The network effect is powerful, and a source of tremendous value, and we need to understand how it works.
Networks depend on standardisation – a consistent, accepted standard for how computers talk to each other, or how all Lego bricks fit together, or how a community works – a shared language and set of expectations that make it easier to collaborate.
We need these norms – they allow us to communicate, to work together better and faster, to make assumptions, even to ignore each other in relative safety. Norms, the middle ground, are the gravity that holds us together, the board from which we spring.
And there’s the tension. Norms that are too numerous or too binding tie us down. Our instinct is to break free, but it’s a dance: without norms and standards (social-cultural, technological), we fall apart. There’s nothing to stand on, push off, be in tension with, break free from.
Without springs and gravity there are no trampolines, and no difference between flying and falling.
Lee must have had something about him – he became editor at 19 – but here’s the thing: he slogged it out writing comics – westerns, crime stories, horror and superhero work – for twenty two years without really hitting the big time. They say he chose Stan Lee as a pen name because he was worried he’d be embarrassed by his work in comics if he ever wrote the Great American Novel.
By the early 60s Lee was fed up, and ready to quit. The Fantastic Four was a last throw of the dice on his wife’s suggestion that he try writing the comics he wanted to write. There was nothing to lose.
He was forty-one years old.
The rest is history.
What if Stan Lee had never written the fantastic four?
Richard Hackman‘s third lens on teams and team performance looks at what happens to the individuals on the team.
What happens to the individuals? Did they learn something? Did they grow and develop professionally, or was this a waste of their time or something that frustrated and alienated them?
Team growth and individual growth are interrelated, but distinct. Team growth is (primarily) related to the team’s ability to work well together as ateam, and whether their ability to get the job done is improving, and the improvement is sustainable.
Individual growth is about personal learning and development:
Are the members of my team developing their own vision?
Are they and exercising and deepening – or possibly redefining – their values?
Are they gaining new tools – ideas, skills, understandings – that will serve them and others well, beyond the team?
Are they developing significant relationships and resources that will help enrich their lives and the lives of those around them?
How is what you’re doing now going to make their lives better in future? How is the work of your team an act of generosity the teams of the future?
Rule 7: Charge a lot (but be worth more than you charge)
How does this rule apply to what a charity charges its clients? Is it ethical to charge your clients a lot?
Shakespeare’s Prospero said it best:
This swift business
I must uneasy make lest too light winning
Make the prize light.
The Tempest, Act 1 Scene 2
I’m not a subscriber to the argument that free things are always un- or underappreciated, but there’s truth in the sorcerer’s words: we value what is dear.
Or perhaps we should say, we value things that cost a lot as long as long as they’re worth more than we paid.
Think about the times you’ve felt frustrated by a cheap purchase that wasn’t worth it. Or the more costly, high-quality item that brought you satisfaction each and every time you used it. Rule 7 follows this logic – just as it’s possible to be cheap and still rip people off, it’s possible to charge a lot and still be generous.
In fact, charging a lot might be what gives you the space to be generous. It’s hard to give people the time and attention they require if you’re cutting corners and pinching pennies. Rule 7 asserts that it’s fine for a charity to charge its clients for its services – even to charge ‘a lot’ – as long as the client makes the most profit from the transaction.
And the fact is, even if the service that you provide to your clients costs them nothing in financial terms, they always pay something – time, attention, the effort of showing up.
When your clients pay a bit more of those things for what you provide, they think more about whether they really want it, and take it a bit more seriously. And just as if you’d charged more money for something, when people have bought in to what you’re doing, there’s a lot more that you can do, so you open up a lot of extra ways to create value for and with them.
As another poet put it,
Where your treasure is, there your heart will be also.
Rule 7: Charge a lot (but be worth more than you charge)
The point here is that your organisation’s selling point – we’re still looking at things from the perspective of donors and supporters – should never be how cheap you are (your price), but how much value you create for your clients.
It doesn’t matter what your price is, as long as you’re worth it – or Seth would say, worth as long as you’re worth more.
This might be about how many people you serve and how many things you do.
Or it might just as well be about how you do what you do – the values that you bring to the table that make you special. The things that would:
Here are two examples from the charity I work for.
Scale and the right size
At the charity I work for, we produce graded reading books to support our literacy curriculum. These aren’t available elsewhere in Indonesia – especially not ones that can be tightly integrated with the curriculum – so we need to make them ourselves.
The catch is, that there’s an economy of scale to printing books. The cost-per-book of printing small runs of books costs more than three times as much as if you bulk print a thousand copies. In fact, a bulk-printed colour copy of a book costs less to print than a black and white photocopied version.
If we want to bring price down and quality up, we clearly need to print in bulk. The catch is, this takes a significant investment, and the only way to make it worth it is if we have thousands of teachers using our books – at which point they pay for themselves.
So a few years ago it became clear that if we wanted to serve more groups at a lower cost (which is a key factor in more groups being able to afford our program in the first place), we need to be big enough to make bulk-printing and storing thousands of reading books a realistic proposition.
Scale and the free prize
The best example of this that I’ve come across is how Amazon moved into web services and cloud computing with Amazon Web Services. In short, they built a huge amount of electronic infrastructure for their own use, then realise that they could share it with others.
Amazon gained a new revenue stream, and companies could run their online infrastructure on Amazon’s servers for a fraction of the cost of making their own. This created huge value for everyone (prizes all round!) – Amazon got richer, and a whole generation of companies (netflix, godaddy, airtable, hubspot, airbnb, coinbase,wetransfer, dropbox*) was able to offer services as if they were already big companies, and grow with their customer base, rather than needing a huge capital investment up front.
The free prize here came when at the same time as we were working out the above, we used the Business Model Canvas to study our (charitable) business model. It became clear that the books were an asset not just to us and our users, but to many other groups doing education work across Indonesia. They wanted books. We sorely needed an income stream.
By selling our books, our partners gained a useful resource to add value to their work, and we gained extra income for little additional effort. Prizes all round!
Scale, the free prize and the non-profit (2)
The other example of this is a work in process – we’re looking at sharing our curriculum and training materials online under a creative commons (open source) license.
This supports our core activity – equipping teachers to teach reading effectively – by allowing our users to review training sessions and check their technique. It might also come in handy for training future partners.
But it will also be a resource for anyone working in the same field as us – something that helps others that we can make available at no cost to ourselves. Free prize!
And of course, the free resources also help potential clients to hear about what we do, and perhaps makes them more likely to use or recommend our other services too.
We left Rule 6 a little watered down: “Scale carefully and find the size that works for your organisation”.
There’s a type of scaling, though, that is a reward: when scaling in a particular way means that you make a free prize for someone (see also here).
There might be a scale at which you are able to give something to your customers (or to people who are not yet your customers – maybe even people who never will be your customers) at no real cost to you. Is there something you own that you can sell cheaply and easily – or give away – that adds tremendous value to them? Could you:
Share a resource or planning tool?
Grow big enough that you can offer a useful physical space to the community?
Thicken the network by connecting different groups of your users so that they can create value for each other – or for someone else entirely? How big does your network need to be to be useful?
If you’re working more in service of a vision (that is, in service of people) than profit, there is more than likely an asset of some kind that you already own that you can share with others.
You might also create a free-prize for your organisation by selling the asset in some way. This isn’t free, but if it allows you to serve more people in a way that creates value for everyone and pays for itself then it’s prizes all round.
Or you might charge a litlte more, covering some of your overheads at no cost to yourself (prize for you) and allow you to serve more effectively and sustainably elsewhere (prize for the community).
Build and own an asset that’s difficult for other people to reproduce
This is an interesting one in the non-profit world, because an attitude of generosity – of wanting to see problems solved more than we want to build empires – suggests that we should welcome others working in our ‘market’ as allies rather than competitors.
But there’s an important point about attitude here – we should always be building assets, and the most valuable ones we can build will always be those that are difficult for others to reproduce.
These assets might be products – in our case, curriculum and reading books. They might be services – delivering teacher training. They might be processes – the ways that the pieces of what you do fit together to create value. They might be things like reputation, trust, and relationships.
Investing in building any of these assets – from building a physical product to making a spec or howto for a process, to training your team – is always worth the time – a gift to your future self.
Here’s a thought experiment that links back to this post from a few weeks ago. Imagine that each central piece of your (charitable) business model was widely available at low cost (what if you open sourced it?). In the absence of each piece, what about your organisation means that people would still want to work with you? How would your clients answer this? How about your donors?
If you’re leading an organisation or a team, a big part of your job is to help others to do their jobs.
The reference escapes me, but I’m pretty sure Peter Drucker used the phrase “to make the work meaningful and the worker effective.”
Making work meaningful is about vision. It means making sure people understand why what they do is important. What’s the point? Who are you there to serve? What difference are you making as a whole, and what difference will it make if a team member does this particular job and does it well?
Making the worker effective is about helping your colleagues to do their roles as well as they can. At its core, the best way to do this seems to be to equip them with useful tools. This means stuff like computers, vehicles, resources. It means equipping them with processes that work – “this is how we train a teacher to teach reading”, “this is how we respond to an email and process a sale”. And most useful of all, it means equipping your team with the tools to make decisions (often these come back to your vision and values) and giving them the information they need to make new tools.
Hardware is important. Physical infrastructure like roads and the electrical grid, machines like drills, buses and computers, even your office space – all of this is hardware.
All else being equal, better hardware is better. It’s worth replacing bad hardware, but it’s often slow and relatively expensive to change.
Software is the non-physical stuff that runs on the hardware and makes it useful. A road network can get by with almost no software – with car drivers who make it up as they go along – if very few people use it. But it works much better – and has capacity several orders of magnitude greater – with better software.
The software of the road network includes the rules of the road, signalling conventions, and a way of enforcing the rules of the system. Better software helps us get to where we’re going faster, more safely, and with less stress.
Mixed up in this software are countless opportunities for generosity, kindness and grace – letting someone in, not cutting someone off, patience in a queue. The software can make them more likely, but there’s no code that can guarantee them… which is a shame, because they make everything better.
What software runs your organisation, and is it time for an upgrade? It might help you achieve a lot more with the same hardware.
Could you do with adding more kindness and grace? They’re infectious.