Traditional companies follow a typical production and distribution value chain to customers, resulting in little interaction between sellers and end customers. This limits the scope of the network effect for traditional business models. There are two kinds of network effects typically taking place in an ecosystem, same-side network effects, where an increase in usage leads to a direct increase in value for other users. This is, for example, the case with telephone systems, or social networks. And cross-side network effects, where the increase in usage of one element increases the value of other elements and vice versa, such as with phones and apps.
In an ecosystem, network effects increase as the number of ecosystem participants and the quality of their participation increase. Several value drivers can have a positive impact on the number and quality of participants.
This is the theory, right? But in practical terms, how have successful organizations enabled and developed network effects to create and capture more value than those with traditional business models?