What are "network effects" and why are they important for these stocks?

Network effects occur when a product or service becomes more valuable as more people use it. For the companies in this collection, each new partner or customer that joins their ecosystem makes the entire platform more valuable for everyone. Think of social networks that become more useful as your friends join, or payment networks that become more convenient as more merchants accept them. Companies with strong network effects often enjoy sustainable competitive advantages and can be harder for competitors to displace.

What makes collaborative business models different from traditional competition?

Traditional competition follows a "win-lose" approach where companies directly fight for market share, often leading to price wars and shrinking profit margins. Collaborative business models create "win-win" situations where companies build platforms that enable other businesses to succeed. Rather than capturing all value themselves, they create ecosystems where partners can thrive, expanding the total market size. This approach often leads to more sustainable growth, higher customer loyalty, and stronger competitive moats through partner lock-in and network effects.

How do these companies make money if they're focused on helping their partners succeed?

These companies generate revenue through various models while supporting partner success. Many charge platform fees, subscription costs, or take a percentage of transactions that flow through their ecosystem. Some provide core services for free while charging for premium features, or they monetize through revenue-sharing arrangements with partners. The key insight is that by helping partners and other businesses succeed, they create a much larger economic pie from which they can capture value, rather than fighting for a larger slice of a smaller pie.

What does "high switching costs" mean for investors?

High switching costs refer to the difficulty and expense customers face when changing from one product or service to another. For investors, companies with high switching costs often enjoy more stable revenue streams and customer relationships. The collaborative companies in this collection create powerful switching costs when businesses deeply integrate with their platforms or when large partner ecosystems form around them. For example, a company using Microsoft's cloud services with custom applications built on that platform would face significant time, money, and operational disruption to move to a different provider.

Why is AI increasing the importance of partnerships and collaborative ecosystems?

AI systems are incredibly complex, requiring specialized expertise in hardware, data management, model development, and industry-specific applications. Few companies can excel across this entire spectrum. The most successful AI implementations involve partnerships where companies contribute their specialized strengths: some provide the computing infrastructure, others supply the data or algorithms, while others focus on industry-specific applications. Companies that can create and nurture these collaborative AI ecosystems often capture significant value as the technology advances and becomes more widely adopted across industries.

16 handpicked stocks

Win-Win Partners

Looking beyond competition to collaboration, these carefully selected stocks are building the future through powerful partnerships. Our professional analysts have identified companies creating shared value and ecosystem-driven growth that's more resilient than traditional business models.

Han Tan | Market Analyst

Updated 2 days ago | Published at juin 17