This was initially published on Substack.
Many of the world’s most important companies are built on empowerment loops.
Empowerment loops describe the virtuous circle that arises when a company makes participation in the core activity its product or service is built around more broadly accessible.
As more users or customers are given the tools and incentives to take part, a company’s network effect gets stronger. The magic of empowerment loops is that value is created for everyone involved.
Empowerment loops lower the barriers to entry for an (often aspirational) activity and in doing so create a new “economy” around the activity. This creates entirely new financial opportunities for emerging participants while simultaneously increasing the returns to existing expertise.
Companies that gain power through empowerment loops move the competitive goal posts for what the activity is and who gets to be involved. They win by being unique and different instead of incrementally better.
Empowerment loops can often be formulated as simply as:
X is larger than those who have traditionally had the capabilities to do X.
A few of my favorite examples…
- Nike — athletics is larger than athletes
- TikTok — music is larger than musicians (or taken to a higher level, creativity is larger than creatives).
- Figma — design is larger than designers (which Kevin Kwok masterfully explained here and which was the starting point for my post)
Nike’s empire is built on empowerment loops.
By expanding the definition for who is empowered to be an athlete, Nike kicks off a flywheel that helps to expand every part of the global athletics market.
As more consumers gain the tools and inspiration to become athletes, Nike creates new demand for sports leagues, media, and other sports-related brands. These two things in parallel expand the influence and economic opportunity for Nike-affiliated athletes.
As these athletes find success and gain access to an increasing number of business opportunities, their professional peers want to jump on the Nike bandwagon. More athletes representing more sports and broader demographic reach again attracts more consumers, which feeds back to help grow every other part of the sports ecosystem (like youth and amateur sports leagues).
Through a simple early insight — that all of us should be empowered to be athletes —Nike has become a true platform for the world of sports, creating far more value for the ecosystem surrounding it than it has itself captured.
TikTok has innovated around — among other things — the insight that music is larger than those who have traditionally been able to be musicians and that creativity should not be confined to those deemed “creative”.
It has shifted the competitive goal posts by effectively redefining what a song is and has built the tooling to allow any creator to have success under that new definition.
Josh Constine described the company’s content-centric empowerment loop:
TikTok productizes remix culture by making it easy to “use this sound”. Tap the audio button on any video and it becomes yours.
You can even duet with the original creator, sharing your video and theirs side-by-side simultaneously. A solo performance becomes a chorus as more duets are hitched together. Meanwhile, remixes of remixes of remixes provide an esoteric reward for hardcore users who recognize how a gag has evolved or spiraled into absurdity.
Other apps in the past have spawned video responses, hashtags, quote-tweets, surveys, and chain letters and other ways for pieces of content to interact or iterate. And there’s always been parodies. But TikTok proves the power of forging a social app with content network effect at its core.
Facilitating remixes offers a way to lower the bar for producing user generated content. You’d don’t have to be astoundingly creative or original to make something entertaining. Each individual’s life experiences inform their perspective that could let them interpret an idea in a new way.
At the same time, TikTok has increased the returns to existing skill. Those who are astoundingly creative or original and have the ability to create “traditional” music have a new outlet to gain exposure and monetize their work.
Figma’s core insight, as Kevin Kwok masterfully explained here, is that design is larger than just designers.
Bringing non-designers into the process is what gives designers a seat at the table of product and business decisions.
By bringing both designers and non-designers alike into Figma, they create a cross-side network effect. In a direct network effect, a homogenous group gets more value from a product as more of them join. In contrast, a cross-side network effect involves two (or more) distinct groups that grow in size and value as the other group does, too.
Figma’s cross-side network effect between designers and non-designers is one of the primary and under-appreciated sources of their compounding success over the last few years.
As more designers use Figma, they pull in the non-designers they work with. Similarly, as these non-designers use Figma, they encourage the other designers they work with to use Figma. It’s a virtuous circle and a powerful compounding loop.
Figma perfectly embodies the core elements of a company built on empowerment loops:
- They lower the barriers to entry and access through a browser-first workflow, meaning non-designers don’t need to download an app or even create an account.
- They shift the competitive goal posts by building the best design tool for companies and teams instead of best design tool for designers.
- They create a new economy around the redefined activity, both by developing new collaboration points internally and externally and opening up new revenue opportunities for external developers through their platform.
Figma also shows us that the opportunity to build massive companies on the back of empowerment loops exists outside of the consumer context.
Finding Empowerment Loops
There are endless opportunities for empowerment loop businesses to be built — health, financial services, ecommerce, education. Every major category is ripe with places to better align incentives and build large companies by increasing creation and contribution surface area. Here are a few that I have been focused on…
1. Knowledge work is larger than knowledge workers
The Consumerization of the Enterprise is a multi-decade trend that has recently hit a high water mark. But the rise of consumer-like experiences in the enterprise has left one very large and important group behind — the deskless workforce.
Historically, technology serving deskless workers — who make up 80% of the global workforce — has been overlooked and underinvested in to a staggering degree. The fact that there is a well adopted and exclusive distinction at all for “knowledge work” is telling.
IT buyers at large companies are starting to dedicate additional attention and resources to improve the performance of their deskless workforce and, perhaps more importantly, drive higher employee satisfaction to combat the high turnover rates seen in the category (even among high-skilled, high-wage workers).
But there are important elements — both cultural and technological — missing and significant opportunity for innovative solutions that ride emerging technology platforms and take a position (both in their market-facing messaging and product features) on the critical role frontline workers play in building adaptive, intelligent enterprises.
2. Teaching is larger than teachers
One of the interesting things about empowerment loops is that they come in different varieties. We can think of Nike’s empowerment loop as an inspiration loop. TikTok’s is a content loop. And Figma’s is a collaboration loop.
Each uses a different tactic to lower the barrier to participation and re-define who is “allowed” to get involved. To build the future of education, companies should aim to draw from all three of these different types of empowerment loops.
Mario Gabriele recently wrote an outstanding piece on the emerging age of “superstart teachers”. I’m sharing a long pull quote here because it speaks directly to the opportunity that exists in education by bundling multiple empowerment loops:
How long will it take for children to return to in-person lessons? Six months? A year? And if it is sooner, how significant will inevitable interruptions be? Online learning has the opportunity to leap forward and fill the gaps. Leveraging digital platforms, popular teachers from the other side of the world may emerge as viable replacements for those down the street. If Peter Tabichi, the world’s best teacher, offered daily science classes, would you pay $10/month for your child to attend?
No platform has been built for this use-case, a school as an approximation of the “Dream Team,” the USA Olympic basketball squad that boasted Jordan, Bird, Ewing, Barkley, and Magic Johnson, among others. What would this look like for primary and secondary school teaching? Masterclass explores this premise but confuses status for pedagogical skill and production value for substance. (It also positions itself towards adults.)
More radical models are easy to envision.
A full-stack solution could work with sufficient talent. At scale, this would create an axially different model, akin to the Professor-TA dynamic on steroids. A handful of elite teachers would serve as instructors, broadcasting lessons, while an army of TAs would serve as customer support, answering questions, and providing guidance. That alone would necessitate different systems: secure chat features, contingent teaching workforces, peer-to-peer collaboration systems, and partially automated grading.
In time, this could account for the importance of in-person lessons, integrating with micro-schools like Wonderschool and Prenda, or rolling out a lightweight franchise model itself.
The pandemic has laid bare the broad-based inadequacies of our current education model — from childhood education to the university system to professional development to self-improvement. Consumers are more than ready to adopt digital learning and are becoming more pragmatic about their approach to education. This creates an exciting gap for emerging companies (or institutions more generally) to fill with solutions that align incentives, meet the learner where they are, and deliver demonstrable ROI.
3. Software development is larger than software developers
Despite the massive amount of attention paid to no-code products over the last year, the market is not new — Excel has been around for three decades. And over the years, there have been no shortage of products built with an eye towards bringing more people — internal team members and external collaborators — into the software development process. Jira and Github are good examples.
But for companies outside the technology industry, software development remains limited in its influence on overall strategy. Leadership lacks visibility into how projects are progressing while team members across the organization lack the access and skills required to collaborate.
In most traditional industries, these barriers have kept software development partitioned off in innovation groups, R&D labs, and digital teams instead of being incorporated into the core strategic workflows of the organization.
Stripe’s John Collison provided very insightful commentary on the opportunity to lower the barriers to software collaboration on Invest Like the Best:
I don’t think no-code will obviate the need for software programmers, I would hope that it can make many more people able to participate in software creation and kind of smooth the on ramp — which is a really sharp, vertical one right now.
By developing solutions that serve software development and not just software developers, companies can break down functional silos, elevate the role of technology within organizations, and capture a share of this trillion dollar market opportunity.
The arc of progress is shaped by society’s ability to lower barriers to participation in valuable activities. We move forward when we ramp up accessibility. This is true across the spectrum — from sports and content creation to education and work.
Many of the world’s most important companies are built on empowerment loops and many of the biggest steps forward we take as a society in the coming decades will be as well.
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