Ecosystems, how to play for small players

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Lately, we have talked a lot about ecosystems, in particular business ecosystems. Normally, business ecosystems follow a hub and spoke model rather than a network approach; one major player sets it up, and then adds customers and partners like independent software vendors, systems integrators, analysts, consultants, suppliers, or other similar entities. Good examples of successful ecosystems are the ones around the big four enterprise software vendors: Microsoft, Oracle, Salesforce and SAP. Sure, there are other ones, but these are easy reference examples.

In theory, ecosystems shall provide more value to customers, better serving their needs by making it easier for them to get access to information, knowledge, skills and productized enhancements to the core solution that they chose to implement. They also get a broader choice of possible enhancements, provided by different vendors in the ecosystem. Of course, this also benefits the other participating stakeholders.

Customers are, of course, an important group of every ecosystem. Treating them as partners helps the platform company to create a transparent prioritization process for delivering requested new functionalities that extend the own solution in an optimal way. Not all customers provide the necessary input, though.

For the platform provider, the ecosystem creates stickiness. Still, this company cannot develop and provide all the functionality that is ever needed by its customers. Nor can it provide sufficient implementation services.

And it does not want to, either.

So, it needs ISVs and SIs as members of its ecosystem to provide this functionality, either as products, or as consulting solutions. What these companies deliver on top of the core solution also increases the attractiveness of the ecosystem. 

ISVs and SIs are often smaller ecosystem participants. They get access to customers and other participants of the ecosystem that complement their expertise. They might also see themselves merge with the platform provider. Worst case, the platform provider sees an opportunity and provides functionality that is similar to the one provided by one or more smaller partners. In this case, the platform provider becomes a competitor. We all have seen this.

Of course, there are also situations where partners compete with each other. The ecosystem is a place where coopetition happens, which is something that is mostly healthy.

The question that arises is how can small companies, especially ISVs, thrive and grow as part of an ecosystem. After all, it is the platform company that makes the rules and that has all the data while the other ecosystem players only have a partial view on it. For these smaller ISVs, this inherently bears the risk of becoming a commodity, which is not a desirable  position to be in, as commodity providers can be exchanged for each other.

This means that the  providers in an ecosystem need to be distinguishable from their  competition. In addition to the diminishing importance of product, price and promotion, another key factor is the experience that the company does provide, how hard (or rather easy) it is to work with the company, how easy its solution is to implement, and how well it fits into the core software that is provided by the controlling company, to name a few relevant points.

This ties back to the pyramid of customer expectations.

On an individual level

  • Information about the solution must be readily and easily available, accurate, and the solution itself must work as advertised, i.e. solve the customers’ problem
  • The solution must be easy to implement and efficient to use, which works best, if it is fully developed in the platform’s software stack, because that way the installation will be  smooth and users do see a user interface that they are used to
  • And it needs to be fun to use, which is a bit harder but goes in line with making life for the user easy by working like the users and not as if designed by someone who never did the job it shall help the user perform. Ideally, it is possible to work with the company to implement missing or additional functionality fast

And then, there is an additional stage that successful small ecosystem players master: They are capable of building temporary ecosystems, temporary partnerships with other ecosystem members to provide more value to customers. These partnerships may be limited to a single project but also involve joint product development and go-to-market. The important aspect is that these temporary ecosystems can generate further synergies

To give a concrete example, this is exactly what an ISV like Fastcall successfully does. Fastcall is a part of the Salesforce ecosystem. The company provides efficient CTI solutions that extend the Salesforce solution. The software seamlessly extends the Salesforce stack as it is a native app, which also makes it easy to install. Because of being a native app, it also seamlessly integrates into the Salesforce UI. The company uses the AppExchange, which makes it easy to find. The company is also very customer driven. This is shown, e.g. when it comes to implementing new requirements in a swift way, as Marshall Lager has recently described in his article Rising to Swift Challenges in App Development.

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