Product Ecosystems and How Startups can Capitalize on Them

Product Ecosystems

A strong product ecosystem can take your startup to the next level of business.

Product ecosystems are suites of interconnected, complementary solutions that businesses offer their consumers. The point is to offer a range of products that can address various consumer needs in connection with the main business of the company.

From Google and Facebook, to Apple and Amazon, the world’s most popular tech companies have capitalized the value of building product ecosystems. And as a startup, planning this kind of integration can help create a meaningful difference in the long run of your business.

How product ecosystems function

A product ecosystem is aimed at increasing the value of your core products, by providing additional value around it through different, related products. If your services centre around online shopping and ecommerce, for example, investing in an integrated delivery system, or a payment process, would make for a convenient experience for your consumer.

Especially for a startup looking to expand, having a strong product ecosystem leads to a number of benefits for your business, no matter your current scale. First and foremost, it creates a convenient experience for users. If customers are comfortable with the experience and find value in your flagship product, it is useful to have related products within your product ecosystem to gain additional value from users. Conversely, users stepping away from your product ecosystem and reaching for other brands is value lost.

On a similar note, having a strong product ecosystem is paramount when retaining customer loyalty. Ensuring that loyalty stays with you and your services is another key advantage to a robust product ecosystem. At the same time, as other entrepreneurs have pointed out, it is all around smarter to solidify a core product, before you explore diversification.

For startups looking to scale, investors and accelerator programs are also eager to see that you are prepared to expand. Apart from the business incentives of having a product ecosystem in this respect, it also proves your desire to grow.

Product ecosystems in practice

The iPhone is a good example of what a fully realized tech-centered product ecosystem can looks like. Having the flexibility of the iPhone means Apple can branch out into many different sectors off the back of their smartphone. Music programs, insurance policies, television services, and more have been built off of the iPhone ecosystem. More recently, Apple’s Air Tags, devices to keep track of items, is built on top of Apple’s ‘Find My network’. Apple was also early to establish seamless interconnectivity between iPhones and their Mac range.

The ‘Find My Networks’ existing user base is so large that stepping into this industry has immediately made Apple the first option for existing iPhone users, and simultaneously pushed out third-party competition. For example, it wasn’t until too long ago that you could FaceTime more than one person at once on an Apple product. Apps such as Houseparty allowed that kind of function before then, but Apple has since made updates allowing up to 32 people to FaceTime at once, effectively making the market for a third-party video calling apps more competitive for the iPhone.

Another perfect example of a business capitalizing on product ecosystems is WeChat, a Tencent subsidiary. The company, which initially began as a simple messaging service, has since branched out into social networking, gaming, payment transactions, ecommerce, third-party and government services, as well as smart home connectivity.

In this proprietary ecosystem anyone can join the platform for free, while businesses pay fees depending on the services they use. This way WeChat can continuously grow its user base with their free service, and incentivize businesses to join their ecosystem to have access to over one billion users.

Product Ecosystems by and for startups

This report outlines how product ecosystem have created a circular investment cycle. For instance, what might start as a simple online ecommerce storefront, can move to a subscription program, scale, create competitive advantages, reach new profit pools, and reinvest. The incentives lie in the long-term goals.

Of course, product ecosystems come in all shapes and sizes. Not all of them might work as well. However, the idea of a seamless, interconnected experience is a key addition worth considering. In the world economy at large, a shift towards online business in general highlights the importance of a well-oiled machine.

Header image by Julian O’hayon on Unsplash

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