China’s Entrepreneurs & The Obsession With Building Ecosystems
Before settling in China I’d never heard of the expression ‘ecosystem’, aside from discussing where ants live in science class, that is.
In China, that’s all anyone is trying to build. It’s so ingrained now that unless you can build the magic ‘E’ word, just don’t bother building anything.
An ecosystem is a network of companies circling a mother ship providing affiliated value to similar customers.
Part of the reason this approach is so strong in China is the success of the big 3. Commonly referred to as BAT, Baidu, Alibaba and Tencent which built vast empires spanning all of China’s major industries. Collectively they make up 98% of China’s web traffic.
Out here, business moves at the speed of light. Entrepreneurs are planning their second, third and fourth companies before they’ve even hit a home run with their first and it’s the obsession with creating an ecosystem that’s fueling the ‘fast and furious’ pace of business.
But BAT had something else, the pathway was different. They didn’t start with ‘how do we build an ecosystem?’, they started by building one single value proposition and doing it really well. For a long time.
Baidu built China’s largest search engine.
Alibaba built the world’s largest B2B marketplace.
Tencent built QQ, China’s leading online chat platform.
They each built a core, made it stronger and continued to improve the pipes, the channels and the network before expanding into other businesses. It was success before ecosystem. Many companies today are pitching their ecosystem before their core is hatched.
Why are we so fascinated by the ecosystem concept? Success is an anomaly, not the norm.
Focus is becoming a rare quality among founders. With pressure to race to IPO, we’re all scrambling to claim title to an industry ecosystem before we’ve established our own identity and history.
We must respect the past, learn from previous generations and not forget the incredible focus that founders like Jack Ma, Pony Ma and Robin Li embodied when building their empires.
An ecosystem is a by-product of a rich and connected community focused on one single purpose. It all starts there. There is no shortcut, we cannot build a product and expect a generation of loyalty with our affiliated businesses.
Time is our friend, not our enemy.
The pitfall of pursuing an ecosystem prematurely is losing ground on your core. The more we commit to other endeavours, the less attention we allow our core value. If your core is not well established and serviced, your customers will feel the distance and potentially go elsewhere. There are countless examples of this.
Category ownership is also really important. That is, being absolutely clear about what it is your product delivers best above all else. By supporting more products outside of your core, your customers (not to mention your people) will begin to question your motives, bringing you entire business into question.
And finally? You’ll lose. It’s that simple. If your competitors sense a lack of focus, they will seize the opportunity to increase competition and gain an advantage in your market. Before long, you’re losing your market share and the ecosystem is nothing but hot air.
So when is it a good time to begin planning the ecosystem?
From my perspective, there are two major indicators that the time is right.
Your core value proposition is a market leading product or service. It dominates the market and you have developed enough trust from your customers they’ll follow your guide into other areas of business.
Cash. You have significant cash-flow from the core business which supports the inevitable burn you’ll incur as your business expands. You’ll need cash, a lot of it.
With the above in mind, focus will create a solid core and therefore develop a market leading position. Customers should be the first to flag affiliate business opportunities, so long as your brand has the trust required, you will create far more opportunities to expand. The ecosystem will be yours.