July 12, 2021 | By Jennifer Vancini.
As a former strategic business development executive, I’ve structured almost every type of partnership imaginable to build significant value for my organizations, with entities such as the US Treasury, MasterCard, Cisco, AT&T, Mozilla, eBay, FireEye, Salesforce, and Microsoft. By partnering with leading security, device and networking technology companies to launch the first mobile VPN client, >$100M was added to Certicom’s valuation. The co-marketing and distribution deals I managed for Telefonica opened up millions of customer acquisition opportunities and revenue lift, which is challenging for a telco, in Europe and Latin America. I’ve leveraged such experiences to closely look at the ecosystem strategy of a potential portfolio company as a clue to its outcome potential.
As a case in point, almost no other industry has experienced the intensity of disruption, and financial opportunity, due to ecosystem development than the mobile industry.
In early 2011, a leaked memo surfaced written by the new CEO of Nokia, Stephen Elop. At that point, the once mighty Finnish cellphone brand was getting hammered by Apple and Android. The memo said:
“I have learned that we are standing on a burning platform…. The battle of devices has now become a war of ecosystems... Our competitors aren't taking our market share with devices; they are taking our market share with an entire ecosystem. This means we're going to have to decide how we either build, catalyse or join an ecosystem.”
I often say it’s not the best technology that wins, but rather the best product. Maybe I need to tweak that to say the best product + ecosystem wins.
Apple’s success hinged on much more than ingenious branding and iterating on the iPod. They captured the high end mobile market with a rich ecosystem of value add applications (App Store, Apple Music). Android and Google Play quickly followed suit.
In a similar vein, CanelaMedia, a Mighty Capital portfolio company, produces a streaming content service for the Hispanic market. Canela locked up some of the best content from around the world to fit their market niche with access to all the major distribution platforms. This follows a Netflix-type content ecosystem strategy with an additional ad-supported business model.
So what exactly makes up a company’s ecosystem? What are the components? How can startup founders and CEOs develop an ecosystem that serves core business goals? Let’s find out.
Take a look at your ecosystem now.
Ecosystem development consists of strategic and organic activities that define where a company exists. While it’s never a 100% planned orchestration, there are ways to guide ecosystem development. The first step is to define and understand your current environment.
I like to think in terms of ecosystem spheres which are interconnected systems or networks where value is exchanged. The following diagram illustrates this concept.
CORE Ecosystem Components
Your core ecosystem is essentially your company. Still, it extends beyond employees and consultants who fill day-to-day organizational roles. All the following groups are part of your core ecosystem due to their commitment to and association with the company. Their impact depends largely on how well you leverage their ability to contribute to company goals.
EXTENDED Ecosystem Components
- Value chain players - Logistics, operations, marketing, sales
- Service providers - Accountants, lawyers, and affiliates
- Vendors, Suppliers, Partners - Are you partners with AWS, Azure, or Digital Ocean? Who else?
- Government Standards & Associations - What regulation influences you? What groups do you belong to?
- Academia & Accelerators - These each have their own networks to tap into as well.
- Competitors - What moves are they making product, communications, and expansion-wise?
- Market Makers & Large Companies - What are the big fish doing that may impact your company and change the playing field?
Apple has done an exceptional job building out its extended ecosystem to the point where they disrupted major players and markets, while keeping the value-add they built under the Apple brand. Beyond selling products and services, they focused on controlling all the hardware, software, and services (technically and contractually) to create a cohesive experience. Most companies aren’t big enough to command so much of the value chain, but the total experience delivered to customers was a huge success factor.
Leverage your location. Define your culture.
Location still counts
Despite the rapid expansion in distributed teams, physical location still matters. Valuable resources, accelerators, VCs, and talent are often found in your neighborhood. Location enables you to meet directly with strategic partners, funders, or acquirers.
There’s a reason places like Silicon Valley, Boston, and Seattle are home to so many great startups. Now we're seeing Atlanta, Miami, Austin, Toronto and Denver coming up the ranks. Hard to find resources are frequently found in communities. We call them hubs since they already have built-in ecosystems.
If you’re not in a major hub, one way to leverage location is to tap into a rich ecosystem through your contacts, such as hub-based investors. This can also lead to interesting cross-pollination activity between cities.
At one of our annual offsites we had a team breakout session to talk about our own ecosystem culture. We asked ourselves: what kind of culture, values, and attributes do we want? The people and institutions in our ecosystem contribute to brand and culture so we want to be intentional about it. A key part of our culture is the belief in product-led growth and excellence, as evidenced by our alliance with Products that Count (300k+ product manager community).
I think AirBnB (a Mighty Capital portfolio company) has done an amazing job at instilling a distinct culture in its ecosystem which consists of nearly 3 million hosts whom they’ve never met personally. Over the years, they maintained low barriers to entry (even without an open API) for guests, hosts, experience providers (there’s that focus on “experience” again), and service providers such as cleaners. In line with their brand culture, they’ve even worked with NGOs to help resettle refugees.
The culture Airbnb created is underpinned by not only its commitment to its mission and values but also to its unrelenting belief in honest, two-way communication, according to Airbnb’s Global Head of Employee Experience, Mark Levy.
Mighty Capital Value Add
CanelaMedia was quick to leverage Mighty Capital’s exclusive access to our sister company Products That Count, and they worked with us to publish a podcast on how to scale a product globally. Canela’s CEO also attended our invite-only Product Salons, and she made connections there with product executives that are potential distribution partners.
For our portfolio companies, these kinds of opportunities, along with our partners, LPs, and GPs, can fastrack access to additional investment partners and other key resources such as legal counsel and governance advice.
Explore your current ecosystem
It’s a good idea to actually sit down with key team members and describe your current ecosystem. Have fun with it. I recommend writing down names to get the overall picture. Invite others to participate in the process and look for synergies.
After you’ve created an awareness of your status quo, think creatively about what resources may be there now to get intros to target customers, strategic go-to-market partners, and other key connections. Start to envision what your ecosystem could look like in 6 months, 12 months, 2 years.
In my next post, I’ll dive deeper into the specific purposes and goals of ecosystem development and how to map connections to key business objectives to make the vision a reality.
Upcoming Blog Post: Ecosystem Development is Critical. Learn how to build yours.
Jennifer Vancini is a General Partner of Mighty Capital. She's been investing for 10 years, and prior to Mighty Capital built Pointgrey Partners, a family investment office where she achieved a 15x cash-on-cash return. Before becoming a full-time investor, she held executive roles in corporate and strategic business development, especially in the high-growth security and mobile sectors with companies such as Telefonica, Symbian/Nokia, and Certicom, which she helped take public in Canada. Jennifer serves on private and non-profit boards and is currently the Vice-Chair of a Dean’s Advisory Council at the University of British Columbia in Vancouver, where she completed her MBA.
Jennifer has drafted, negotiated and executed 100+ deals spanning the spectrum from partner programs, to distribution, to M&A, and joint development. Such experiences have been invaluable to her as an investor and supporter of entrepreneurs.