Reality Bubbles and the Network Effect

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Over the last decade Innovation “appears” to have exponentially increased predominately due to the advent of broadband and mobiles which has made it much easier to reach the consumer with very little outlay. Sites like Kickstarter have also brought investing in Innovation to the consumer market.   This connection however still does not guarantee success and there are two major factors which can’t be overlooked.

Reality Bubbles: In our hyper connected world everyone craves new gadgets and isn’t afraid to comment or offer a “like”, however this is a very abstract response and does not overlay needs, competition, price and most importantly desirability.  For any product to be successful in addition to the normal marketing principles you need to understand whether the product or technology being offered is appropriate to the masses now as it could take a decade for the product to become mainstream.  Do you want to be the organisation that funds the early incubator development stage that is dusted off in a few years by someone else?  This can been seen in the financial services market at the moment where some organisations have started looking at wearables, Oculus rift, QR codes, Biometrics etc (the latter two have been around and investigated for at least a decade now).  As Internet Banking still doesn’t have 100% penetration and Internet Banking apps are only just starting to become more popular when do organisations actually think we will be using VR or wearables to engage with our financial affairs?  Every organisation needs to decide if the play to win (which comes with a very large price tag) or play not to lose.

Network Effect: Even though you may have created a very well thought out and constructed product this does not guarantee success and as most start ups have seen “network effect” is the number one concern even above revenue in the first few years.  If you can create a system where you, your friends and your friends of friends reside, the stickiness of the platform is guaranteed, look at Facebook, they have only recently started making money as initially it was all about user adoption whereas mainstream companies expect a return in the first 12-18 months or will “right off” the proposition before it gets traction.  Generally the innovators and early adopters are the only ones who will try new products as their friends are also likely to do the same, however for the masses this is different and they need a very good reason to jump ship.  Once you have your captive audience you can then begin to monetise you’re offering, however consumers are very fickle and will expect continuous Innovation and as seen by the big players the most successful way to do this is by buying other companies with established network effect.

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Author: Steve Wakefield

Steve Wakefield is an experienced Innovator presently based in London.

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