IDG Contributor Network: The network effect on wealth creation
We live in a network-centric world, and network laws are beginning to govern business models and even global economics. When you understand these laws, you begin to understand why we live in a world where new network-centric business models (think Google, Facebook, Amazon, Airbnb, etc.) become de facto monopolies that result in incredible wealth creation.More important, you might be able to figure out how to put these same network effects to work for your business to spur growth and increase customer and shareholder value.Metcalfe’s Law and network effects The first law to understand is Metcalfe’s Law. As you probably know, Bob Metcalfe is the co-inventor of Ethernet. I’ve met Bob a few times in my career. He’s smart, kind and very intuitive. Back in the dawn of networking, he made an observation about how networks work, and he put an equation behind it. That equation has come to be known as Metcalfe’s Law. Here’s how it goes and why it’s critical for modern business models, not just for the networks that underpin them.To read this article in full or to leave a comment, please click here