High Growth Product Strategy Using Stack Integration

Corporate strategists have long looked to horizontal and vertical integration as tried-and-true expansion strategies.  Horizontal integration is just a fancy way of saying that you plan to buy out your competitors to expand your market share.  And vertical integration just means you plan to buy out companies that are upstream or downstream from you in your supply chain.  For example, a clothing designer might buy out a chain of retail clothing stores to move downstream in the supply chain.  Or they might instead buy out textile mills to move upstream in the supply chain.

“Today there is one emerging trend in high tech which is promising (or threatening) to shake up the technology stack for countless high tech companies:  Cloud computing.”

In world of high tech product strategy, we have a third option I like to think of as “stack integration.”  Much like vertical integration, a stack integration product strategy means you plan to expand upstream or downstream in the technology stack.  Since products at higher layers in the stack often generate demand for lower layer products, the product strategy implications of stack integration are very much like those of old-school vertical integration.

For examples of successful stack integration product strategy, look no further than Oracle’s move from the database business—its core business for about 10 years—into the enterprise applications business, and eventually into every nook and cranny of the entire enterprise software stack.  Or take a look at Microsoft’s expansion from the operating system business into the office productivity application business.  More recently, witness Google’s expansion from the ad-sponsored B2B2C application business into the mobile operating system business.

Although the “technology stack” might be defined differently depending on your personal corner of the high tech industry, you can think of it in general terms as looking something like this:

• Services: Integration services, training or consulting
• External Applications: Public or customer-facing applications, such as websites
• Internal Applications: Productivity-boosting applications, such as CRM, SFA or ERP apps
• Infrastructure Software: Software products embedded into the guts of other software, such as databases or data integration middleware
• Data: Exactly what it sounds like:  the foundational tier of any n-tier software architecture.
• Operating Systems: Software that talks to hardware so that other software doesn’t have to
• Hardware: Any tech you can touch

Some of the advantages of a product strategy of moving higher up or lower down the technology stack can include:

• Higher price points
• Higher sales volume
• Lower cost of sale
• Less commoditized products
• Newer, less competitive markets
• Market leadership opportunities in newer, growing markets
• Closer access to the purchasing decision makers for your current market

Just as with good old-fashioned horizontal integration, the right product strategy for you may be to dominate your own niche within one layer of the technology stack.  Or, more like a vertical integration strategy, your best product strategy may instead be to expand by offering products higher or lower in the technology stack.

Today there is one emerging trend in high tech which is promising (or threatening) to shake up the technology stack for countless high tech companies:  Cloud computing.

Whether your company sells SaaS, enterprise software, consumer software, ad-based B2C apps, mobile apps or any other high tech products, your product strategy should consider the opportunities and threats cloud computing poses to your business.

In a future blog post, I’ll go more in-depth on exactly how you might have an opportunity to define a product strategy that leverages cloud computing to expand your market share, reach new markets you didn’t even know you could tap, or just pummel your competition into a pulp.  Subscribe by e-mail or by RSS now so you don’t miss a single blog post.