHA Want Network Effects
ecashman
Last modified on October 5, 2015 at 11:57 pm
Hobby games are booming and they're making the jump online in search of network effects.
Skype: how a Northern European peer-to-peer software has conquered the world thanks to network effects
europeanfederalist
Posted on October 4, 2015 at 11:16 pm
Once the ultimate savior of long-distance relationships (no matter what their nature is), Skype has been increasingly challenged by new digital players, What's app in particular. How did Skype make itself so relevant, and how does it capture enough value [...]
Shut out: Can Meerkat win the mobile live streaming war?
moniguzman
Posted on October 5, 2015 at 11:35 am
In March, techies (myself included: http://www.geekwire.com/2015/why-meerkat-is-going-to-make-it/) went wild over a new kind of live streaming. A startup called Meerkat launched a mobile app that let users broadcast high quality live video to the world straight from their phones, using Twitter [...]
From the Windoooows to the MALL – Mall of America in the Digital Era
Won't Not
Last modified on October 4, 2015 at 6:41 pm
Mall of America has been able to digitally amplify its massive direct and indirect network effects to remain a tour de force of brick and mortar shopping.
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