The Network Effect

Networks are a major source of wealth creation. In the 20th Century, hierarchical companies dominated the economic landscape. The classic example was the automotive industry. Henry Ford redefined wealth creation by vertically integrating the manufacturing and distribution of the automobile.

In the 21st Century, networked organizations such as Apple, Facebook, Netflix, Alphabet and others are redefining wealth creation. Each time Apple sells a new cell phone, each new user increases the value of the technology. The more people who have phones, the more valuable they become.

The Network Effect also applies to the creation of value through human networks. Let me give you an example.

In August 2020, we had just completed one of our Business Builder Playbook Workshops. The Key Takeaway from that session was the importance of your Top 20 Relationships in growing your business. We have coached thousands of entrepreneurs who are building their business. Typically, these businesses generate 40 to 80% of their new revenue in a three to twelve month time frame from 20 core relationships.

After the workshop, I received a text from D’Arcy McConvey, one of our clients who participated in the session. The text was as follows: “Norm, I am going to be on your Top 20 Relationships List before the end of the year.”

That turned out to be an accurate prediction.

D’Arcy is the classic example of the Network Effect in building a business. The best form of Marketing is Word of Mouth. When your clients and Centres of Influence become your evangelists, your reputation precedes you. Rather than pursuing clients, you attract them.

This is particularly true when your clients are natural connectors. D’Arcy McConvey is a natural connector.

D’Arcy has a broad and deep network of successful entrepreneurs and professionals who both like and respect him. They value his opinion. As a result, an introduction form D’Arcy carries a lot of weight. It usually leads to a meeting with an entrepreneur or professional who fits our Ideal Client Profile.

The best form of Marketing is Word of Mouth. When your clients and Centres of Influence become your evangelists, your reputation precedes you. Rather than pursuing clients, you attract them.

Each of these introductions add value. The more influential people who have a positive image of your business, the more value they ascribe to what you do. The more these introductions lead to people becoming clients, the more valuable your network becomes.

That is why clients like D’Arcy are so important to the growth and sustainability of every business.

Each client who becomes your evangelist puts the Network Effect to work for you.