3 Tips To Better Leverage Network Effects For Your Technology Platform


I am the CEO at Happy Money and have spent my career connecting ‘fin’ and ‘tech’ by uniting the benefits of Silicon Valley and Wall Street.

In today’s “winner take all” tech world, the majority of successful companies are leveraging the power of network effects—when the number of users positively impacts a product or service’s value. I am a strong proponent of platform-oriented businesses that enable greater scale and extensibility and encourage innovation and growth throughout the ecosystem.

The software-as-a-service (SaaS) model has become a solid way to build strong businesses that benefit from network effects. As an example, Shopify, a platform for supporting direct-to-consumer brands, scaled its platform so that as it grows, it provides a truly high-tech, competitive service. As more businesses integrate on their platform, Shopify develops stronger services, which, in turn, benefits its merchants and those merchants’ customers.

3 Ways To Leverage Network Effects

At Happy Money, the power of network effects is integral to building and operating our business. As such, there are a few concepts I keep in mind when building businesses and platforms with network effects. Here are some of the most important ones.

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1. Grow With Your Partners

Technology businesses—API businesses specifically—are integrated into the operating model of the businesses that use them. This means you’re set up to grow with your partners. As your business scales, this should attract even more partners who see the value you provide. Having a more diverse spectrum of partners should then deliver value back to you in the form of insights, feedback and greater elasticity.

Supporting innovation around your product allows others to innovate as well. As Happy Money, for example, we are exploring who the right partners are across a mix of traditional and newer financial institutions, like neobanks, and brands looking to embed finance products and open up new business lines. This is how we can create a platform that provides new, innovative lending products to current and future customers.

2. Give Up Control

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I’m sure this concept will raise some eyebrows, but giving up control where you can is a great way to help your business grow and scale. For example, an API-based business allows other businesses to embed its offerings into their own digital experience. Sometimes this even means providing white-label access to your services—giving up brand recognition on the partner platform for the sake of growing your business.

So keep an eye out for disruption in your industry and find strategic ways to be part of the growing ecosystem of network and platform businesses. Paying attention to the decomposition and recomposition of services (like what is happening in fintech) can spark your own creativity and move your business forward more quickly.

3. Don’t Leave Your Values Behind

While working with—and occasionally ceding control to—clients is vital for leveraging network effects, it doesn’t mean you need to leave your values behind. One of the benefits of owning the network is that it allows you to define the parameters and ensure that you have the right safeguards. For example, Happy Money enforces very strict ability-to-pay guidelines to ensure clients have enough free cash flow to minimize their stress.

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So, be sure to choose partners who align with your beliefs because it will help you build products and services that serve the best interests of consumers and deliver results they want. One of the best ways to ensure this is to always keep your values centered. Employees should know the values inside and out, and leaders should encourage a transparent culture that provides a safe environment for anyone to ask questions or point out concerns.

Leveraging the power of network effects isn’t right or possible for every business, but most of us can benefit from making our vision bigger. Expand beyond the scope of your business today. You may find that you can benefit from implementing some of these concepts and unlock greater growth.


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