Li Jin and D’Arcy Coolican, writing for Andreessen Horowitz:
Network effects are one of the most important dynamics in software and marketplace businesses. But they’re often spoken of in a binary way: either you have them, or you don’t. In practice, most companies’ network effects are much more complex, falling along a spectrum of different types and strengths. They’re also dynamic and evolve as product, users, and competition changes.
They go on to outline sixteen ways in which network effects can be measured, grouped into five categories:
Acquisition
Organic vs. paid users
Sources of traffic
Time series of paid customer acquisition cost
Competitors
Prevalence of multi-tenanting
Switching or multi-homing costs
Engagement
User retention cohorts
Core action retention cohorts
Dollar retention & paid user retention cohorts
Retention by location/geography
Power user curves
Marketplace metrics
Match rate (aka utilization rate, success rate, etc.)
Market depth
Time to find a match (or inventory turnover, or days to turn)
Concentration or fragmentation of supply and demand
Economics-related
Pricing power
Unit economics
I love it when somebody adds granularity and nuance to a concept I previously understood only in binary terms. This post does that for network-centric businesses.
As designers, we’re called to improve our clients’ conditions. This, in turn, requires that we improve their client’s conditions. The “ask” usually comes as a request to move some variable relevant to the business: increase engagement, improve conversions, drive revenue, etc. But these are symptoms, not causes. You don’t design to drive revenue; revenue is the result of successfully meeting customer needs.
Charles Eames said that recognizing the need is the primary condition for design. While the project may be striving to drive revenue, that’s not a need. Engagement is not a need, nor is conversion. Those are business goals. What’s a need? More often than not, that’s up to the designer to uncover. You may speculate — but must research. You’re changing the state of the world. Who will benefit? How will they benefit? How does the change map to their current understanding — if at all?
Sometimes the need is obvious, but often it can be quite subtle. In some cases, you’ll be addressing a range of needs, some more relevant than others. Being clear on what they are — and having clear priorities — can be challenging. Different stakeholders may place more emphasis on some than others. Some needs will appear to conflict with others. Recognizing and clarifying the need is critical, and it won’t come with the “ask.” Framing the question correctly is essential if one is to produce a relevant answer — and that’s up to designers.
I’ve worked in digital information environments for most of my career. Feedback loops in these systems are close to instantaneous. For example, you can see how many people are using your website almost in real-time. You can analyze their flows through the environment and make adjustments as required. Not so with books.
Living in Information has been out for a month. As you may imagine, I’m very keen to know how it’s received. There’s no equivalent to Google Analytics to see how a book is doing, so I’m cobbling information from various sources. For example, I’ve set up a saved Twitter search for the book’s title, which I check almost daily so I can interact with readers. And of course, I’m also regularly visiting the book’s Amazon page looking to see if people are leaving reviews.
(Please — if you’ve read the book, leave a review. It doesn’t need to be a five-star review; any rating helps. This article in USA Today explains why Amazon reviews are so critical.)
Shortly after launch, I was surprised to see this little notice on the book’s Amazon page:
“Bam!,” I thought. “#1 New Release in Ethics!” I was proud and excited. I can’t imagine ethics is a hot-selling category, but still… When I visited the book’s page a couple of days later, the little notice was gone. “Oh,” I sighed. “That was that.” But later that day I saw it again. And then, a few days later, I saw this:
Yikes! Web site design is a larger category than ethics. That must be a good thing, right? Still, I’m puzzled by the whole thing. Why were these banners appearing and disappearing? How were these categories chosen? How long is something considered to be a “New Release”?
I’ve been trying to find information about Amazon’s “#1 New Release” feature, but haven’t found details on how the algorithm works. (As expected; companies usually aren’t forthcoming with this sort of thing.) The one on my book’s page seems to change hourly. (At least.)
The “#1 New Release in…” banner probably affects book sales. I’ve run across it before as a buyer, and it’s influenced my understanding of how well-received a book is, encouraging me to check it out. It’s a good example of algorithmically-driven context-creating elements that can tweak an information environment to change behavior.
Anything you make enters the world as part of a context; nothing is truly new. As a result, its reception depends significantly on how it addresses its relationship to the things that preceded it. Let’s say that you work for a company that is known for making sprockets. (Let’s call it ACME.) ACME decides to create an information environment to serve as a community for sprocket experts. Inevitably, this environment will be evaluated in the context of the company’s trajectory thus far. It’s not starting from scratch; instead, it rides on its maker’s reputation in the field of sprockets.
This is useful when the new thing builds on the organization’s strengths. However, sometimes the opposite is true: an organization launches something to try something new, to diversify its efforts. In those cases, its reputation may hinder adoption of the new thing. For example, ACME may want to launch an app that appeals to widget-makers instead of sprocket experts. Both the widget-makers and sprocket experts may be confused. The former may think, “What does ACME know about widgets? Aren’t they the sprocket experts?,” while the latter may think, “Doesn’t ACME care about sprockets anymore? What are they doing?!” Whatever the case, it’s unlikely that either group will evaluate the new thing on its own merits. ACME’s reputation and trajectory will influence how they think about it.
This conundrum must be dealt with. Organizations that aspire to longevity must keep evolving; this requires that they branch out to try new things. (Of course, they don’t need to be as radical as moving from sprockets to widgets!) But they must do so in a way that doesn’t confuse or turn off its core constituencies. I’m reminded of something that the musician and record producer Brian Eno wrote about the impact of fan expectations on his own (eclectic) body of work:
… success has many nice payoffs, but one of the disadvantages is that you start to be made to feel responsible for other people’s feelings: what I’m always hearing are variations of “why don’t you do more records like – (insert any album title)” or “why don’t you do more work with – (insert any artist’s name)?”. I don’t know why, these questions are unanswerable, why is it so bloody important to you, leave me alone… these are a few of my responses. But the most important reason is “If I’d followed your advice in the first place I’d never have got anywhere.”
I’m afraid to say that admirers can be a tremendous force for conservatism, for consolidation. Of course it’s really wonderful to be acclaimed for things you’ve done – in fact it’s the only serious reward, because it makes you think “it worked! I’m not isolated!” or something like that, and it makes you feel gratefully connected to your own culture. But on the other hand, there’s a tremendously strong pressure to repeat yourself, to do more of that thing we all liked so much. I can’t do that – I don’t have the enthusiasm to push through projects that seem familiar to me ( – this isn’t so much a question of artistic nobility or high ideals: I just get too bloody bored), but at the same time I do feel guilt for ‘deserting my audience’ by not doing the things they apparently wanted.
Naturally, Eno is writing from the perspective of a creative artist. Many businesses can’t afford to challenge their customers in this way. But this idea of success as a force that nudges towards conservatism and consolidation has broad implications; it’s something to be acknowledged and dealt with as an organization embarks on exploring new grounds.
One trend highlighted in this year’s report caught my eye: We’re spending more time than ever online. In 2008, U.S. adults spent an average of 2.7 hours online every day. In 2017, it was 5.9 hours per day — more than twice as much. To put this into perspective, this means we’re spending on average close to a third of our waking hours online. That’s a lot of time.
What are we doing with our time online? I’ve seen the press describe it as “digital media consumption.” But is “media consumption” what’s really going on here? I doubt it. My sense is the phrase is a carryover from the world of television, where viewers were indeed passive.
Except for watching video (which admittedly is an important online activity for many), the things we do online are active: we work, shop, learn, gossip, and play there. To frame our online activity as “media consumption” is to do violence to the role information environments play in our lives.
Approaching the design of most online experiences with the expectation that they will be “consumed” borders on malpractice. We’re making places with information. We don’t consume places; we inhabit them. It’s time we start designing them for inhabitation, not consumption.
Many years ago, my wife and I heard about a new bagel shop that was opening near our apartment. We decided to check it out one Sunday morning. The place was charming: roomy enough to feel comfortable, but not bustling. There was a large selection of fresh bagels, an assortment of fixings (including many flavors of cream cheese), and a well-stocked self-serve coffee bar. We loved it; lounging there over the newspaper became part of our Sunday morning routine.
It wasn’t long before other people discovered the bagel shop. Soon the place was crowded, and the experience suffered. Ordering became a chore, with lines that stretched out of the store. The once quiet place became packed and noisy. Worst of all, open tables became a rarity. We changed our routine to arrive close to opening time to get one, but then we would feel guilty about lounging around when others were waiting to sit.
Eventually, the owner leased the store next door and the bagel shop grew to three times its previous size. The expansion relieved some of the shop’s most pressing issues; now it was easier to find a place to sit. However, the quality of the food suffered and the relaxed experience of the early days was gone. The new shop was OK — but it wasn’t the same. At three times its former size, it couldn’t be. That’s not to say it wasn’t a good business anymore; it probably made more money in its new digs. But the soul was gone.
Change is a central part of doing business. If things aren’t going well, you must do something about it. But when things are going well, you must also do something about it. Staying still is the only option not on the table. How the business responds to the always-changing context it participates in (and helps create) will be one of the factors that define its level of success.
Architecture is a critical factor in that response. The bagel shop responded to increased demand with an architectural intervention that changed the character of the business. Even though on the surface things looked the same, a threefold increase in the shop’s physical environment made for an entirely different experience.
The laws of physics don’t apply to digital businesses in the same way they do to a bagel shop. A digital business can scale without needing to physically grow. However, the architecture of its information environments plays a critical role in how customers perceive and interact with the business. As with the physical business, the architecture of a digital business must change if it’s to evolve.
A digital business looking to level up has many options open to it. For example, a product could be on track to become a family of products or a platform. Or perhaps the business is expanding from an advertising-supported business model to a paid-membership model. “More of the same” is not on offer in such cases. The business must rethink its information architecture. Yes, this will impact its website and app navigation structures. But more than that, it’ll result in a new conceptual model that will affect all aspects of the experience.
A thoughtfully designed architecture will result in a new UX that will enable the business towards the next stage of its evolution, without compromising the things that made it great. A solid information architecture is a platform for enabling directed emergence: aimed towards a fixed objective, but open-ended enough to respond to real-world conditions as they arise; a platform for sustained growth that doesn’t sacrifice the soul of the business.
Like you, these days I find my inbox flooded with GPRS compliance emails. Some come from services I use every day. Others are from services I signed up for a long time ago, and no longer use. Still others are from services I can’t recall signing up for. Did I open accounts with these companies unwittingly? Did someone open an account on my behalf? Did I open an account with another business that was then acquired by the company I’m getting the email from? I find myself at a loss, and quickly move on to the next email.
Compliance with the new rules is important to the companies sending the emails, but as a user the collective effect is a burden. I have little incentive to do anything other than archive the messages. Still, the (seemingly) endless stream of GPRS emails reminds me of how scattered my identity is in information environments.
Each of these companies has a digital representation of me somewhere in their systems. They aren’t centrally coordinated; each company’s dataset is an independent representation of my information. These snapshots of me vary in fidelity. For example, those that have my physical address as of five years ago are wrong. Others are newer, and therefore have better information. There is no one “true” representation they can sync to, and I have little incentive to keep them all up to date, since I don’t have plans to visit many of these places anymore.
As we move between physical places in the “real” world, our identity comes with us. When I visit my local grocery store, people know who I am. When I go next door to the local pharmacy, I’m the same person. In my pocket is a wallet with little plastic cards that identify me: a driver’s license, various credit cards, a transit card, etc. These identifiers travel with me as I go from place to place. I show them as needed, and they remain in my possession.
Moving through online places doesn’t work like this. When you first enter most information environments, you’re anonymous. As in the real world, you must identify yourself if you want to transact there. Once you do, your identity is somehow no longer in your possession; a new instance of “you” has been created in a database which you don’t own. This digital “you” starts life as (mostly) a blank slate and gets a history of its own as you interact with the company’s services.
When you’ve been online as long as I have, you have hundreds of such “yous” lying around. Some are dormant, others very active; all are scattered, out of your control in ways no government regulation can ultimately rein in. Occasionally you’ll read news about one of these “you’s” homestead being compromised, your personal information trickling out to — who knows where? — without much you can do about it other than changing your password, the damage long done. As the GPRS compliance emails remind us, we can’t speak of our online identity in the singular; each of us is a plurality that is only partially under our control.
What does it mean to have a systemic approach to design? It’s not just about striving for a comprehensive understanding of the key components and actors in the system and how they relate to each other. For the complex problems and environments we’re facing today, that’s table stakes. Beyond this, designers must also understand the conditions that brought the system about to begin with. What key forces precipitated the need for the design intervention? Often, the problem we’re being asked to work on is a symptom of a deeper issue.
For example, imagine somebody in your organization has discovered an inefficiency in the way service personnel interacts with customers. You’re being asked to design a system that allows service reps to get a more comprehensive picture of interactions with customers. It’s great if the system you design can resolve the problem, but if it’s even better if the process of doing so also helps resolve the underlying organizational issues that brought it about to begin with.
Often these issues emerge not from technical deficiencies, but from social/political/organizational/interpersonal ones. You won’t find this stuff spelled out in RFPs! Discovering the underlying issues requires you to ask difficult questions. (The five whys framework is useful for this.) It also requires keen observation. Designing in such projects often calls for working with multiple stakeholders, people from groups that may not interact with each other day-to-day. What have you noticed happening among them? Where are the disconnects? Are they using different names to describe the same things — or worse, using the same names to describe different things? Why have these disconnects come about? What contextual conditions led to the situation? Are these conditions still relevant?
On the surface, even a complex system will address a set of requirements. Resolving them will add value to the organization, and (ideally) to society in general. But addressing the issues that brought about those issues to begin with will create even more value — especially if they’re resolved with a generative perspective that accounts for their ongoing evolution.
Before he retired, my dad was an orthodontist. When I was a kid, we often talked about his work. One such conversation was about advertising. The impression I got was that advertising was seen as something for shoe stores and used car salesmen, not service professionals such as dentists. Advertising left a bad taste in the mouth. (Sorry.)
So I grew up thinking that for some lines of work, new business comes through reputation and referrals. Anything more aggressive than that is tacky, perhaps even a sign that something’s wrong. (Desperation?) As a designer and a consultant, this perspective hasn’t served me well. There’s nothing inherently wrong with letting people know you can help them.
Still, I sense a widespread (if unacknowledged) understanding among designers that some aspects of doing business are “beneath us.” One such aspect is selling. The word “sales” itself is often met with contempt; for many of us (myself included), it speaks of deception, pressure, and manipulation. The image: Alec Baldwin in Glengarry Glenn Ross pushing hapless minions to ALWAYS. BE. CLOSING.
For professionals who center their identity on empathizing with others to create things that help them accomplish their goals, the idea of pressuring anyone into anything they don’t want to do is anathema. Repulsive, even. We come up with euphemisms like business development so we don’t even have to utter the dreaded “S” word. But as popular as the image of the high-pressure, less-than-honest salesperson is, we must resist the drive to see all sales in a bad light.
All of us are in sales. If you’re operating within any business context — in any role — sooner or later you’ll need to “move others” (Dan Pink’s phrase). This doesn’t mean you must mislead them or pressure them into doing things they wouldn’t do otherwise. It means you help them understand how you can help them, and then make it possible for them to let you do so.
This isn’t easy. People are busy, and they have many other things clamoring for their attention. How will they know you can help? To begin with, they must be aware of who you are and what you can do. Then they must be able to see how that can help with their problems. There are things you can do to move this along, and there’s nothing nefarious about this. (Actually, it’s a disservice both to them and yourself as a professional to not make your value clear and actionable.)
Designers are especially good at empathizing with the people who use the things we design. You can think of the sales process as empathizing with the people you can provide value to so you can understand their problems and concerns. Once you do, you can jointly design ways for them to engage you to help them. As with the design of a product, this calls for revealing the opportunities and constraints implicit in the situation. It calls for understanding context and developing trust. These things are central to design, and they’re central to selling design services.
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