axiom 2 – early entrants win the field
axiom 3 – significance precedes momentum
axiom 5 – producer and consumer utility
axiom 6 – gatekeepers, intermediaries, and the attention deficit
axiom 7 – positive feedback loops
axiom 8 – differentiation of products and pricing
axiom 9 – switching costs and lock-in
axiom 10 – free information: cooperation in a competitive environment
Axiom 7 – Positive Feedback Loops
Virtual communities create increasing rates of return (or positive feedback loops) in three ways:
- 1) when a business incurs large up-front expenditures to develop a new product or service and the incremental cost of producing each incremental unit of the product or service is minimal;2) as businesses move up the learning curve, or experience curve…businesses typically achieve a certain percentage reduction in the cost of making and delivering that product or service to the customer;3) the last kind of increasing returns leverages network effects: the more units of product or service that are deployed, the more valuable each unit becomes. (Hagel and Armstrong, 44)
Positive feedback makes the strong get stronger and the weak get weaker, leading to extreme outcomes. (Shapiro and Varian, 175)
In the industrial economy success was self-limiting; it obeyed the law of decreasing returns. In the network economy, success is self-reinforcing; it obeys the law of increasing returns (Kelly, 25).