The Power of Hidden Networks and Inclusive Design

The Power of Hidden Networks and Inclusive Design

In today's competitive business landscape, it's crucial to find innovative ways to create and sustain a strong network effect. Network effects occur when the value of a product or service increases as more people use it. While traditional network effects are well-known and widely employed, there are also hidden network effects that don't immediately appear as such. These hidden network effects can provide significant advantages to companies that understand and leverage them effectively.

One aspect of hidden network effects is the concept of slow networks. Slow networks refer to the time delay between when a network is created and when it starts to show value. This delay can make it difficult to recognize the true potential of the network and may lead to less attention and fewer copycats trying to build a similar product and overlapping network. Companies like Lambda School exemplify the power of slow networks. It takes years for the true value of their network to reveal itself. However, once built, slow networks are usually difficult to displace, as evidenced by the longevity and resilience of top universities' networks.

Another type of hidden network effect is the concept of unfinished networks. An unfinished network is one where a product feature or strategic decision leaves the network temporarily incomplete. However, when the network is eventually completed, the network effects become immediately clear. OpenTable is a prime example of an unfinished network. As they built up enough restaurants, they were able to invest in their consumer-facing products, completing the network and amplifying the network effects. The challenge with unfinished networks is that they often don't get completed, leading to the demise of many startups. Understanding which part of a network has been built and how difficult it will be to complete the full network is critical to success.

Throttled networks are yet another type of hidden network effect. Throttled networks occur when a product feature or strategic decision limits the size or engagement of the network, masking the true strength of the network effects. Chief, a professional network for women, is an example of a throttled network. In the short run, the network effects may not be apparent, but in the long run, they might unlock the value of their network through increasing opportunities to engage, pricing that rises with network value, or a larger membership pool. Exclusivity-based networks, such as dating apps like Raya or members clubs like Soho House, often have an upper limit to their network effects. Recognizing whether a network is throttled or exclusive is crucial in understanding its true potential.

Lastly, there are latent networks, also known as "Come for the network, stay for the tool" networks. These companies focus on building a community that acts like a network before introducing a product or tool. Game developers have successfully employed this strategy by setting up Discord servers to build a network of gamers before launching a game. The challenge with latent networks is predicting and executing their activation. Sometimes these communities function more as an audience rather than a network, where users derive value from the central node rather than the network itself. Distinguishing between an engaged network and a passive audience is key to identifying latent networks.

Understanding the power and potential of hidden networks can provide significant advantages to entrepreneurs, investors, and employees. These networks may require more patience, conviction, and capital, but they offer unique opportunities for growth and sustainability. To leverage hidden networks effectively, here are three actionable pieces of advice:

1. Identify and invest in slow networks: Look for businesses that have all the features of a network effect business but exhibit long product loops or insufficient saturation. Have the patience and resources necessary to let the network come to fruition.

2. Evaluate and support unfinished networks: Assess whether a network is incomplete and if there is emergent behavior on the incomplete side. If users are trying to pull the product there, it's likely an unfinished network. Provide the necessary resources and strategic decisions to complete the network successfully.

3. Unleash throttled networks: Determine whether a network is being limited intentionally or temporarily. If relaxing constraints would result in positive or neutral outcomes, it may be a throttled network waiting to be unshackled. Explore opportunities to increase engagement, network growth, or ease of access.

In conclusion, hidden networks offer a wealth of untapped potential for businesses. Slow networks, unfinished networks, throttled networks, and latent networks all present unique challenges and opportunities. By recognizing and leveraging these hidden network effects, entrepreneurs, investors, and employees can gain a competitive edge and drive sustainable growth. Embracing the power of hidden networks and incorporating inclusive design principles can lead to innovative solutions and long-term success in today's dynamic business landscape.