A castle is only as good as the moat that shields it from its enemies. And a business is only as good as its barriers to competition.

A business without a moat is a Squirrel Cage.

A business with a moat is a Fortress.

Companies based on Network Effect become more Invincible as they grow. This is a m-a-j-o-r solution to the endless frustrations that most entrepreneurs suffer from:

• You’re on a promotional hamster wheel
• You feel like you bought yourself a job that you can’t quit
• You’re on a constant treadmill of “what have you done with me lately”
• You’re looking over your shoulder at competitors
• You’re always feeling downward price pressure
• You know your business is not living up to its potential
• The business is difficult or impossible to sell
• You can’t take profits out of the business without compromising growth, advertising or operations.
• The business doesn’t fund the things that are personally important to you - like paying for kids’ education, travel, giving, upholding promises to loved ones, covering medical expenses or helping relatives in need.

You get deluged with the chorus of standard, tired, worn-out list of suggested solutions: You need more traffic. You need an operations manager. You need an integrator. You need to systemize your business. You need to work on your business instead of working in your business. You need to 10X your business. You need to harness the power of AI. You need better email deliverability. You need more presence on social media. You need to write a book. You need a salesperson. You need a copywriter. You need to start a podcast.

Any of those things could be a good idea. But the chances of any of these things shielding you from competition are nil. But one force transcends all of those things: Network Effect.

A sterling example of Network Effect is Uber: Riders attract Drivers which reduces Wait Time (and reduces cost) which attracts more Riders. A virtuous circle ensues and expands all over the world. Even City Hall could not prevent it from spreading like wildfire.

Network Effect is the secret sauce of Apple, Google, Facebook, Uber, Amazon, eBay, AirBnB, Spotify, Slack and hundreds of other companies. Once a company with Network Effect gets established it’s almost impossible to take out. Even eBay, stodgy and outdated as it is, maintains an iron grip on its market. To create a rival would be futile.

Network Effect is king. However… doing it the way Silicon Valley does it costs billions of dollars… and never has a strong odds. (That’s why they call them “unicorns.”)

In Advanced Mastery Network we devised a cousin of this, which does not require unicorn luck or hundreds of millions of dollars of Venture Capital: Network Effect for Mere Mortals. This is a version of Network Effect which is effective in business as small as mid-six-figures. It’s not just for internet companies or Software As A Service companies. It’s for roofers, recruiters, shipping companies, marketing agencies, law firms, software developers, restaurants and manufacturers.

Our flavor of Network Effect is typically invisible to owners (until we point it out to them) and is even more invisible to customers and competitors. This is why it works so well. By the time it’s locked in, it’s too late for competitors to do anything about.

A series of case studies from Advanced Mastery Network follows. 

Damien Deighan is founder of Data Science Talent Limited, where he specializes in recruiting data scientists, often with degrees from prestigious universities, to work for Fortune 500 and Fortune 1000 companies. These companies recognize the significance of understanding, processing, analyzing, and acting on data to stay ahead of their competitors.

Unfortunately, many companies struggle to navigate the hiring process and heavily rely on recruiters, who often have little understanding of what Data Scientists really do.

Damien joined Advanced Mastery Network in late 2019 before the pandemic hit, foreseeing an economic downturn in 2020 and preparing for it financially.

Instead of aggressively marketing like his competitors, Damien chose to invest in infrastructure and strategy during the uncertain times. Six months into AMN, Covid-19 struck. It impacted hiring, but the shift to virtual platforms like Zoom presented new opportunities for him. While many may believe marketing is the most crucial tool for a recruiter, Damien's experience proved otherwise. He chose to harness the power of Network Effect in his recruitment success.

The greatest advantage of Network Effect is: The bigger your network gets, the more immune it is to competition. To try to start a new ride sharing company and compete with Uber and Lyft would be sheer foolishness. The Network Effect of those companies creates a “moat” around the castle that is impossible to penetrate. Damien endeavored to build just such a moat in data science.

The only way this could happen was if Damien’s company delivered a fundamentally superior match between client and job candidate. He needed to establish a clear, inarguable advantage in matching a department's needs with a candidate's skills, unlike most recruiters who rely on resumes, degrees, and instincts.

I advised him to develop his own version of the Marketing DNA Test but tailored for data science skill sets. We delved deep into the problem, meeting regularly to figure out how to assess data scientists effectively. After six months of work, Damien had a beta tool. He showed it to a client.

He had broken data science down into nine distinct skill sets, explaining that a successful data science department requires all of them. The client was so impressed with Damien's approach, he said, “You just gave the best explanation of hiring data scientists I have ever heard.” Even though the tool wasn't completed yet, the client immediately engaged Damien with their recruiting needs.

This validated Damien's meticulous approach to matching opportunities to talent, setting him apart from other recruiters who prioritize sales over systematic problem-solving processes.

Damien's approach to data science recruiting aligns perfectly with the principles of AMN: make your product irresistible by SIMPLIFYING, built a moat with Network Effect, dominate your market with Star Principle, and become competition proof with a Definitive Selling Proposition.

Rather than just focusing on marketing like traditional consultants and training programs, we chose to address multiple aspects with a single strategy. Developing a tool that could better match candidate skills to department needs would create a substantial advantage in the recruiting market… not only for Damien but for clients and candidates alike.

By creating a platform that outperforms other recruiters' gut-level approaches, Damien's company accumulates valuable data on data scientists and job performance, enabling continuous improvement of the tool. Additionally, the platform itself would serve as a marketing attractor, eventually becoming an industry standard, further solidifying Damien's position in the market.

His tool also predicts team dynamics within the company, incentivizing clients to hire entire teams through Damien rather than fragmented recruiting. This unique offering sets him apart and SIMPLIFIES hiring, bypassing traditional resumes and cover letters, via more reliable analysis.

Damien's venture is positioned to axis-shift the data science recruiting industry.

Most businesses have 3-6 Network Effect levers that are invisible to their owners. Lying dormant, waiting to be harnessed. Damien's experience illustrates the power of using a platform to SIMPLIFY a process in your industry, creating a Network Effect that benefits both your business and your customers.

By applying a platform to match the needs on both sides of your market, you can Simplify life for your customers and become a Star player in your industry, where the money and opportunity flow.

There is tremendous potential in applying these advanced concepts to small to medium-sized businesses… and yes, yours as well.

My experience in AMN has really shifted my thinking to the next level in terms of what we can achieve as a business. Those ideas came as a direct result of our AMN sessions. And the roadmap of how to start developing and implementing them also came from one to one sessions with Perry.

I'm not aware of any other program that is applying these concepts in an advanced way to businesses that are of small to medium size.

-Damien Deighan

Mark McShurley's company, RoofSimple, has harnessed the power of network effect through an innovative approach to “Review Velocity” - the speed at which online reviews accrue. In an industry where differentiation is almost non-existent, Mark found a way to stand out and rapidly grow his business from a humble start with $600K in revenue, operating from his inlaws’ basement, to an eight-figure enterprise expanding into adjacent markets like solar power.

At the core of RoofSimple's success is Mark abandoning the standard, deeply flawed roofing sales experience. Rejecting convention, he made a bold decision to never hire salespeople from the roofing industry. Instead, he outsources labor to local roofing crews, focusing on the role of concierge to oversee projects and ensure a pleasurable customer experience.

This novel approach had both immediate and long-term positive effects. Not only did it result in a more pleasant sales experience for customers, but it also allows Mark to nip dissatisfaction in the bud, earning the company five-star reviews and immediate payment upon job completion. Furthermore, Mark saw that each roofing job served up valuable data and feedback, shedding light on what truly drove sales and made customers happy.

RoofSimple's ability to amass a large number of effusive online reviews became a significant network effect for the business. With its growing reputation as a trustworthy and reliable roofing company, RoofSimple became the obvious choice over competitors lacking similar feedback and reviews.

Moreover, RoofSimple's fast payment process and capacity to attract the best contractors in any geography added more Network Effects. By paying well and promptly, the company established solid relationships with contractors, yielding a reliable workforce eager to work with RoofSimple. This in turn draws more customers via consistent quality of work.

Another crucial network effect was RoofSimple's ability to attract ideal salespeople for their unique approach. The company's culture and sales strategy came into alignment with Mark's vision, making it clear who was an ideal fit.

By cascading these network effects, RoofSimple achieved exponential growth, rapidly scaling from its initial revenue of $600,000 to north of $15 million in seven years. The company's recent expansion into a complementary sector, solar power, further illustrates the robustness of the approach.

RoofSimple's success proves the potential for “ordinary” brick-and-mortar businesses to build secure moats against encroaching competition. It’s not just for Silicon Valley. By focusing on generating positive reviews, creating exceptional customer experiences, and leveraging feedback loops, businesses can apply network effect principles to flourish and establish themselves as leaders in their niches.

A completely different example of Network Effect lies in Matt Coffman's business. Matt's company builds websites for therapists and generating leads for them.

Building websites in any industry might seem like a race to the bottom, but Therapy Practice Accelerator enjoys remarkable immunity from competition.

At first glance, one might assume that this involves straightforward marketing strategies, but in reality, Matt and his team have meticulously developed a system with myriad nuances and subtleties, setting them apart from the competition.

Their expertly crafted system allows for a cost-effective onboarding process for new customers, making the entire experience favorable for both the clients and the company.

Matt has cultivated a community of over 400 therapists, the great majority enjoying more success than their peers. These therapists boast excellent websites, compelling messaging, and a steady influx of clients. Some elect to expand their practices into multimillion-dollar ventures by employing other therapists or renting out office space.

Maintaining such a thriving community of successful therapists has yielded a powerful network effect for Matt's firm. Prospective clients are naturally drawn to a company with a welcoming community of satisfied customers who can vouch for the effectiveness of the service.

The most remarkable aspect of the “moat” around Matt’s castle is that it's not at all apparent to competitors. One would naturally assume that this business is easy to compete with, but the reality is more complex. The subtleties of their system lend them a significant advantage, making it challenging for rivals to replicate their success.

Therapy Practice Accelerator leverages the power of community and a well-designed system to attract and retain customers, giving them a significant edge over competitors. Even “ordinary” service businesses can leverage invisible Network Effects to retain clients for many years with high levels of profitability.

For Mark Riffey, Network Effects accrue because features attract more clients, and the growing client base supports development of still more features. His company serves architects who analyze whether steel beams in buildings can handle required loads and comply with local codes. Their software performs intricate calculations and ensures compliance with regulations unique to each state.

As they grow, their architect clients bring unique requirements and needs to the table. When the state of Washington mandates a new calculation for building stability, Mark's team swiftly integrates the capability into their software. Relentless evolution and expansion of features make their platform increasingly appealing to potential clients, as they know that their specific needs will be addressed.

Government regulations are ad hoc and unique to each region. As Mark's software accommodates these ever-changing requirements, it becomes exceedingly difficult for competitors to keep up. This further solidifies Mark's position as a leader in the industry, offering services that others can't match.

Most important, this network effect enhanced their attractiveness as an acquisition target. One company looking to enter this space found it more feasible to acquire Mark's business rather than attempting to build a comparable platform from scratch.

Their 20 year history granted them a significant first-mover advantage, making it even harder for competitors to catch up.

The Network Effect, in this case, is the cumulative result of clients attracting more features and ease of use, which, in turn, attracts more clients. The cycle continues to strengthen their market position.

Mark sold the company for $32 million in 2022, ans has continued on as an equity stakeholder. His story illustrates how a company can leverage the network effect to gain a sustainable edge.

Network Effect for Mere Mortals is a game-changer for many businesses, including the case studies we've examined. It is the foundation of their success. It is the one factor that grows easier (and not harder) as your company expands.

Damien might have opted for typical recruitment strategies, such as hiring LinkedIn reach-out specialists or investing in PR agencies. These approaches are common, straightforward, and make perfect sense to marketing savvy individuals. In fact, Damien was working with a marketing agency before he came to us. Advisor John McGee showed them how they were wasting his money!

Similarly, if Mark McShurely hadn't discovered Review Velocity, he might have followed the conventional route in the roofing industry. He could have attempted to hire salespeople with prior roofing experience, a standard practice in the industry. But such muscle-powered solutions are often limited in their scope and impact.

The power of network effect is in its invisible “flywheels.” It's about designing a business that attracts customers and features through a well-crafted system rather than brute force marketing. It's not about chasing customers but rather creating a magnet that pulls them in. This approach is not at all obvious to most people, but it makes it much harder for clients to leave you and go to another vendor.

It's not about spending more. It’s about self-reinforcing sources of growth. By shifting their focus to building platforms that attract clients and features, Mark Riffey unlocked exponential growth and success that would have been challenging to achieve through more conventional means.

Martin Schweiger & Partners of Singapore transformed an ordinary commoditized service firm (patent law) into a highly sought-after specialist that is miles ahead of rivals. They accomplished this in a series of stages over a span of one year… without raising Venture Capital or risking the future of the company.

When Martin joined Advanced Mastery Network, we alerted him that by being able to do patents twice as fast as competitors, his firm would become four times as appealing to prospective customers.

Speed is everything in patent applications, as companies aim to secure their intellectual property ahead of rivals.

Network Effect propelled this even further.

Client attraction equals the job speed squared. The faster Martin turns around a patent, the more exponentially attractive his company becomes to clients.

Martin started asking how he might not just knock out one or two patents faster but revolutionize entire categories of patents.

The first step was to identify a particular flavor of patent they could speed… then disqualify ALL clients for whom their process wouldn't be faster. By nicheing down to only the specific types of patents and technologies where they excel, the firm designed its sales process to repeal non-ideal clients.

This accomplished two things:

• Normally firms can only give clients a rough ballpark estimate of the cost of a job. They began quoting projects with absolute pricing certainty.
  
  
• Normally a patent takes 6 to 16 weeks. Schweiger and Partners reduced the turnaround time of specific patent types down to just a few days.

Suddenly for the ideal client Schweiger and Partners wasn’t merely a competent provider… they were the only provider.

Within a few months 10% of their business was coming from other patent firms who were private labeling the service and reselling it to their clients.

He accomplished all of this with very ordinary internal processes - Excel spreadsheets, Word documents and documented procedures.

Now that this is in place, Martin has much more recently invested in AI technology to streamline the patent process further.

In May 2023 for the first time Martin completed an entire patent application from start to finish in one hour, a feat that previously took weeks and often months. At our Advanced Mastery Network meeting, Martin strolled in while everyone was eating breakfast and said, “I just completed a patent application for a client in 30 minutes!”

The capacity to rapidly secure patents and protect intellectual property now becomes highly attractive to big companies seeking to safeguard their innovations.

Each patent contract further improves and refines the AI algorithm, creating a self-reinforcing cycle of efficiency and client attraction.

As a result of embracing the network effect, Martin's patent firm has shifted into 95-5 territory - where 5% of the players enjoy 95% of the business.

We can’t overstate the fact that for most of this process they were using very ordinary tools like Word and Excel, which enabled them to outstrip any other law firm in the world. Only now they are shifting into high gear with full automation.

Most people get this backwards and their dream of automation never materializes.

By engineering their business to leverage Network Effect for Mere Mortals, they not only transformed their own company but are poised to revolutionize the entire patent industry.

By applying technology and network effect principles, even businesses in traditional industries can thrive and grow.

The goal is to find ways to increase velocity, efficiency, and client attraction through technological solutions, leading to increased market share, higher prices, and a competitive advantage.

Seize the day,

Perry