The Limits of Scale

The value of many products and services rises or falls with the number of customers using them.  The fewer fax machines in use, for instance, the less important it is to have one.

In industries as varied as credit cards, fashion, and online games, these "network effects" influence consumer decisions and limit the number of companies able to compete. 

Strategists have developed some well-known rules for navigating business environments with network effects.  "Move first" is one.  "Get big fast" — by aggressively growing market sh.....