The ultimate product strategy where you can lock in your customers is to create a complete ecosystem for your products.
Too many people think of only making beautiful products with proprietary software platforms, accessories and peripherals. They believe that this allows them to “own” the customer. Their belief is that everything made or sold is in direct competition to them.
On the contrary, winning companies think of opening up their products to allow users and third parties to further innovate, complement, and enhance what they offer. This expands the features and functionality of their product and, ultimately, their customer base. These people recognize that others can complement their products and enhance their customer value proposition. The third parties are not seen as competitors but rather “complementors”.
“Complementors” are so important that they are defined the sixth force in Michael Porters’ Force Forces of Competition framework. A commercial symbiotic relationship develops when a product or service complements another. The sum becomes greater than the individual offerings in the eyes of the buyer.
Apple took the first route with their original computers. While they were technically superior to the competition, its hardware and software were proprietary. They used unique cables, disk drives, and power cords. You had to have an Apple computer to run Apple software. Apple did not build up enough partners to support their products. This made Apple PCs more expensive and severely limited their initial customer base.
Bill Gates, at the same time, developed the Windows operating system which was open to third-party developers. Andy Grove at Intel also understood the concept and built microprocessors that were used across multiple industries. The combined “Wintel”, personal computers with Intel processors and Microsoft Windows allowed others to help create software applications and hardware around them, building a huge software and hardware ecosystem to dominate the PC market.
Another lesson on ecosystems is from the mobile phone industry. Blackberry was dominant but also very proprietary - its OS ran only on Blackberry devices. Google’s Android OS was open source and eventually a whole ecosystem of hardware devices and applications was built around it. Samsung, LG, HTC, Motorola, Sony, etc. all make Android phones. Over one million applications exist for Android today. The iPhone operating system was eventually opened up to allow third-party developers to build applications. Microsoft’s Windows phones are still fighting an uphill battle because of their small ecosystem – it’s applications library is limited compared to Android and Apple’s. According to research firm IDC, Android owned 80% of the global market and Blackberry fell to less than 1% in 2014.
So always think of the product ecosystem. Apple eventually grasped the importance of platform and ecosystems when Apple created the iPod. Steve Jobs persuaded the big music companies to join the iTunes Music Store. They released “iTunes for Windows” to allow PC users to use Apple's iPod on their Windows computers.
Think of competitive strategy in terms of having a pie. Those who want closed, proprietary products believe that their pie is finite - in danger of being divided and taken by others. Those embracing open systems and enabling third parties and partners will have their pie get bigger with more than enough to share. Consider how Amazon.com opened up their website to third party sellers - a "win-win".
Think Platform. Look for and encourage Complementors.
Frank Lio is a Product Manager, Strategist, and Change Agent in the Hi-Tech industry. His growing track record of successes include creating 3 winning software products, leading nationwide seminars, and turning around a failing business unit. He is currently serving a dual role as Product Manager and Business Team Support Manager at Instron ITW.
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