vs. Practice Fusion
athenahealth
Every denial becomes a rule for all clients
- What it did
- 50+ staff researching payer rules, 100+ added monthly (2007)
- Practice Fusion
- No claims flow of its own; data sold to pharma and labs instead
Data network effects
What are Data network effects?
Usage generates observations that feed back into product quality for other participants. The effect depends on the usefulness of additional data, diminishing returns and the availability of substitute data. Data exchange, private-account personalization and data volume alone do not establish this mechanism.
How Data network effects work
Strength depends on whether marginal data still improves the product, whether the data is proprietary or reproducible, and whether the improvement is visible to users. Most claimed 'data moats' fail at least one of these tests.
How companies won with Data network effects
From the win chains in Strategy Canon case studies: what the winner did, and what its rival did at the same step.
vs. Rdio
Spotify
Listener scale feeds personalized discovery
- What it did
- Bought Tunigo and The Echo Nest (2014) to feed editors song and skip data
- Rdio
- Discovery through following other listeners; dropped Spotify-owned Echo Nest recommendations for Gracenote (2014)
vs. Akamai · 2010–26
Cloudflare
Counter-positioning: free traffic lowers cost and trains defenses
- What it did
- CDN free since 2010 because it serves the paid security products
- Akamai
- Traffic only from paying customers, billed by use
vs. Afterpay · 2014–19
Affirm
Underwriting each transaction in real time
- What it did
- Levchin's PayPal fraud-model work carried into per-purchase risk models using 70,000 variables (2014)
- Afterpay
- No credit-score check; ASIC flagged limited inquiry into borrowers' finances (2018)
Also tagged: ZoomInfo
The question to ask of a company
Does the ten-millionth user's data still improve the product for the first user? Could a competitor buy or synthesize equivalent data?
Who names it — 2 of the canon
| Author | What they call it / where it appears |
|---|---|
| NFX | Data network effect (type #9) |
| Helmer | A route to Network Economies or Process Power, depending on whether the loop is cross-user or internal |