As pointed out by James Currier in the NFX Bible, network effects are responsible for 70% of the value created in technology since 1994.
In the past 10 years, a lot has been written around them and as often happens with information overload, things get fuzzy and a good practical systematization can be of great help to cut the clutter and get the essentials. In this week's issue, our colleague Esme González Pillado intends to bring some clarity around network effects and their implications in platform thinking.
This recap has been inspired and is heavily based on several important pieces of work that the reader should look up to go more in deep with the topic. Our intention is to start sharing with you a basic framework to help strategize and activate the mechanisms to achieve better network effects.
Figuring out how to identify, distinguish and activate NFXs has become an important topic for investors and is one of the reasons entrepreneurs keep awake at night. Entrepreneurs concerned with social impact, or even platform-cooperatives cannot afford to ignore how NFXs work: for better or worse, achieving NFXs is vital for any platform-organization. In other words, if you have any stake in creating or running a platform you should be trying to understand the NFXs that you’re subject to. You should also be looking to distinguish network effects from counterfeits and how to activate them and make them more robust.