The Network Effect
In the article, The Network Effect, Julie Driscoll talks about what the network effect is and how it can be utilized by technology companies to maximize investments. Driscoll defines the network effect as being the “impact that one user of a good or service has on the value of that product to other people.” The first step in capitalizing on the network effect is to work with engineering and product design teams to collaborate better with sourcing teams. The engineering and product design teams create CAD designs of the product and send CAD drawings to the sourcing teams in order to get the product manufactured. In order to promote better collaboration, Driscoll recommends that all members of the team should focus on product cost in order to maximize overall savings.
There are suggestions provided for all of the different roles including the design engineer, the manufacturing engineer, and the project manager. The design engineer usually designs for form, fit, and function, but they can also design for costs if the program manager gives them a target cost. The project managers can help out by finding catalog parts instead of creating custom parts as well as carrying over old parts to use in the new designs. Manufacturing engineers can work with the design engineers in order to see whether outsourcing certain parts could save the company money.
The next step for increasing the utility of the network effect is utilizing enterprise automation solutions which allow businesses to communicate with their suppliers more directly. Companies traditionally would send printed CAD drawings to suppliers in order to get parts made. With the enterprise solutions, companies would be networked with their suppliers who would be able to simply open up the CAD model saving a lot of time. Instead of sending printed drawings back and forth, suppliers and engineers could work together on the model simultaneously to reduce costs.
This article relates to Chapter 17: Network Effects from class. In class, we looked at the network effect and how people can benefit from following each other in buying products such as a fax machine, using online services like Facebook, and choosing a restaurant based on the number of people inside. This article describes how the same effect can be used when creating technology products to minimize costs and maximize profits. Aligning all of the engineers and suppliers together can benefit the company by reducing the cost of the product and therefore increasing profit. The suppliers can save money by using less expensive materials and manufacturing processes.