Many of the great companies and organizations of our era rely on network effects to grow and become successful. Facebook, LinkedIn, Didi/Uber, and many other ‘household names’ all rely massively on network effects. In short, network effects exist when connections between people create more value as more users join/use the service/product. With Facebook, the experience becomes more valuable the more of your friends are on it. You see more of their updates and stories and photos and gain more value in that manner. With LinkedIn, the same is true with professional connections. You are able to connect to more job opportunities and thus you gain value. With Didi/Uber, the more users are on it, the more drivers want to be on the platform. Thus, more users find it convenient to use, more drivers join the platform, and on goes the cycle.
In the words of D’Arcy Coolican at Andreessen Horowitz, network effects typically reduce customer acquisition costs, increase liquidity, or improve retention on the platform. For marketplaces, payment networks, and social platforms, this is especially true, he continues.
At LearningLeaders, we do, in fact, experience network effects. The more families who choose to work with us, the more families they tell in turn. From my latest count, we’ve seen an increase in placement tests and inbound inquiries every single semester. Since we don’t spend much time or capital in advertising, this likely, though not definitively, proves that we are experiencing network effects.
We also see families run into their friends (or enemies, who knows!) in the LearningCenter all the time, looking shocked to realize that their family friends also attend LL courses. I know there is still much work do be done to optimize this positive cycle. I have the utmost faith in the Brand Team, Community Team, and Learning Optimization Unit to think even more carefully about how this network of relationships can be maximized in the future.
What I want to focus on today is another area of our work that benefits from network effects, but will take a much longer time to see the benefit of our efforts: our aLLumni Network.
Let’s begin with the end in mind: What does a highly-functioning alumni network do for a school or a company? In short, increase brand equity and provide ongoing access to capital. Strong alumni networks increase brand equity because the alumni networks perform two major actions. First, the alumni network demonstrates clearly what a ’success case’ looks like. These 'success cases' demonstrate the benefits of attending an institution or working at a particular firm. This brings more top-of-the-funnel interest to attending or joining such a program. Second, the network continually discusses and reifies the brand of the institution itself, holding reunions, activities, and other rendezvous where alumni can speak about and share their experiences. This makes the abstract idea of an alumni network real. Therein, the brand or idea of the institution creates demonstrable value.
When you know that a founder of a successful company or the president of a nation attended Stanford, or graduated from the Indian Institute of Technology, for example, that increases the value of that brand. This narrative implies, “If you attend this institution, you might have a chance to become president too! Or at least your chances are better than if you join an institution where no president has ever attended...” Secondly, when the Stanford reunion happens every spring, all the alums get together and reminisce about ’the good old days’ when they were students, bringing the bonds of the alumni network closer and making the Stanford experience more valuable in the eyes of the alumni themselves. They then are in turn happy to share more about their experiences with ‘outsiders’ who in turn spread the gospel further and thus the brand equity continues to increase. Whether or not these connections are self-congratulatory or not is actually besides the point. The name ’Stanford,’ or ‘IIT’ is still on the tips of people’s tongues, name-dropped in casual conversations and resumes, and emblazoned on t-shirts of two-year-olds. The brand equity is increased.
But what about providing access to capital? In the case of educational institutions, this means donations or legacy admits (I’m sure we can have a debate about whether schools’ non-profit status, donation solicitation practices, and preference for legacies are good/bad things separately. For now, let’s merely recognize this is indeed the norm). When alumni officers reach out to an alum to ask for donations, they are striving to increase the university’s ability to access capital. While the majority of endowment funding comes from outsized long-tail donations, it’s critical for the university to maintain a connection with alumni in their early professional career so that they: a) don’t lose touch, and b) get the alum into the habit of donating. Alumni sending their children to the same university is one of the best ways that a school can possibly secure these outsized donations: when someone’s child is about to attend a university, a parent is likely at or near the peak of their professional earning potential and has an ever-deeper connection with their institution. Cue the Scrooge McDuck theme music.
In the case of companies, alumni networks provide access to capital in two major ways. First in terms of increasing revenue through increased sales (liquid capital). Second, reducing recruiting costs (human capital). McKinsey is famous for having a tight-knit alumni network. Why? Because they know that as soon as an Associate leaves McKinsey, goes to business school, then rises up the ranks at Proctor & Gamble or Ford or Starbucks or Disney, in 10-15 years that person is likely to be in a position of decision-making authority at their new company. Once in that position, they get to propose which consulting firm the F500 company calls up. And guess what? It’s McKinsey (The same story can be told of many firms, including Goldman Sachs, Bain, many law firms, etc. for their respective service offerings).
Additionally, when the firm is recruiting for a certain position, they nearly always advertise in their alumni networks first. This is a group of trusted people who may or may not be looking to return to a company they’ve previously worked with as a boomerang hire. It lowers recruitment costs in terms of the top-of-funnel and also in terms of speed/friction. Because the person has already worked at the firm, they also know what to expect, can onboard more quickly, and generally are pose reduced risk of not meshing with the culture the firm maintains.
So, why does LL need to build our aLLumni Network? And where do network effects come in to play? Much for the same reasons as written above, but there are additional benefits to our students that are less prevalent in other networks. This is by virtue of the special time in someone’s life it is to move abroad and to be a student.
At LL, our alumni network can benefit alums tremendously in the short/medium-term. For students traveling away from home to go to school abroad, adjusting to their new lifestyle can be a big challenge. For anyone who has ever moved to a new country or city, you probably have experienced some of those challenges as well. I’d argue that even at a marginal level, having a group of people who you know you can reach out to and speak with about the challenges you’re facing adjusting to school life or personal life is a net benefit. Even if you don’t pick up the phone, knowing that someone ‘has your back,’ that you’re supported, and that someone is cheering for you can be hugely positive. More specifically, in terms of the debate and public speaking community, we can also give our alums a leg up once they arrive at their new home: if there are already LL alums on the debate team or involved with on-campus activities, there is an immediate bond that can be even closer than simply another student from Shanghai or even from the same school. The smaller the alumni network is, usually the tighter it acts and people are more willing to help each other.
In the long run, there are massive benefits to both LL and the students working together: We can recruit directly at the schools where our alums are studying for Summer Fellows and full-time candidates. Additionally, our alums are able to refer their friends and colleagues to LL if they share similar interests of education, learning, and communication skills. In the future, when the LL VR program is up and running smoothly, we can first offer opportunities to be LL-certified virtual coaches to our alumni, who we know will provide a certain degree of quality, rather than opening up to the general public first.
Looking further down the road, it’s not a stretch to imagine alumni becoming clients of LearningLeaders VR or Executive Excellence programs. We’ll have to be patient, but the opportunity is clear: a student heading off to college in 2020 could easily recommend LL as a vendor or training service provider to their new company by 2025 - 2030. It seems like a long way away, but in the grand scheme of things, it’s actually right around the corner! By the time that our other businesses (aside from LL Academy) are spinning up and looking for additional clients, our own alumni will be the perfect channels to help us develop our business. This is, of course, provided that we don’t lose touch with them. And if not them directly, perhaps their parents’ companies would be interested in working with us. That’s a value of the LearningLeaders alumni network that we must also tap into.
These opportunities are less likely to be available to us in 5-10 years unless we begin actively preparing now. The investment is not large, mind you, but the opportunity cost of not investing in it could be huge. In addition to the direct benefits to our alumni, this is the business case for us launching the LL aLLumni Network over two years ago with our first Step Up Ceremony back in 2017.
An alumni network for our own Partners certainly needs to accompany this, though it will take a good deal longer to generate and foster. The sheer denominator of Partners leaving LL each year I hope will never match the number of students graduating each year, but once the LL alumni network reaches the size of a few dozen (I think we’re at about half a dozen now), then it’s worth putting time and effort into fostering those relationships as well. I know that we’ll have some LL Partners go on to accomplish absolutely incredible work and contribute massively in other fields.
There is no reason that LL cannot support them in their journeys even once they’re no longer a full-time Partner here in Shanghai. It’s a simple win-win. The successes of our students and Partners in 2025, 2030, and beyond is a testament to the work that we are doing today. It may be tough to see right now, but the value of keeping ties strong and building our alumni network will become massive. They will also become a competitive advantage if we leverage them properly. If our competitors are not fostering such a community now, when they wake up in 10-15 years and start to realize its importance, it will be too late.
The network effects that exist in our business today provide an underlying value that will become more and more difficult to capture if we are not conscious of it today. LearningLeaders will be not only the market leader in terms of experiences, people, products, processes, and profits, but also in terms of our alumni network, which will strengthen our brand year by year.
I’m so excited to continue to build our aLLumni Network, slowly but surely, over the coming decades. It may not immediately rise to the level of a Partnership Quarterly Priority in the near-term. But watch this space and see what a difference it will make in our business years from now.
A seed has just been planted two years ago. In the future, we’ll be standing in the shade of a mighty oak.