Breaking down the 3 types of digital ecosystems to see which one will benefit you the most
The concept of a digital ecosystem has been around for about two decades. However, there is still no well-established classification in any English-speaking market. HeyInnovations, the leader in mobile ecosystem development, shared their unique approach to grouping and gave renowned examples.
Customer is a top priority of any business. Therefore, it is correct to view ecosystems from the customer experience perspective, what exact experience any ecosystem offers. To make things easier, let’s imagine a character, Helen. By inspecting her life situations, we will explain the difference between horizontal and vertical ecosystems and how the latter differs from omnichannel ecosystems.
The entire ecosystem centers on the company’s product, and a value chain created for customers. Companies set up a platform to sell, maintain, and deliver their product and create space to interact with it. After a while, more interaction options emerge, and new consumption opportunities open.
For instance, Helen is interested in the book “Atlas Shrugged” by Ayn Rand, so she looks it up on Kindle. There, Helen can buy both paper-based and digital copies of the book, read it, listen to the audiobook, and get familiar with the supporting content. Her entire experience while interacting with the ecosystem centers on a single product — a book.
Companies providing all kinds of services for home renovation represent vertical ecosystems perfectly, too. Let’s take Mr. Handyman. They offer a range of related services for home renovation, from equipment and materials supply to repairs and waste disposal.
Horizontal ecosystems grow on the extension of the product, not the consumption mechanics behind it. For example, Helen wants to change her eating habits. She learned about the YAZIO app and gave it a try. Besides the calorie counter, the app allows users to track their physical activity, participate in challenges, explore recipes of various cuisines, and get answers to the frequently asked nutrition questions. The app allows users to reach healthy eating goals but also helps to change their lifestyles.
If vertical ecosystems focus on a sole task, horizontal ecosystems cover the whole range of needs. New products are added within the same sphere to enhance every bit of user experience.
One more renowned example is Airbnb. This platform is gradually extending its influence. Earlier you could only book the accommodation, whereas now it goes all the way down to building a full-scale vacation plan for you. It shows the nearby bakeries and activities and tells more about the local lifestyle. If Helen doesn’t want to plan her vacation, Airbnb will do it for her, from the accommodation and eating-out choices to excursions and exploration of the local sightseeing.
The primary task of omnichannel ecosystems is to mutually integrate diverse channels and services into a uniform system to ensure seamless and stable communication with the customer. The best-known example of such a system is WeChat. If Helen were a user of this service, she would be able to order food, pay taxes, and purchase clothing in a single app.
In the U.S., horizontal ecosystems smoothly turn into omnichannel ecosystems. Look at how Amazon is developing. It has successfully expanded into pharmacy, hardware, grocery, and content and created a complex logistics network. With a single profile connected to her personal details, Helen can purchase groceries and on-demand products, publish her original e-book, listen to music, and more.
Companies partnering with omnichannel systems are full-fledged players and equally important for users. The platform supports them and, at the same time, helps Helen to accomplish daily tasks more conveniently, getting a personalized experience.
While analyzing the strategies of different companies, we revealed that the transformation and creation of the ecosystem is a necessary step in business development. It mainly deals with the growth of user acquisition costs and their retention in the digital environment. User queries for services help to come up with original ideas on what can better and easier solve new tasks.
Approaches to the transformation vary, from integration to the current ecosystems as mini-apps to building a brand-new ecosystem. We recommend starting from the vertical ecosystem, gradually transforming its user experience at every stage of the value chain. After that, you can turn it into a horizontal system, adding complementary services for customer needs.