The theory goes you identify an Ecosystem of like-minded businesses that share a common need to solve a vexing problem, challenge or concept. Then, one party sets up a platform or gains the agreement of one already available, a neutral platform, to use it. Hence, it has all the technology, governance and structure to enable the group to communicate, exchange and build the (emerging) solution to work and then have the structure for it to (rapidly) scale.
The marketplace, the third part, often gets left to last when those achieving this new solution realize it needs a place for actual exchange, a thriving buyer/seller market.
Today, we have witnessed a rapid expansion of the Marketplace on offer. Marketplaces are increasingly being stretched, and the boundaries of their understanding keep extending. We have moved from simply listing, though, to transactional marketplaces ( travel, delivery), full-stack marketplaces (on-demand services- Uber), Market Maker (for homes, cars, jobs) into eCommerce(fashion, groceries) and Direct-to-Consumer( food, banking, wellness, lifestyle and eyewear)
By participating at an Ecosystem level, you are putting clear skin in the game; the platform provider tends to drive the roadmap, provide the governance and often play the lead role. There are so many “neutral” platform providers that much of the technology and engineering solutions can be resolved by using established platforms that many of the tensions, when ecosystems are formed, can fall away, allowing those working on a challenge to focus specifically on that and spend their time breaking down the IP and the returns, building the new solution.
Yet it is the role of the Marketplace that determines increasingly the success. Just reflect on some of the most prominent marketplaces. You have Amazon, Alibaba, Airbnb, Salesforce, Booking, eBay, LinkedIn, etc.
The whole APPMarket has been exploding to get established on these marketplaces. They are fundamentally changing the way organizations are undertaking their businesses.
The marketplace actually becomes the most valuable part of any newly designed value proposition.
Imagine a real market where you shop. A good platform has a discovery side, a marketplace stack full of goodies, a range of products and services ready and available to sell, has the logistics sorted and enables you to have a (user/ buyer) journey in experience to completion. Add in software to direct and help facilitate discovering, buying and selling, payments, service fulliment and final delivery.
The question you might ask: Is the Marketplace the bottom-up adoption strategy or does the ecosystem and platform drive down to provide the “best” environment for a thriving marketplace?
So do Marketplace designs drive the adoption of platforms and ecosystems? Does this more “bottom-up” approach make sense, and is the better way to achieve earlier productive gains and commercial success than seeking specifically an Ecosystem adoption?
Building new ecosystems can be a risky business that so often needs to have the hard building block work in thinking and designing that eventually drives it. Building thriving marketplaces draws in the ecosystem of buyers and sellers. Knowing where your value “sits” partly determines the investment decisions, time, return assessments, and where to place your resources.
Marketplace designs can indeed drive the adoption of platforms and ecosystems.
A marketplace approach can facilitate a “bottom-up” adoption strategy, where individual participants are attracted to the ecosystem through the value they can gain as buyers, sellers, or users of services. This approach can be effective in achieving ecosystem adoption for multiple reasons. Let’s take a look:
Marketplaces can continue to be simply of Self-Interest and concerned just for your Incentives: Marketplace designs inherently offer value to participants. Buyers are drawn to a marketplace where they can access various products or services, and sellers are attracted by the potential to reach a wider customer base. This self-interest encourages adoption to join different platform and ecosystem configurations if you have value to offer (IP, Resources, Expertise, Value as a Testing Environment).
The Power of Network Effects: As more participants join the marketplace, the value for each participant increases due to network effects. Buyers are more attracted when they see a growing selection, and sellers benefit from increased customer reach. Working actively in multiple marketplaces, you gain different network and relationship effects. Unqualified success if you get these right and work on them
The building of an Incremental Participation approach: The “bottom-up” approach allows participants to engage incrementally. They can start as buyers, then become sellers, and eventually contribute to the ecosystem’s growth through collaborations or innovations.
The cost of participating in just the Marketplace does give Low Barrier to Entry: Marketplace designs often provide an accessible entry point for participants. The ease of joining as a buyer or seller encourages more stakeholders to participate. The “expense and burdens being more vested in running the platform or being in the constant ecosystem sharing discussions are for others.
Today, we are seeing increasing Organic Growth in marketplace approaches: When participants find value in the marketplace, they naturally promote it to their peers and networks. This word-of-mouth growth can lead to organic and sustained adoption. By being on multiple marketplaces, you see more buyers or sellers, and your geographical scope multiples for your business offerings. Increasing scope for a total addressable market.
Organizations constantly search for Agility and Flexibility: A marketplace approach allows for agile evolution. As the ecosystem adapts to participant needs and preferences, the marketplace can be iteratively refined. The constraint of not being a player with skin in the game means you have less chance to influence the changes, yet as a major buyer/seller, the ability to add greater platform functionality does make a big impression on the platform provider.
User-centric design is essential to gauge: Good Marketplace designs prioritize user experience and value. This user-centric approach aligns well with the concept of ecosystem adoption driven by meeting user needs. Your need to protect and advance this user-centric approach may bring you to the decision to join the Ecosystem to influence it in the future by pushing ideas and designs further. Consumer preferences evolve over time, and being a trusted party can enable greater expansion and services for all to gain from.
Ecosystem Diversity is important to evaluate: Marketplace designs can attract diverse stakeholders, enhancing the richness and innovation potential of the ecosystem. he more diverse the ecosystem mix, the better the marketplace and what it can offer. Just avoid being locked out if you are not within the Ecosystem itself, simply a buyer/ seller.
Data-Driven Insights: Marketplaces generate data that can provide insights into participant behaviour, preferences, and trends. This data-driven approach enables iterative improvements. Being just within the Marketplace you will receive ‘relevant data’ but more than likely excluded from the richer insights that the platform provider or the ecosystem partners will have access too.
Engagement and Participation can be very varied in its dynamism: Participants engage in meaningful interactions within the marketplace, fostering a sense of belonging and motivating ongoing participation. It is the platform providers or the ecosystem partners that will drive new cloud services keep their focus on their time-to-market for their new product or service offerings; you only operating within the marketplace will be perhaps more of a laggard.
The thriving AppMarket and its ability to provide (novel) solutions bring the real “total economic impact” on all involved and participate in the real impacts of the solutions on offer to their organizations. App market development can be fraught in sudden redundancies, cost containments and risks that may have a greater risk on your total business. Application development is full of struggles, risk mitigation, governance, sourcing, servicing etc
In summary
The key need is knowing your place, not just in ambition to grow, be more agile, to expand but in fully understanding your limitations, tolerances and risk acceptance.
While participation as a marketplace-only approach has many benefits, it’s important to note that a successful ecosystem adoption strategy may combine both “bottom-up” and “top-down” approaches. The “top-down” approach involves strategic partnerships, collaborations, and leadership endorsement that help set the vision and direction of the ecosystem and give a greater strategic overview and benefit.
Combining both approaches- entry into the Ecosystem as a participant that offers value and operates in the marketplace for chasing growth and opportunity- can create a balanced and sustainable ecosystem and marketplace participation that benefits from organic growth and strategic guidance.
Today, building businesses on Ecosystem thinking and design needs a whole lot of careful evaluation, I can help but the assessment, evaluations and discussions can be complex and challenging. Are you up for it? Let me know.
