The Cold Start Problem: Using Network Effects to Scale Your Product – A Review

Summary

So you wanna build a Network? ⏱️ Time to read: 12 minutes I have to say this is one of the best books I have ever read. Author @andrewchen (Andrew Chen) from a16z goes into depth from personal experience and research on what it takes to build a networked product and platform and more importantly what critical mistakes that people make and how to recover from them with actionable strategies and tactics. The book is long but worth it, but since I know you are busy (hopefully trying to build a network), let me give you the tasty bits. It's a Paradox Andrew writes an amazing insight at the end of the book that sums up the whole shebang: But here’s the paradox: To build a massive successful network effect, I argue that you must start with a smaller, atomic network. And use the success in the first set of networks to tip over the next set of small networks. I’m not convinced this step can be avoided. Pay attention to that last bit. 👆 Chen has spent a lot of time thinking about this and concludes there is no one-shot way to skip the "a big network" is built from "the smallest possible network". Define: Atomic Network The smallest possible network of users that can stand on its own and provide value to its members, thereby becoming stable and self-sustaining. So to Chen's suggestion, we must focus on the MVN (Minimum Viable Network) the smallest number of users for which they will continue to generate actions in the system. Each action that one user does generates actions from the others and they inturn continue like a perpetual motion machine. They do this because the network gives them value for participating and participating generates value for the others. Define: Hard Side The group of users who create disproportionate value for the network, often by providing the core content, service, product listings, or liquidity that attracts the "easy side" (e.g., consumers, viewers, buyers). Key characteristics often include: They are essential for the network's core value propo...