Over the last decade, many traditionally product-based companies have been shifting their business models. Instead of simply providing their customers with individual products, they’re now focused on designing whole product ecosystems. A product ecosystem is an interconnected web of products that work in tandem to provide for all of a customers’ needs in a particular area.
The technology space in particular is full of them. Companies like Apple and Adobe have been able to consistently beat out their competitors and remain at the top of their market segments by providing customers with suites of products that all sync together, making customers want to stick with them for years and years. Based on these success stories, many companies are now looking to create their own product ecosystems.
But there’s danger in launching a product ecosystem without fully knowing what you’re doing. Over our last 40+ years in business, we’ve seen many organizations lean on old product development strategies to try and develop their new ecosystem—only to underperform on their financial targets, alienate their customers with unfulfilled promises, and send their sales team into a tailspin.
Depending on your unique situation, launching a new product ecosystem may not be for you. But how do you know? And how can you develop an ecosystem that will provide for your customers and ensure repeat business for years to come?
Product-based vs ecosystem-based
You’re likely familiar with the product-based approach to doing business. A company develops a product and then sets about trying to sell it to as many people as possible. They spend a lot of time and money developing these products—as well as their marketing and sales materials—to acquire the necessary customers and make as much money as they can. Then they come up with another product and do it all over again.
An ecosystem approach reimagines your products as a series of interconnected offerings that work together to provide end-to-end solutions. From customer management to inventory to equipment and everything in between, your customers need help managing all the moving parts of their operation. Instead of leaving it up to them to cobble together their own series of solutions, an ecosystem allows you to provide them with a full suite of solutions that meets all their needs.
Benefits of a product ecosystem
Making any major operating transformation worthwhile requires that it benefit both the customer and the business as a whole. Shifting from a product approach to an ecosystem approach is a huge undertaking. But it has countless benefits to both the customer and the company’s revenue.
Benefits to your customer:
- Solutions that work together: When all your solutions integrate and share data with one another, your customer is free to get back to doing their actual job, rather than wrestling disparate databases and uncooperative systems.
- Cost-per-solution savings: Bundling your products together into an ecosystem that the customer buys into typically ends up saving your organization money. This allows you to offer discounts to customers who opt-in to the full product suite.
- Less time wasted: Your customers’ business operations have many moving parts. Giving them a product ecosystem to address all their operational needs saves valuable time that would normally be spent syncing operations, vetting and purchasing new systems, and training employees.
Benefits to your company:
- Lower customer acquisition cost: Once you’ve invested in acquiring a new customer, selling them just one product is leaving money on the table. Selling a new customer into a full ecosystem of solutions allows you to increase your profit-per-customer. This lowers the number of new customers you need to acquire to meet your goals.
- Speed up product development cycle: When you’re focused on developing a product ecosystem, it forces your teams to become experts in a niche area. This focus guides your product development, allowing you to move faster and with precision.
- Build company reputation: The focus required to develop a product ecosystem forces you to deep dive in a specific industry and customer segment. By staking your claim in a niche area, you can more easily gain reputation as a thought-leader.
How can you make the shift?
Developing your own product ecosystem isn’t just a matter of rewriting your product catalogue or moving web pages around. It’s a major cultural shift that requires your whole organization to be on board and working in lock step together.
Listen to your customers.
In the past, your product development has likely involved some level of customer research. But product ecosystems are a much more customer-focused model. Not only do your individual products have to meet your customers’ needs, they must also work together intuitively. As such, they have to begin with a deep understanding of customer needs and preferences.
Just because you think your products should fit together a certain way doesn’t mean that’s how your ecosystem should work. The products in your ecosystem have to work together in the way your customers want their ecosystem to work. Without an understanding of what they want, you’ll end up developing an ecosystem your customers don’t treat like an ecosystem. In other words, they’ll buy one product because it’s the one they need, but because it doesn’t work together with your other products in exactly the way they want it to, they’ll go off and purchase the rest of their product suite from someone else.
One of the most effective ways to include your customers’ voice in your ecosystem development is to involve them directly. Using a co-design process, you can bring your customers into the development process. Present them with your first-draft and enlist their help in iterating until together you come to a product ecosystem that meets everyone’s needs. While many organizations aren’t willing to unveil what they’re working on until it’s “perfect,” inviting your customers into the process while it’s still in development can help you avoid major pitfalls in the long run, saving you development time and money.
Break down your silos.
The traditional product-based model of development has siloed product teams working separately on their own individual projects. But an ecosystem requires all your teams to work in tandem to create products that integrate with one another. This includes all your existing teams, but may require the creation of new ones as well. Teams responsible for analyzing data to improve your offerings, teams governing the subscription or service that organizes your ecosystem, etc.
When your organization is used to working in this divided way, it can be very difficult to change. Many organizations accidentally foster a culture of scarcity, leading individual teams to become territorial over their particular product. To ask them to suddenly work together and share with other teams can lead to resentment and distrust, and ultimately a failure of your ecosystem development.
Breaking down silos requires intentional coordination. Bring together all of your teams to get clear about the new model of governance for your ecosystem, and ensure everyone is clear on their role and how success is being measured. More than that, you have to build a culture of collaboration between these teams. Create incentives that reward cross-functional collaboration. Highlight how this new way of working will make your teams’ jobs easier, not harder. For your ecosystem to work seamlessly for your customers, it has to work seamlessly for your internal teams as well.
Learn real communication.
Once you have your ecosystem developed, the key to ensuring its success both internally and externally is communication. You need to be clear about the benefits of your new ecosystem and how everything works together. But real communication is more than just a matter of developing your messaging and disseminating it to your audience. Just like your product ecosystem, effectively communicating a major organizational change like this requires developing a communications plan that meets people where they are and delivers the information in the way that makes the most sense to them.
In our decades of experience, we’ve found that there are three keys to driving successful communication for change.
- Visualization: The human brain reacts differently to pictures than words. We process images faster and stay engaged longer. When we see a visual representation of an idea, we are immediately more engaged because it’s tangible and requires less work for us to digest.
- Storytelling: Storytelling has been a key part of human communication for millennia. We all love a good story, especially one with a surprise or twist. We also love a story that is simple and direct enough for us to re-tell. Create a compelling story around the change and let each of your teams know what role they play.
- Repetition: To make sure the story of your change sticks in people’s minds, you have to be a broken record. Be repetitive, but keep it fresh with new perspectives and insights that draw your audience in.
How can we help?
Over the last 40+ years, we’ve helped many Fortune 500 companies shift from a product-focused to ecosystem-focused approach. We’ve found that this shift becomes much easier when you have an experienced partner to plot a roadmap for the shift, and help you manage the change by getting all your teams on board and excited to push it forward.
If you’re ready to make the leap, or just want to learn more and explore the possibilities, we’d be happy to chat. Just shoot an email to our Principal Steve Frank at [email protected] and we’ll get back to you ASAP.