UCL School of Management Associate Professor Joost Rietveld and PhD student Joe Ploog’s co-authored paper entitled ‘Rolling the Dice: How to Resolve Demand Uncertainty in Markets with Partial Network Effects’ recently won the Platform Leaders Academic Prize. Published in the Academy of Management Journal, the paper explores the strategic presence of partial network effects through an analysis of almost 20,000 board games and their subsequent impact on performance.
Explaining their board game analogy, the co-authors highlight that games such as Magic: The Gathering and Warhammer 40k create value by adding collectible components that can be traded among players, while board games such as Monopoly are designed with a 1-board-per-game principle. Ultimately, the co-authors argue, network products face higher demand uncertainty than standalone products.
In other words, the social element of network products require a significant adoption at the launch stage, making it difficult for consumers to assess a product’s future value. Similarly, potential buyers are unable to long-term value of a game if usage fluctuates over time. Ultimately, the co-authors argue, the inclusion of network effects is a deliberate decision and, while it can add irrefutable value, it also increases the risk of product failure - particularly in cases where the products fail to reach the masses.
Additionally, managers should consider the key drivers of demand uncertainty. For Joost and Joe, these are product novelty and competitive intensity, which ultimately determine the success of products that adopt collaborative features. It is the decision to include these features that, according to the co-authors, allows companies to roll the dice.
Platform Leaders is an initiative of Launchworks & Co., a consultancy firm specialising in platform strategy. Each year, Platform Leaders awards a prize to an academic paper that demonstrates exceptional relevance and practical applications to the business world. Sharing the paper’s findings more widely, Joe Ploog recently spoke at the annual Platform Leaders conference and discussed the impact fo the paper on businesses more broadly.
