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Prime Law of Networks™

Interaction between innovators and customers in niche markets is essential to sort brilliant ideas from commercially viable ones. The fact that transportation still has the gas mileage of the Model T underscores that the Prime Law of Network needs to be applied to transportation networks as it was to communications after the Federal communications monopoly was recognized as unconstitutional in 1982.

The Prime Law of Networks is perfectly stated by Kevin Kelly in a Sept 1997 Wired article, “New Rules for the New Economy”:

“Value explodes exponentially with membership, while this value explosion sucks in more members.” 

Value is illustrated by the number of connected lines.

 

We see this Prime Law of Networks is every aspect of human behavior from children playing games to the way commercial giants create economic clusters such as Silicon Valley. More work needs to be done to polish the parameters of this Prime Law of Network. As a starting point it seems to be driven by:

  1. The seed of commercialization. Brilliant ideas are a dime a dozen. Brilliant ideas can be found everywhere in society from college campuses to the back on napkins. On rare occation, some one or relatively small number of people find customers willing to pay to use an idea and a process unfolds: 
    • If there is a profit, if the value customers willing pay exceeds the cost to compete, the idea begins to commercialize. To drive a paradigm shift, to get people to change habits, requires a 10x (10 times) increase in value or decrease in costs relative to current expectations.
    • If the implementors cycle increases in value faster than customer expectations grow, customers start recruiting their friends to become customers faster than customers abandon the idea for others options. 
    • Competing idea both compete with the original value creator and add more customers choosing the value proposition.
    • If the rate of value expansion exceeds the rate expectation increase, a gravity well is create that sucks in ever more customers and competitors trying to delight them with value.
  2. Sustained commercialization requires increasing network value faster than customer expectations grow. Brilliant giants of the tech industry such as Cray, Digital Equipment, Sun are gone because they failed to increased the value faster than customer expections; so customers turned elsewhere for value. These companies added to the gravity well that created the economic cluster of the Silicon Valley, but are no longer driving network value.
  3. Societies exist because of the fundamental human need to be connected to community. Exceeding the expectation of the community is what drives network adoption. ​Exceeding customer expectations is a process, not a technology. Smart thinking trumps smart devices, as brillant devices today are rapidly tossed aside for better standards tomorrow. 
  4. Technology is a tool that will be displaced by better tools as expectation increase:
    • The book by Alexandra Horowitz, On Looking: A Walker’s Guide to the Art of Observation provides brilliant observations of the intricate dance people engage in while walking in a city. Any application of technology may start at current levels, but will quickly have to exceed to value expectations ingrained in people's deep and intrinsic understanding of how connected communities move in our daily lives.
    • Solindra was a brilliant idea, but lacked the ability to exceed customer expectations of value. To be effective, every tool must exceed current expectation and be displaced by better tools that exceed the growth of expectations. Commerically valuable ideas are sorted from brilliant ideas in crucible of profits, value customers are willing to pay for must exceed the cost to compete so strength is added to the process of innovations exceeding the growth of customer expectations.
  5. ​Start Small, Iterate Relentlessly. Network Density is a critical driver. The Wired article looking at the overview of the Internet talks of this as the Law of Connections. But at the beginning of Internet adoption is was not the vast numbers of connects, but the density of connections in specific niche markets. Total number of connection is critically important to network growth, but high density concentrated in small niche markets is essential for the seed of commercialization to germinate. You cannot solve the world's problems with traffic except by repeatedly solving someone's local congestion. By focusing on very small implementations, such as airport economic communities, the vast majority of vehices can be connected to create the essential density for network survival. Success in niche networks can cascade as value created exceeds rated of customer expectation increases.
  6. Scaleable: Once a seed of commercialization germinates in niche solutions, is polished in that crucible, they must still provide a 10x value increase while exceeding much broader and more skeptical customer expectations to become scaleable. Each customer that is delighted with a product will tell zero to 8 people. Each person that is disappointed with tell 8 to 22 people. Overcoming all these realities is why there are so few people like Edison, Bell, the Wright Brothers, Ford, Gates, and Jobs.
  7. Exponential Adoption: At some point, with luck, a tipping point will be reached as explained in the Wired article (based on Net Gain by John Hagel):

The chart of Microsoft's cornucopia of profits is a revealing graph because it mirrors several other plots of rising stars in the Network Economy. During its first 10 years, Microsoft's profits were negligible. Its profits rose above the background noise only around 1985. But once they began to rise, they exploded.

Federal Express experienced a similar trajectory: years of minuscule profit increases, slowly ramping up to an invisible threshold, and then surging skyward in a blast sometime during the early 1980s.

The penetration of fax machines likewise follows a tale of a 20-year overnight success. Two decades of marginal success, then, during the mid-1980s, the number of fax machines quietly crosses the point of no return – and the next thing you know, they are irreversibly everywhere.

Network Resiliancy is the reverse of adding network connections:

The Mother of All Demos was in 1968. Despite the fact that the technology existed, it could not commercialize until liberty was restored in 1982. Liberty is society's tolerance of disruptive minorities. There is no minority as tiny and disruptive as commercial innovators.

This 1994 news cast illustrates how expectations at one point are entirely backward sounding today. All applications of technology to networks must keep ahead of expectation to remain relavant. Networks are dynamic processes, not static technology.

 

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