One of the exercises I recommend to my mentees is to diagram the ecosystem of their market. The above is a diagram of the Digital Health System from Fortune magazine, graphic by Nicolas Rapp. The are multiple types of nodes in a market ecosystem, but standard ones include:
- Your product or service
- Accessory products
- Complementary products or services
- The end user
- The economic decision maker
- Retail (offline) channels
- Online channels
- Strategic partners
- Local, state, and federal agencies
- Media (writers and analysts who cover your market)
- Field sales reps
- Sales engineers
The goal of the exercise is to understand the complementary and competitive forces that the company faces, to avoid being blindsided, for example, by a state or federal regulation that governs the manufacture of your product.
The exercise also helps to spot nodes in the network that can slow down or even halt the flow of product to customer.
Instead of merely keeping a contact database, the diagram of the ecosystem shows relationships amongst the nodes. Keeping this ecosystem up to date is an issue however. First how will you know, for example, that a new VC focused on your market has just been formed? That one of your suppliers is in danger of going out of business? That a new low cost competitor is on the horizon?
All these questions and more fall under the domain of business intelligence. Most startups are rightfully focused on building and selling their products, not tracking business intelligence.
The best person to keep up such a map of the ecosystem is the product manager, who works closely with engineering, marketing, sales, and support. Each functional group should own responsibility for feeding information into the product manager.
My first exposure to business intelligence was the PIF system at Addison-Wesley Publishing Company. Unfortunately I didn’t keep a copy. But as I recall the Product Information Form was used by sales reps to report on publishing opportunities in the field. For example, a professor who was interested in publishing a book with A-W. These PIFs were sent to the appropriate editor to be followed up on. This was a paper and pencil system. Today there are CRM systems from Salesforce and other to capture, aggregate, and analyze customer information.
The market ecosystem diagram is a good complement to the Business Model Canvas.
There a multiple uses for the ecosystem diagram: presentation to the Board of Directors, use in pitching to investors, orienting new employees, and periodic review of the companies strategy.
Whether you create this diagram as a one-time exercise to demonstrate the knowledge of your market to your mentors, decide to maintain it, or move to a business intelligence software platform, it should at minimum prove a useful exercise for the management team, to help make sure everyone is in sync on what the nodes are in the network and how they affect the company and its products.