Your App Ecosystem's Golden Circle

October 2, 2022

“Software is eating the world.” It's amazing to observe that huge wave. Every report and analysis show vertiginously high curves of growth. Some call it the App Explosion, as there are more and more apps out there.

This kind of curve. Source: Statista

This App explosion results in companies using an increasing number of apps daily. Average companies use 254 applications today, enterprises use 364. These companies are looking for value. Sharing data and seamless processes between apps they use adds value for them. They don't want to switch between browser tabs, trying to work with several siloed applications. They demand complete solutions with strong interoperability. In fact, the ability to integrate has become the single most important factor in selecting a SaaS vendor, even before price. 

In a world with 100,000+ B2B SaaS products, how could it not be?

On top of that, in the post-pandemic era, there are two opposite trends that make competition even harder between SaaS companies.:

  • SaaS companies have received a lot of investments
  • Customers have to streamline their software costs and look for the most efficient tech stack. 

So, to survive and win in your category, you have to create value to your customers WITH others. And that means growing your product into an app ecosystem.

Why should you be part of the Software Ecosystem ?

  • Decrease customer churn

The more you are connected, the higher the switching cost for your customers. 

If a customer needs to streamline software costs, do you think they will keep the software that is well connected with the other apps they use, or the software that works alone ? By providing an ecosystem of apps around your product, you make it stickier, more difficult to kill, and you get an edge over your competitors.

  • Lower the costs of your go-to-market

The software space is so crowded, that all you can do to be in front of customers is a golden opportunity. Being part of an ecosystem increases your exposure, and can change the trajectory of your business. Think Pipedrive, Maze, or Gorgias for example. They all started as apps, and grew into multi-million dollar companies because they fast-tracked their acquisition as part of other ecosystems. 

“When you think B2B SaaS customer acquisition, you often think content marketing, advertising or direct sales. But it turns out that one of the cheapest, most powerful forms of customer acquisition are B2B app marketplaces.” Martin Gontovnikas, Former SVP of Marketing and Growth at Auth0. More here.

  • Expand your market size

The equation is straightforward: expanding your product feature coverage allows you to support more use cases which increases your TAM (Total Addressable Market) and allows you to grow your customer base.

In a nutshell, building and growing an App Ecosystem increases your product defensibility, decreases customer churn, and expands your market size. With these benefits, it’s easy to understand why you would want to make the leap on that strategy. 

To sum up, it enables you to accelerate your revenue growth.

What makes this so difficult?

Waiting to build an ecosystem around your product is a big risk. While you work to innovate your product and educate the market, a competitor can piggyback off your existing work and capture your lucrative segment thanks to a more connected product. This is an extremely difficult territory to recover.

  • Feature prioritization is hard

Even if strategic, it's difficult to prioritize building an app ecosystem over core features which are directly visible to your end user. It is difficult to free up some developer time to work on a partner portal, an app marketplace, a app submission process etc. With an app ecosystem, you don't serve your end user directly. You primarily serve developers, buyers, partners, internal departments... which then serves your end users.  So it's easy to understand why they are de-prioritized by product teams.

On top of that, an app ecosystem is not something you build once and leave alone. It requires continuous updates and evolutions. Ecosystem-readiness is not a single sprint. 

This complex prioritization requires a very experienced product manager. And the complexity of the management between different personas requires deep technical capabilities, I.e your best engineers. That leads to my other points.

  • Expensive strategy

The required features to build a thriving app ecosystem take a long time (i.e. cash). Be prepared for years of investment - a low estimate for building these features will take you around a year and 1 million dollars of investment.

  • Focus split

Splitting focus is necessary, but really difficult. If you don’t integrate these ecosystem-ready features, a competitor will and will steal your market. If you focus on them only, a new startup will come and pull existing customers with shiny new features (you had deprioritized).

So you need to keep investing in features for your core users, and build for these side-personas at the same time. This is very frustrating. Really.

 

How can you be an App Ecosystem ?

No matter how deeply funded you are. You’ll spend millions of budget to run behind leading companies, trying to build the same features. It's going to be slow, and going slow is a big risk. But if you don't do it, someone else will. You should not have to go through this chaos! 

So, how can you make it a success?

First, acknowledge that you cannot do it alone. You need a community of partners and developers to go fast and to go well. 

Slide from the Heedjy Deck - inspired by a great presentation of Brandon Chu

Opening your product with API & UI extensions is the most important work you can do. By focusing on the value you’ll deliver when designing your API, you strengthen your positioning and your value proposition. Only you can do this efficiently.

In addition, you need to:

  1. Attract developers to build apps, and build strong relationships with partners.

That’s the tricky part. They need to see you as a distribution channel. You need to provide them transparency along the relationship, and a smooth collaboration to make business together. You need to build a branded portal to nurture your partnerships, allowing to:

  • Empower your community to submit integrations
  • Build apps in a collaborative way with Chats, Github login, Notification system
  • Let partners monitor app usage and installs.

  1. Build trust with your Customers

That’s the tip of the Iceberg: having a public website listing the apps that you want to promote to your market (i.e. an App Marketplace). Customers want trust in your partners. Customers want to trust your recommendations. The goals of the App Marketplace are:

  • Showcase partner apps directly to your customers 
  • Get customer feedback on integrations
  • Drive real revenue from partnerships

  1. Work efficiently as a cross-functional team

That’s where we can say “The cobbler's children have no shoes.” Your team has to deal with a lot of tasks to animate and run a successful App Ecosystem. They deserve a business application which centralize all partnership operations into a single interface, allowing to:

  • Build a custom app submission and approval workflow 
  • Monitor integrations activity and usage
  • Maintain and support integrations with low engineering resources

Sound like a lot to tackle? It is, and this is just the first step. 

With Heedjy, we’re here to help software companies to succeed in building an App Ecosystem.

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- Photo by Daniela Cuevas on Unsplash

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