Topic: Network Effects
Guest: John Kelley – CEO Craftpeak
Discussion 1: What are Network Effects
Question #1: What is your definition of Network Effects?
“As you probably know, the simplified definition of network effects is that they occur when a company’s product or service becomes more
valuable as usage increases.”
“72 years after Vail first described direct network effects, the father of the Ethernet standard, Robert Metcalfe, took the concept a step
further by proposing that the value of a network is proportional to the number of connected users squared (N^2). This is now known as Metcalfe’s Law.”
Discussion 2: Why are network effects important to business results?
· Deep understanding of the needs of their users
· Brand Value – Goodwill (Facebook example)
Discussion 3: What are the network effects you are seeing in your business?
· Gain a deeper understanding of the challenges our breweries (All Breweries are facing) - Flows into our product development and our offerings
· Technology Improves with increased users and Feedback
· We act as a node that understands the challenges in the industry from a unique vantage point. While our customers are focused on the challenges facing their single brewery, we are able to aggregate insights from brewery owners across dozens of breweries. There is a lot of value in the collective insights.
· We all get better together!
· Marketing - Breweries acknowledge that they want to be part of the Craftpeak Team and what we are doing
· Beer Enthusiasts (not our direct market) are fans of ours because of who we are working with
· Mentors, Advisors, Peers, - We get better through the mind-share of the networks we have developed and rely upon – I would even throw our competitors in there
Discussion 4: How network effects can benefit a company’s sales strategy?
· Much easier to say we are working with sixty amazing breweries, than two. Jim Collins “Good to Great” Get the massive fly-wheel moving
· Increases sales velocity, and provides 3rd party validation of our value
· I feel like it is something that we continue to help cultivate, but at this point in our trajectory we are move focused on bringing lots of value for our customers, serving them well, and developing technology that is going to help them compete.
Summary: There are several different types of Network Effects and being aware of them is the first step to understanding how to use them to
improve your business and increase competitive advantage.
Close: Thanks to John Kelley for joining me on this initial episode of "The Connector" Podcast.