As a business term, the network effect is an interesting one, explaining that the more people are on a network, the more valuable the network is itself, due to strength in numbers and the critical mass to make it work.

This explains, I think, the value of webs like LinkedIn. If there were a few people in it, as opposed to a few million, it would service virtually no purpose other than that of a small, private, dwindling club..

The network effect means a slightly different thing to me. For me it symbolises the power of who you know over what you know. If you’re looking for a job, or a new contract, or a supplier of some kind, your network is your first point of call. ‘Who do you know who’s looking for or can provide ABC?’ If they can’t help you directly, they might know of someone in their network who can, or they can put out feelers into other networks, rippling out your original request in ever farther – though ever diluting – waves. Added to that, when you look for a new role or contract, knowing someone in the company, especially if they’re recommending you and they have a high perceived value in the company, gives you an almighty leg up on the competition.

It seems to me that my version of the network effect – who you know, not what you know – is still very much in effect, repetition intended. I think it hinges on comfort and trust. It takes some of the guesswork out of finding a new person, short-cuts the process and de-risks it. I guess that’s why so many companies in competitive industries, or industries where supply of quality staff is outpaced by demand, offer finders’ fees for employees who successfully refer in a new recruit.

It’s a smart policy to keep your network up to date. Your diligence will pay you back and you’ll benefit – perhaps many times over – from the network effect.

Advertisements