Sigmoid Curves and Network Effects Drive Scale and, Usually, Profit Margins

Ultimately, businesses live and die on three simple dynamics: distributions, network effects and  sigmoid curves (S curves), says Niel Robertson, Trada CEO.

Distributions tell you how much you can afford to spend selling a product, he says. Accounts worth $1,000 each cannot be sold the same way as accounts worth $1 million each. Mass media advertising or distributors might work for the former, but direct sales is feasible for the latter. 

S curves determine how far you can scale a business, he says. S curves also illustrate product life cycles and the strategy of creating the next new wave of products before the current revenue driver begins to decline. 

Network effects account for the out-sized returns when a business can achieve huge market share.

Almost all problems (and most opportunities) come from understanding how to take advantage of these functions – rather than fight against them, he says.