Networks, Lock-in, and Pathways

In his podcast, Akimbo, Seth Godin teaches us how to adopt a posture of possibility, change the culture, and choose to make a difference. Here are my takeaways from the episode.

  • Gillette figured out that selling one razor is a tough business, but selling a lifetime of razors is a great business.
  • Network, Lock-in, and Pathway effects are important to understand for two reasons. First, if we are not careful with them, we might fall as a victim to those effects. Two, those effects are powerful ways to dance with culture, especially when we are trying to affect changes on the culture.
  • Metcalfe’s law states the effect of a telecommunications network is proportional to the square of the number of connected users of the system (n2). Another word, more connections create value. That is the network effect.
  • Lock-in occurs when the cost of switching from one solution to another feels too much. Marketers and businesses work hard to create those effects when we use their products and services.
  • The work required to create the lock-in effect and path dependency is immense and slows you down at first. Once the structure is in, it is much easier for others to plug in and become interoperable with the system as it currently exists.
  • On the other hand, for freelancers and entrepreneurs who want to affect changes, the easy path of being plug-and-play and interoperable is not the way to change the culture, to create value, and to make the impact.
  • The lock-in effect can also make it difficult to change minds or reconsider past choices by creating a cognitive dissonance thinking.
  • How to launch something new when there is already something in place that is dominant? Find something outside of where you are that is a fundamental shift, which encourages new choices to be made. At that moment, all the lock-in and sunk costs seem less important because the shift creates a new network effect with momentum. Find those moments of the shift.
  • During those moments of the shift, Seth suggested four questions we can ask ourselves.
    1. What are the sunk costs that are getting in the way of you making the new decision?
    2. When you commit to a solution, do you take the approach of open systems (which lessen the switch costs later) or do you take close system (which has the lower upfront costs but with lock-in)?
    3. What is the sea of change coming to your industry that is going eliminate many of the lock-in, path-dependencies, and sunk costs? How will that change allow you to have a fresh start?
    4. Are you willing to invest in creating a network effect, in building something better that will bring more value when more people have access to your solution? After you can create a network effect, a cultural shift becomes possible.
  • The things we love and trust all have a network effect. “People like us do/use thing like is” Culture is the ultimate network effect. It is on us to speak up about the network effect, the should’s and should not’s, and it is up to us to use the network effect wisely.