Some thoughts on a16z’s SlideShare on Network Effects
Last month, a16z produced another remarkable report on Network Effects (please see link below).
While comprehensive, there is an important data point critical to network effects strategy + tactics that could also be considered.
It’s been demonstrated in research that there is a tipping point in networks when critical mass is established.
Specifically, “when just 10 percent of the population holds an unshakable belief, their belief will always be adopted by the majority of the society.” (see link to report below)
What this means is that there is a scientifically proven “tipping point” that’s very relevant for network effects + business dynamics (also political + social dynamics) where an opinion of a strong minority passes a threshold and then becomes mainstream.
Intuitively this makes sense and is what Malcolm Gladwell described: “The tipping point is that magic moment when an idea, trend, or social behavior crosses a threshold, tips, and spreads like wildfire.”
Defining a market by users or user engagement and then identifying the 10% of that market that are first movers will lead to obtaining network effects or gaining a first mover advantage in business.
Below are charts of Facebook’s, Instagram’s and WhatsApp’s growth rates. It’s not difficult to identify where each network reached a tipping point — their growth rates increased dramatically at near 10% then continued to grow faster from there.
The TakeAway: Define your market as any business should, then identify the 10% of influencers that will begin to believe that your business/network is worthwhile. Reach 10% of your market actively engaged in your idea/product/platform. That leads to a dominant position.
See more on the 10% tipping point research at these links:
— http://news.rpi.edu/luwakkey/2902#sthash.SDW5txcO.dpuf
— http://freakonomics.com/2011/07/28/minority-rules-why-10-percent-is-all-you-need/
— http://phys.org/news/2011–07-minority-scientists-ideas.html
a16z’s Presentation:
