Concentration of Power: Focus, Lanchester, & Network Effect

Consider 3 models of Systems of individual entities  (think: people, computers, companies, Social Network Analysis, Network Theory, Dark Networks, … )

1)  In the Analysis I offered regarding Large Organizations becoming out of touch with reality, there was the tacit assumption that individuals ‘inside’ the organization were somewhat blocked from seeing and interacting with the outside world, possibly because of more internal demands on their time, lack of visibility to the outside, lack of empowerment to deal with the outside, and an illusion of being protected from the external world.

2) In the realm of the “Network Effect”, the tacit assumption is that the individuals are not limited in their interactions with the outside by their connections.  The focus is on the increased channels of communication, possibilities for collaboration, a flat organizational structure…  The additional noise, spam, distractions are not usually considered (although I will address that regarding the importance of boundaries, solitude, privacy)

3) Small or large organizations where there is a strong culture of entrepreneurship, individual responsibility and ownership.   Here survival is important, but the sense of urgency for innovation and growth is paramount.   In an ideal situation, the organization is relatively more ‘flat’ in terms of lack of hierarchy, fewer ladders to climb, and greater exposure to the environment.  There is no sense of a “zero sum game”.  This is very much what I experienced at PayPal in 2000 – 2001.   The company was mostly ‘surface’ (as compared to my ‘sphere’ analogy in a previous blog)… with little indication of an insulated ‘inside’ cut-off from the market.

Next, I’ll review the network effect paper I wrote in 2001 at PayPal, its relation to eBay and leveraging eBay’s Network Effect, Lanchester Theory of Markets, and concentration of power.   I concluded that the best expansion strategy to leverage the network effect, and concentration of effort, was to go after one region or market at a time.   Then one would more rapidly reach the ‘tipping point’ and develop an advantage that would be hard to lose.

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