The Cold Start Theory suggests that businesses can manage growth plateaus by focusing on network effects and viral growth. One strategy is to identify and leverage existing networks where the product or service is already being used, as PayPal did with eBay. Another strategy is to create incentives for users to bring in new customers, thereby creating a viral effect. Businesses can also focus on improving their product or service to increase user satisfaction and retention, which can lead to organic growth.

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The Cold Start Problem

When a networked product launches, it faces a chicken-and-egg problem: people need to use it for it to be worth anything. So how do you start the very...

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The Acquisition Effect is essentially viral growth via organic use—the network effect that powers the acquisition of new customers. PayPal is a good example of this viral effect. Initially, a company that struggled to envision the 'perfect customer', it eventually latched onto eBay, where PayPal was already used by hundreds of sellers (unbeknownst to the PayPal team). PayPal went with this and created its own 'pay with PayPal' badges to place on eBay items.

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The lessons from the Cold Start Problem can be applied in today's business environment in several ways. Firstly, businesses can focus on identifying and leveraging existing networks or platforms where potential customers already exist, similar to how PayPal leveraged eBay. Secondly, businesses can create incentives or features that encourage users to invite others to join the network, thereby facilitating organic growth. Lastly, businesses can focus on delivering value to the initial set of users, which can help in attracting more users.

The 'tipping point' and 'escape velocity' stages are crucial in the Cold Start Theory. The 'tipping point' is the critical point in a situation, process, or system beyond which a significant and often unstoppable effect or change takes place. In the context of a networked product, it's the point where the product gains enough users to start benefiting from network effects. The 'escape velocity' stage is when the product's growth becomes self-sustaining. It has gained enough momentum to continue growing without the need for additional external inputs.

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