Network Effect: The 5 C’s to Building a Successful Platform

By Greg Battle

Building a successful platform business is like tending a greenhouse of rare plants. First, there is a seed of an idea, but without any nurturing, that seed will do nothing but lie dormant. Funding acts like sunlight to provide energy to live another day. Your audience is like water, and user acquisition can be either organic like rain or paid for like irrigation.

Network effects are the soil containing the nutrients that either foster or mitigate viral growth.

There are 5 C’s that dictate the quality of a platform’s soil: Connection, Communication, Collaboration, Curation and Community.

Connection:

Most people’s understanding of network effects begins and ends with connections, representing the theoretical number of interaction pairs among the community.

As each participant, or node, is added to the connection graph, the theoretical number of connections doubles. The emphasis here is on theoretical, as connections alone do not translate to actual interactions. For example, MySpace still has 300 million user profiles, with a gazillion potential connections, yet it sits like a giant empty rusting amusement park. Womp womp. :-(

Communication:

This is how we the turn potential energy of connections into kinetic energy by encouraging real interactions among the platform participants. Great platforms, like Facebook or Kickstarter, provide a spectrum of engagement opportunities, not just aggregated presence. There’s nothing worse than a party with a DJ and nobody dancing. Move your users.

Collaboration:

Let’s add some context to our communication by allowing platform participants to work with and for each other through collaboration. Producers of value can team up to create hybrid products with embedded attribution across contributors (think reblogging on Tumblr or retweets on Twitter). Consumers of value can leverage collective behavioral consumption patterns to improve discovery of value producers (e.g., recommendations like related content on YouTube or “Customers who bought this item also bought” on Amazon).

The more we make historical interactions a virtuous cycle of feedback within the product, the better we’ve captured derivative value amidst the platform’s data exhaust.

Curation:

If collaborative production and consumption provides a macro layer of communication, curation is the micro layer, representing individual tastes via personalization. Self-expression through the rearranging of other’s work offers a powerful form of meta-creativity. Allowing that meta-creativity to be shared creates a rich taste-making user segment in the value chain, ostensibly filling all the value gaps left open by the anchor producers.

A pinboard on Pinterest is a curated take on a particular topic, in the same way that a playlist on Spotify allows for the individual expression of content you didn’t create.

Community:

Though often used as a catch all for all things “social,” community, as it relates to network effects, encompasses two symbiotic characteristics. The more a platform allows for permissionless involvement across the other C’s, the more the participants feel as if they have an ownership stake in the platform. These two intertwined factors of community are the vital roots of externalized innovation and co-production (yes, I snuck in a 6th C, but really, 5 is plenty).

Great examples are Stack Overflow, Wikipedia and reddit, which all have highly engaged participants who create and dictate the implicit rules and social mores that govern their communities.

Grab Your Shovel:

Connection, Communication, Collaboration, Curation and Community are a reflection of your ability to attract, activate and empower your platform participants. I could extend the metaphor of platform growth to include exogenous factors like disease (vicious cycles), floods (usage exceeds capacity) and frost (regulatory environment changes), but that’s another post entirely.

Remember to keep your network effects soil well aerated and to use enough compost. Need help gaining a green thumb? Feel free to contact me @gbattle.

Happy farming.

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Filed under: Platform Innovation | Topics: Curation, network effect, platform innovation, platforms