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Blink 3 of 8 - The 5 AM Club
by Robin Sharma
Listen to the Intro
The Cold Start Problem summary
Andrew Chen
How to Start and Scale Network Effects
20 mins
Brief summary
The Cold Start Problem by Andrew Chen is a business book that offers guidance on how to launch products without an established user base. It provides insights, case studies, and actionable tips for entrepreneurs and startups.
Table of Contents
The Cold Start Problem
Summary of 6 key ideas
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Key idea 1 of 6
Launching new tech is very difficult in the twenty-first century.
Okay, now that we know what network effect is, we might be tempted to think, well, that it would be easy to take advantage of. Everywhere you look, from the metro to the sidewalk, you’ll see people squinting into their devices, hooked on apps and games.
You’d think, then, that right now would be the optimal moment for launching new technology. The environment seems perfect to turn a plucky little start-up into the next Tinder or Zoom. Network effect means that new products can easily attract users through word-of-mouth and organic growth. Even a tiny start-up can leave established companies in the dust. Right?
Wrong. Utilizing network effect is far from easy.
In fact, it’s very difficult – we live in the age of squeezed attention spans, where only the most useful, or engaging, apps and technologies will succeed.
Let’s go back a moment to 2008. That was the year when the iPhone apps platform hit phones and devices everywhere. Back then, when there was barely anything on the platform, all a new app had to do to succeed was be more interesting than a commute or waiting for a bus. That was easy.
A decade later and it’s a different story. Today, the App Store has several million apps, all competing for attention. To succeed, any new app has to steal attention from all the other extremely addictive apps – many of which have been optimized over time to engage users. For years, the top charts of the Google Play Store and Apple App Store have looked the same.
Success is even difficult for massive established giants looking to move into a new market where a smaller company dominates. Even if a larger company offers the same product as a smaller competitor, it won’t be able to break through if the smaller company has captured the market and is growing through the network effect.
Take the battle between Snapchat and Instagram. When Instagram tried to copy Snapchat’s features, like its Stories and photo messages, it just couldn’t outdo its rival. The reason? Snapchat had a resilient and growing network that Instagram just couldn’t capture.
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What is The Cold Start Problem about?
The Cold Start Problem (2021) explains what network effects are, how they work in practice, while illustrating them with real-world examples, from companies like Zoom, Airbnb and Uber. From getting tech companies off the ground in the 21st century, to the population dynamics of meerkats, The Cold Start Problem is an in-depth look at the way networks develop and interact with each other.
Who should read The Cold Start Problem?
- Startup leaders looking for rapid growth
- Established CEOs looking to reawaken sluggish companies
- Anyone interested in network dynamics
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