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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Thomas Mercer-Hursh who wrote (38903)2/5/2001 9:40:46 AM
From: JAPG  Read Replies (1) of 54805
 
Hi Thomas,

Just wanted to add some comments on Networks and Network Effects, as they relate to products and services provided by the type of companies that we are interested in (ie. the “limits” of our interest):

1) IMHO the network is constituted “only” by:

A) The installed customer base
B) The value chain.

Every time I think I found a new network group, within the “limits”, I somehow end up with a variation of A or B. Then again, I welcome any information that shows otherwise.

Please note that type A usually has either a linear or a many to many connectivity and type B usually has one to many connectivity. Also the size of networks type A is orders of magnitude larger than Type B.

2) IMHO, the 2 most important NE effects are:

- The value of a product, for an individual user, increases as other individuals use that same product
- The “Information Contagion” phenomena which acts as a positive feedback for potential users entering the market.
(see: Message 15288968 )

3) Marrying GG and NE theory. The good news is that NE is almost secretly embedded into GG. There are hints of it in, page 40 - paragraph 2 and page 315 – paragraph 2 of TRFM. It goes something like this: (helps to read mentioned paragraphs first)

- Network Effects cause Increasing returns
- The Gorilla advantage is created due to the existence of Increasing returns.
- The Gorilla advantage creates the Gorilla.
- Within the “limits” of our interest, the TALC curve describes our network

All of the above IMHO

So I guess it is: more power to Geoffrey

Take care

JAPG
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