If you are a founder, the first stage of creating a network is by far the hardest.
Slack isn’t useful until your colleagues are also on the platform. Uber isn’t useful until there are enough drivers, who won’t drive until there are enough rides.
It is a chicken and egg situation that Andrew Chen calls the ‘Cold Start Problem’ in a book with the same title.
So how do you solve for it? He talks about identifying and building an atomic network, which is a single stable, engaged network that can self-sustain.
Then rinse and repeat
He calls out how this strategy has played our in the largest networks we see around us – from Facebook to Uber and Slack.
It is critical he says to identify what the appropriate atomic network is for each product.
“For Zoom, it’s simply two people that want to video call each other. For Slack, they found it took 3 users to have a stable network. But for Airbnb, it took hundreds of active listings in a given market for a stable network to arise.”
The Cold start theory provides a 5 stage framework that every product team must traverse to fully harness the power of network effects –
#1 The Cold Start Problem
#2 Tipping Point
#3 Escape Velocity
#4 Hitting the Ceiling
#5 The Moat
A brilliant primer on Network effects – for anyone who is keen on understanding how networks drive the world around us!
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