A few weeks ago I wrote an article summarizing the often cited criticisms of LinkedIn. My premise, however, wasn’t to rant about LinkedIn’s problems, it was to highlight the fact that LinkedIn has lost its ability to innovate beyond what it is today and that it’s spending too much time extracting value from its customer base rather than providing value to them.
My intention was not to criticize LinkedIn as much as point out how many companies miss the point of their business and it hurts them. That article brought out a lot of emotion in people as expressed their dislike for LinkedIn, and one person even said they were leaving the platform. But it’s unlikely that LinkedIn is going to change much as there is little reason to think that LinkedIn will be disrupted or face serious competition any time in the near future. There is too much defensibility in its core advantage: the network effect of 400 million interconnected people.
There is a great, classic article on Quora about how Craigslist is being disruptedby literally dozens of other companies. Although Craigslist also has a core strategic advantage in its network, if each of those micro networks (buying/selling tickets, cars, renting apartments, job postings) can branch off elsewhere, that will eventually breakdown Craigslist to a thousand battlefronts as its users start to divide off in these micro markets. VC Andrew Parker made this clear with his nifty little (2010) image of the logos going after Craigslist.
editorial note: by the classic definition, Craigslist is not being disrupted as it is defined by Clayton Christensen. Rather, it is being subjected to competition in a death by a thousand paper cuts.
That may not happen with LinkedIn because their base has a molecular bond-like interconnectedness that Craigslist users don’t have. Even sites like Facebook would have a difficult time—different network, different molecular bond. Branchout tried, but failed. Viadeo has a niche market, but is less than 10% of LinkedIn’s base. But what LinkedIn is missing out on is the creation of a new services that can benefit from its core.
By shutting off its API to most, it has created a closed ecosystem, it doesn’t seem to be inventing value internally. But the real issue is the lack of an open ecosystem model from LinkedIn that would allow innovation to flourish and build off of their core strength. The basis for an open ecosystem model was best coined by Harvard professor Henry Chesbrough:
“No one has a monopoly on knowledge the way that, say, IBM had in the 1960s in computing, or that Bell Labs had through the 1970s in communications. When useful knowledge exists in companies of all sizes and also in universities, non-profits and individual minds, it makes sense to orient your innovation efforts to accessing, building upon and integrating that external knowledge into useful products and services.”
There are many, companies that would be interested in using LinkedIn’s API or companies that are just innovating around LinkedIn but could benefit from accessing LinkedIn’s core network. A few that recently came up on my radar include Paysa.com and Inbot, and a series of professional networks likedoximity.com. Unlike the Craigslist scenario, they are not taking business away from LinkedIn. They are innovating around it. That’s where LinkedIn needs to be, working around the edge of its business to look for opportunities to add value to groups within its customer base.
The concept of edge strategy may not be new. In fact, a lot of lead user research that has been around for decades has been used to create powerful edge-based products and services. There is a new book out called Edge Strategy that captures the concept pretty well. Hopefully someone at LinkedIn grasps the concept before they become as relevant as a Rolodex. There's value around that core...hopefully they can find it.
If you have seen other innovative ways companies are working around LinkedIn, or other feedback, I'd love to hear from you.