System strategy emphasises competition
To employ system strategy, a company enters the ecosystem providing offering spanning multiple components and subsequently integrates other components from the ecosystem leveraging the synergies.
This strategy requires that the company has capabilities to produce multiple components and charge high margins.
Component strategy emphasizes cooperation
The idea is to enter the ecosystem as one of the components, coordinate with other components and help them innovate in the shifting ecosystem bottleneck. The crux of the differentiation effort is in differentiation from other component rivals.
This strategy is very useful in nascent ecosystem where innovation is the key problem.
Bottleneck strategy balances competition and cooperation
As Ecosystem bottlenecks constrain the growth and performance of the ecosystem, a company may enter emerging ecosystem bottleneck and improve its performance (cooperate) while capturing part of the value created (competition).
The competition-cooperation focus is driven by the bottleneck crowdedness. When the bottleneck is uncrowded, companies focus on competition through market power. When the bottleneck is crowded, companies focus on cooperation.
Strategies comparison
| Dimension | Component strategy | System strategy | Bottleneck strategy |
|---|---|---|---|
| Value creation source | Superior component | Components integration | Increasing ecosystem performance |
| Resource intensity | Low - requires focus on one or few components | High - requires development of multiple components | Moderate - resources investment spread over emerging bottleneck entries |
| Growth | Growth may be constrained when not in bottleneck component | Requires aggressive growth and sensitive to demand drops | Always in the high growth component |
| Integration capability | Limited - less ability to integrate components to improve system performance | High - enables integration of components which increases value creation | Moderate - can cooperate and compete with complementors depending on the bottleneck crowdedness |
| Scaling speed | Adaptive - can adjust ecosystem with changing complementor quality | Slow - slow to sale initially | Fast - scales quickly initially |
| Value capture | Moderate - differentiate from withing component rivals | High - limits dependence on partners | Variable - adjust cooperation-competition behaviour with changing bottleneck crowdedness |
| Operational complexity | Low - focus on single component innovation and orchestration | High - complex coordination of multiple components | High - operationally complex, requires foresight and transition skill |
| Strategic evolution risk | Stable strategic positioning | Stable strategic positioning | Risk of strategic drift to system strategy requiring active exit component management |