Marketplace Network Effects & Flywheels
Credits and Links to all resources referred to in this article are in the comments section below. This idea originally was posted on my Twitter profile and I got a lot of feedback on it.
If you are a marketplace founder, business leader, product strategist then it is critical that you understand how your business "ticks". A great way to understand this in marketplace business is the concept of Network Effects/Virtuous cycles/Flywheels - First articulated by Jim Collins in Good to Great
There is no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment. Rather, the process resembles relentlessly pushing a giant, heavy flywheel, turn upon turn, building momentum until a point of breakthrough, and beyond.
Understanding this concept gives you insight into company strategy and what it takes to build a great company.
The most famous flywheel example is Amazon where based on the three pillars of "Lower prices, Unlimited Selection and Fastest Delivery" resulted in the behemoth they are today
Three-sided marketplaces like Doordash gave a glimpse into their network effects of Restaurants, Riders, and Consumers in their S1 filing. This applies to most food delivery companies like Delivery Hero in Europe, UberEats, Zomato, Swiggy in India, Grab in Indonesia, etc
Data - Not just limited to marketplaces - The data flywheel for Cloud companies (from AWS) but applicable to all cloud companies like Google Cloud, Microsoft Azure was an interesting view into using data as a network effect enabler
Transportation - Uber's iconic flywheel description introduces the concept of the geographic density of drivers and riders leading to better utilization of drivers and lowering prices while improving faster pickup for riders
Network effects in Crypto
I am new to crypto but this made so much sense to understand this space. There will be a lot more learnings from here in the future
Testing & Experimentation - Flywheels in A/B testing? Yes ! It made me think about testing and experimentation in a completely new light
Entertainment - Network effects are not new - Back in 1957 Disney created a strategy which we could start to think as a flywheel where each part feeds into the other making the overall business stronger
Space - Popularized by Spacex explains how the space industry is dramatically dropping prices while increasing the quality, speed, and reliability of launches
Trucking / Freight - Digital Freight Network from Convoy where the value for both shippers and carriers increases as more people participate in the marketplace. The trucking industry is fundamentally about matching the right driver to the right shipment.
Messaging - After successfully capturing intra-organization users, Slack triggered its next phase of network effects between organizations (companies/ partners etc) that work together via "shared channels"
If you want to learn more about marketplaces, platforms, eCommerce then please "Follow" me sign up for my substack newsletter (links in comments)
Care to share your own examples of flywheel/network effects?
Links
Slack Shared Channels - https://slack.com/intl/en-de/blog/news/shared-channels-growth-innovation
Convoy - https://convoy.com/blog/the-most-efficient-digital-freight-network/
Future of Space - https://futureblind.com/category/business/
A/B experimentation - https://medium.com/booking-product/it-takes-a-flywheel-to-fly-b79ad69a62ee
Crypto Business Model -
S1 Filing of Doordash - https://www.sec.gov/Archives/edgar/data/1792789/000119312520292381/d752207ds1.htm
Jim Collins Flywheel - https://www.jimcollins.com/concepts/the-flywheel.html