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4 min

How to Build Customer Value in 2024: a Guide to Vertical, Horizontal, and Multidirectional Ecosystems

Seeing which ecosystem type to choose to cover your customers' needs.

Alex Semenov

Chief Executive Officer

Eva Petritski

Content Manager

January 11, 2024

Amazon created a digital ecosystem to turn into the Everything Store we know today, Uber to balance out the pandemic losses, and Klarna to grow from a BNPL service to an international shopping platform.

These companies were able to achieve such results because they chose the right ecosystem approach that fit their business goals. We explain how to do it in one of our previous articles about open, closed, and hybrid digital ecosystems.

In this article, we will delve into horizontal, vertical, and multidirectional digital ecosystems to see how each type helps companies satisfy their customers' needs and which one to choose to serve your audience best.

Approach

The success of a business depends on how much value it delivers to its customers. Therefore, it is correct to view any business strategy from the perspective of customer experience and how exactly the given strategy can enhance the value of your product.

To make this perspective clearer, let’s imagine our customer, Helen. By looking into her daily tasks, we will explain the differences between three digital ecosystem types, and see how each type can be useful for different customer needs and business goals.

Vertical ecosystems

To fully satisfy the core customer need
and gain competitive advantage

Vertical ecosystems center around the company’s key product. They offer extra services to complete the experience of using this product, thus creating more value for customers.

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 supplementary information.

In this case, Helen uses the services of a vertical ecosystem. She gets extra value beyond just one product and thus is more likely to choose Kindle over another book service.

Another good example of a vertical ecosystem is Home Depot. It is the largest home improvement retailer in the U.S. selling tools, appliances, and construction products.

To stand out from other retailers, they developed a B2B ecosystem for pros and additional services for customers. Its users can access a DIY hub, rent tools and vehicles, and hire professional contractors from several touchpoints: physical stores, a website, and a mobile app.

In 2021, Home Depot's ecosystem generated $151B in total. It is almost 20 times the revenue of Ace Hardware, a DIY retailer with twice as many physical stores but no ecosystem.

Horizontal ecosystems

To cover ancillary customer needs and ensure business stability

Horizontal ecosystems do that by offering ancillary services that cover other needs on the user journey.

For example, Helen’s goal is to go on vacation. One step on her user journey is booking accommodation. So she opens Airbnb. Here, Helen learns that she can not only book, but also rent out stays, plan her vacation activities with the help of local hosts, organize business trips and relocation, text, and pay online.

Such extra services help Airbnb bolster its core as now Helen will have more reasons to return: either to rent out her own place or, say, research activities for her next trip.

Another example of a horizontal ecosystem is YAZIO. Apart from counting calories, users can track their physical activity, participate in challenges, explore recipes of various cuisines, and get answers to frequently asked nutrition questions.

This way, a horizontal ecosystem goes past offering just one product and attracts more customers with equally important related services.

Multidirectional ecosystems

To cover a variety of daily needs and ensure continuous communication with customer

Multidirectional ecosystems gather diverse services in one place. It allows them to satisfy multiple unrelated user goals and ensure more frequent user-company interactions.

A good example of a multidirectional ecosystem is Rakuten. If Helen was a user of this service, she would turn to it on a daily basis to do her diverse tasks: purchase goods, stream shows, book trips, and make online payments.

In the U.S., multidirectional ecosystems smoothly grow out of horizontal ecosystems. Look at Amazon, for example.

It has expanded from selling books to pharmacy, hardware, cloud solutions, and content, all powered by its own logistics services. Here, Helen can purchase groceries and on-demand goods, publish her original e-book, listen to music, stream shows, and more, thus turning to the ecosystem almost every day of her life.

Key takeaways

We differentiate 3 types of digital ecosystems:

  • Vertical.
  • Horizontal.
  • Multidirectional.

Vertical ecosystems enhance the experience of using one product and are good for businesses that want to gain an edge over competitors.

Horizontal ecosystems offer ancillary services in addition to the main product, and are a great option for ensuring business stability.

Multidirectional ecosystems gather multiple unrelated services under one brand and serve to provide frequent interactions with users.

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