The position of your company in the market often benefits from the broader ecosystem. For example, we have written elsewhere about the complementary benefits between Apple TV and NetFlix—Apple TV gets access to streaming NetFlix content, and NetFlix potentially gets additional subscribers to its service.
Those complementary relationships may be mutually beneficial for the long term, but the other side of the coin is that depending on an outside company for part of your business strategy has a built-in potential downside. Consider the following perils when you consider how the relationship is likely to progress:
1. Their missteps may become your missteps. If the company whose operations you are benefiting from makes bad decisions or even fails, yours can suffer as well, with little or no control over the situation.
2. The other company could become a competitor. The other company could determine that they are missing upside by not offering the product or service you provide and begin competing with you for your customers.
3. Your customers could decide that the other company’s product or service is all they need. This scenario is a manifestation of the Substitute force from Porter’s Five Forces.
4. The other company could change the rules. Particularly when there is no formal agreement between you, the other company could suddenly limit how companies can access their service using your product, for example.
By Sean Campbell
By Scott Swigart