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	<title>Comments on: Strategy for (dealing with) Growth</title>
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		<title>By: billpetti</title>
		<link>http://billpetti.com/2010/01/05/getting-growth-right/#comment-411</link>
		<dc:creator><![CDATA[billpetti]]></dc:creator>
		<pubDate>Wed, 06 Jan 2010 15:07:18 +0000</pubDate>
		<guid isPermaLink="false">http://billpetti.com/?p=1517#comment-411</guid>
		<description><![CDATA[Thanks, Noah.  Great point.  What I probably didn’t do as clearly as I wanted to in that section was make the analytical distinction between network effects and a halo effect.  To me, network effects are more ‘mechanical’ than halo effects, which are more reputational.  Network effects obtain when a product or service becomes more useful to a marginal buyer as the total number of adopters grows.  Social networking sites have more utility the more people join that you know.  There is a positive feedback loop to adoption (which holds for all kinds of software, etc).  Software may be buggy, suboptimal, etc, but if my clients all use it and my suppliers all use it and it’s critical in my market that I can integrate with both the dominant buggy software wins over the less adopted, but technically superior, alternative.

Halo effects are different.  With halo effects, marginal users are less interested in the raw number of additional adopters and more interested in the perceived quality of the product—both for what it can do for them and for how use of that product will be viewed by others.  If McKinsey, or another comparable firm, is viewed as best-practice for strategy consulting as a result of great work with others it will likely influence the perception of their work (current and potential) with new adopters (the number of clients isn’t as important as who those clients where and how well the work turned out).  Additionally, customers that want to increase their reputation as a solid firm may adopt McKinsey in order to ‘leverage McKinsey’s halo’.  (I’ve thought a bit about whether conspicuous consumption obtains in the professional services world, but haven’t gotten around to writing about it yet.  I think there is something there, but still working on it.)

To be sure, it isn’t a clean distinction in reality, with both effects blending, overlapping, and feeding into each other.]]></description>
		<content:encoded><![CDATA[<p>Thanks, Noah.  Great point.  What I probably didn’t do as clearly as I wanted to in that section was make the analytical distinction between network effects and a halo effect.  To me, network effects are more ‘mechanical’ than halo effects, which are more reputational.  Network effects obtain when a product or service becomes more useful to a marginal buyer as the total number of adopters grows.  Social networking sites have more utility the more people join that you know.  There is a positive feedback loop to adoption (which holds for all kinds of software, etc).  Software may be buggy, suboptimal, etc, but if my clients all use it and my suppliers all use it and it’s critical in my market that I can integrate with both the dominant buggy software wins over the less adopted, but technically superior, alternative.</p>
<p>Halo effects are different.  With halo effects, marginal users are less interested in the raw number of additional adopters and more interested in the perceived quality of the product—both for what it can do for them and for how use of that product will be viewed by others.  If McKinsey, or another comparable firm, is viewed as best-practice for strategy consulting as a result of great work with others it will likely influence the perception of their work (current and potential) with new adopters (the number of clients isn’t as important as who those clients where and how well the work turned out).  Additionally, customers that want to increase their reputation as a solid firm may adopt McKinsey in order to ‘leverage McKinsey’s halo’.  (I’ve thought a bit about whether conspicuous consumption obtains in the professional services world, but haven’t gotten around to writing about it yet.  I think there is something there, but still working on it.)</p>
<p>To be sure, it isn’t a clean distinction in reality, with both effects blending, overlapping, and feeding into each other.</p>
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		<title>By: Tweets that mention Strategy for (dealing with) Growth « bill &#124; petti -- Topsy.com</title>
		<link>http://billpetti.com/2010/01/05/getting-growth-right/#comment-410</link>
		<dc:creator><![CDATA[Tweets that mention Strategy for (dealing with) Growth « bill &#124; petti -- Topsy.com]]></dc:creator>
		<pubDate>Wed, 06 Jan 2010 01:54:45 +0000</pubDate>
		<guid isPermaLink="false">http://billpetti.com/?p=1517#comment-410</guid>
		<description><![CDATA[[...] This post was mentioned on Twitter by Bill Petti, Bill Petti. Bill Petti said: Latest post &#124; Strategy for (dealing with) Growth &#124; http://bit.ly/7rage7 [...]]]></description>
		<content:encoded><![CDATA[<p>[...] This post was mentioned on Twitter by Bill Petti, Bill Petti. Bill Petti said: Latest post | Strategy for (dealing with) Growth | <a href="http://bit.ly/7rage7" rel="nofollow">http://bit.ly/7rage7</a> [...]</p>
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		<title>By: Noah Brier</title>
		<link>http://billpetti.com/2010/01/05/getting-growth-right/#comment-408</link>
		<dc:creator><![CDATA[Noah Brier]]></dc:creator>
		<pubDate>Tue, 05 Jan 2010 13:53:34 +0000</pubDate>
		<guid isPermaLink="false">http://billpetti.com/?p=1517#comment-408</guid>
		<description><![CDATA[Really interesting post, Bill. I do have one small issue in your thoughts on McKinsey, though. First you say, &quot;what makes them so dominant is not simply that their client base encompass most of the Fortune 500 or that they have thousands of consultants–it’s the quality of their work.&quot; But then you say, &quot;In other words, working with McKinsey is a best-practice. As the saying goes, no one ever got fired for hiring McKinsey.&quot; I may be splitting hairs, but that seems like a fundamental point: It&#039;s not the actual quality of the work that matters, but rather the perceived quality. I&#039;d say there is a sort of network effect at work there as work for big companies begets more work for big companies and by focusing on that segment exclusively they were quickly able to capture the rest of the business world, as most firms like to look up. (I don&#039;t know the history of McKinsey at all, but that&#039;s what I&#039;m gathering from your writing.) Cheers.]]></description>
		<content:encoded><![CDATA[<p>Really interesting post, Bill. I do have one small issue in your thoughts on McKinsey, though. First you say, &#8220;what makes them so dominant is not simply that their client base encompass most of the Fortune 500 or that they have thousands of consultants–it’s the quality of their work.&#8221; But then you say, &#8220;In other words, working with McKinsey is a best-practice. As the saying goes, no one ever got fired for hiring McKinsey.&#8221; I may be splitting hairs, but that seems like a fundamental point: It&#8217;s not the actual quality of the work that matters, but rather the perceived quality. I&#8217;d say there is a sort of network effect at work there as work for big companies begets more work for big companies and by focusing on that segment exclusively they were quickly able to capture the rest of the business world, as most firms like to look up. (I don&#8217;t know the history of McKinsey at all, but that&#8217;s what I&#8217;m gathering from your writing.) Cheers.</p>
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