The "Network Effects" of successful organizations

Recently, while clearing some of my old magazines, I came across an article in Businessweek ("The Web's Walking Dead", Sep19-25, 2011 Issue) describing how some of the technology companies like Yahoo and AOL who used to be the darling of consumers and investors are now in tatters.  Other tech companies like Nokia and RIM came to my mind. While it is easy to pin the blame on poor product strategy and execution or even management, what is interesting in the article was the mentioned that these failures were due to the lack of the "network effects" that is necessary to remain successful.

Technology sector is a highly competitive one. Any one who has an great idea and a great product can market to the consumer with ease. If successful, the business will grow. But, this is the point where the similarities between a successful startup and a successful organisation stop.

So what are the "network effects" for a tech company to be successful? To understand this concept, it is easier to give a few examples. The mention of Apple, Oracle, Amazon, SAP, Cisco and Microsoft will strike cords with many of us who knows these companies for many years. There are 3 common features found across these organizations:

a) A successful suite of products backed by strong external community developers, functional and technical expertise.
If one look at the likes of SAP, Cisco or Oracle, there are many communities (across regions) to support the local sales, product and technical support because these organizations recognize that the way to expand the reach is to create opportunities for anyone to pick up the product knowledge and instantly becomes a "walking billboard" for the organization.

b) Establishment of a strong supply chain linking the suppliers to the end consumers
Apple and Amazon recognized that consumers want to acquire the best product at the most competitive price. Besides offering its own products for sale, Amazon evolves and started to look for suppliers who can offer a better pricing than itself and link it up with consumers via its website. iTunes and App Store creations help to create a global marketplace that stimulates the entrepreneurial activities that indirectly demands the products and services for sustainable growth.

c) The need to recognize that there are inherent limitations within the organization
Management is always quick to highlight successful business stories to investors and employees to boost the stock prices and company morale, respectively. But management must also recognize that there are inherent limitations in the organization that impedes the growth. Besides, organic growth or M&A, the 3rd option is to grow is explore the community by understand the intricate network that it has build and tap those opportunities.

With the rise of social media, organizations need to understand the how to bring various stakeholders together and continue to grow its business.