Network Effects

When products or services become more valuable as more people or organisations use them.

Key Insights & Principles

Insights:

Network effects can create powerful feedback loops, where the result of adoption becomes the catalyst for new users.
First movers in a market tend to prevail only when there are strong network effects.
Every good customer gets you another one in network effects businesses - the best customers can act as new salespeople.
Early adopters have an incentive to bring new ideas to the masses.
If a product or service only works at scale the user base will never grow large enough to see network effects.
Products must be valuable to the first users, and give them an incentive to share it.

Principles:

Focus on delighting good customers, and early adopters.
Ensure that the product or service is valuable even when the number of users is small.