Where I mix customer-vendor loops and developmental stages for a fresh take on a year-old framing, then dive into a difference of perspectives, revealing ecosystem and product loops.
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Stages of the customer-vendor loop
One other thing that seems useful is the idea that the feedback loops go through what appears like stages of development – I know! I am sorry! I see developmental patterns everywhere. Here’s a quick framing that captures the idea.
Let’s start with a stage I call aspirational. A customer-vendor loop at this stage isn’t actually a working loop, but rather just an inkling of it. Every team that sets out to build the next popular app has their customer-vendor loop here. There is not yet a product or users or interactions. There’s just a bunch of folks who want to make it happen. When starting with a customer-vendor loop at the aspirational stage, it might be useful to capture the hypothesis and share it with your fellow teammates to ensure everyone is focused on bringing forth the same customer-vendor loop.
The stage that typically follows is nascent. All the components of the loop are either already in place or starting to come together, but the compoundness of the customer-vendor loop is not yet clear. There is a Product, some Customers, and even maybe Interactions, but a lot of tweaking needs to happen to get it really cranking. The asymptotes first show up at this point and necessitate rethinking of the loop hypothesis. Here’s when the sudden realization hits that maybe the stock Customers is not as large as we thought, or that the Interactions do not generate value as we imagined. This stage is most often characterized by us messing around with the original customer-vendor loop hypothesis. We re-examine our assumptions about each stock and flow, looking to find the right combination of components.
If we are lucky, we find that combination. Enter the compounding stage. No sooner that we pat ourselves on the back, we are thrust into the constant game of keeping the compounding loop going and squeezing more and more compounding power out of it. These stages are thrilling success stories, and their visibility and appeal tend to leave us believing that they are more common than they actually are. Very commonly, this stage is characterized by optimization. However, a team with enough foresight will run forward looking for future asymptotes and invest heavily into moving them.
Despite all the effort put into pushing away the asymptotes, sooner or later, our loop reaches the mature stage. Customer-vendor loops at mature stages may still compound, but it is fairly clear that the growth is slowing down, stalled, or waning. The dreaded upper hook of the S-curve is here. At this stage, loops typically involve large quantities of stock and highly optimized flows, so even a tiny bit of compounding may sustain the team and allow it to keep going for a while. However, most interest in such loops tends to be in reusing its components for another loop. A successful reuse is what usually triggers growth in another, new loop that is born out of the ashes of the old one.
While visualizing these stages, I am constantly tempted by the idea that the process of moving through the stages is the process of constructing a viable compounding loop. My experience tells me that falling in love with this idea is fraught. It is more productive to view the stage progression as the process of searching. Compounding loops are found, not created. Sure, observing a novel combination of a customer-vendor loop might seem like it was created from whole cloth. However, upon closer examination, the path to every one of these lies through a patient, fits-and-starts exploration over possible combinations of loop components, rather than a matter of grand architecture.
Reflecting on a post from a year ago, this framing might be a somewhat more disciplined articulation of the three organizational missions: questing, scaling, and keeping. The “questing” mission is characterized by the “nascent” stage of the customer-vendor loop, with the “scaling” and “keeping” missions matching the “growth” and “mature” stages, respectively. The additional “aspirational” stage feels right as the early brainstorms that might precede any team mission. Hooray for another rewrite count increment!
🔗 https://glazkov.com/2022/06/26/stages-of-the-customer-vendor-loop/
Product and ecosystem loop perspectives
There is a useful distinction that arises from examining our position in relation to the customer-vendor loop: product and ecosystem. These are not two different kinds of loops, but rather a matter of our involvement in them. For example, the same loop can be the product loop for one organization and the ecosystem loop for another. Think of them as different perspectives on a customer-vendor loop.
We’ll start with the product loop, since it’s the perspective we’ve been using so far in this string of stories. Should you and I start an ice cream shop, we’d be establishing the product loop. We are the Vendors, our Product is ice cream, and we attract Customers to buy a scoop or two (Interaction). In a product loop, the Interaction is commonly a purchase of some sort.
Now, let’s pretend that you and I, having grown tired of churning and scooping ice cream all day, developed a popular social media app. In this app, Vendors are the app users who produce content (product), Customers are the users reading and reacting to content (interaction). Both sides attract each other, generating a compounding loop. For a budding influencer, the app looks just like a typical product loop: the produce content, attract users, etc. However, from yours and mine perspective, this loop reflects an ecosystem of users. We built a place that attracts both Customers and Vendors — and lo and behold, they came and started living in it. Our product enables a whole other customer-vendor loop, or more precisely, an ecosystem loop. A reliable way to spot an ecosystem loop perspective is when our product is the setting for another customer-vendor loop. This setting is commonly called a “platform”.
Ecosystems are weird – they are somewhat of a living thing, having a “mind” of their own. Working with ecosystems can feel a bit discomforting, because we have no direct control over them. Inviting an ecosystem inside of our app is kind of like planting a random seed in our home garden. It might blossom into a beautiful flower or it could take over the whole garden, kudzu-style – or both! The word “platform” and its sense of supportive stability might just be our way of coping with the unknowable.
Let’s also pretend we’re very lucky and that the compounding strength of this ecosystem loop is pretty high, and we can afford to attenuate it by imposing some sort of a content production fee on our influencers. In reality, this is a seriously dubious business model, but in this story, you and I live in the alternate universe where it worked. It worked! We now have revenue continuously flowing and growing with the loop. So lucky.
Of course, we can also see the product loop perspective: after all, we ship a product. Through this perspective, we are the Vendor, our Product is the app, and our Customers are folks who download and use our app. What is Interaction that attracts us to build the app in the first place and then to support and improve it? Unlike in our previous endeavor with the ice cream shop, it is no longer the purchase of the Product (the app). The fountain of revenue from the ecosystem loop will encourage us to remove any attenuation from our app product loop, including imposing a price to engage with the app on our users. We will want to make the app free and as easy to use as possible. In this particular product loop, the attraction comes from the potential (and realized) value of the ecosystem loop. For you and I, the valuable Interaction is simply users engaging with our app. This “Interaction value = user engagement” pattern is a strong marker of an ecosystem loop lurking underneath, even if aspirational.
But wait, there’s more! Our app product loop is not just sitting out there all by itself. When we decide on the technology we’ll use to build our app, we pick… the ecosystem loop in which we’ll participate! Should we choose to make ours an iPhone app, we will be joining the ecosystem of iPhone app developers and users. Should we opt for a PWA, we partake in the Web ecosystem. Or maybe we’ll choose to do both. Every product loop is a part of at least one ecosystem loop, it seems. And every ecosystem loop is a part of some product loop. It’s a network of loops, laddering up all the way to the whole of humanity … and beyond.
Understanding this product/ecosystem interconnectedness seems fundamental to cultivating a viable business. Having a sense of where our product loop is placed in relation to ecosystem loops and how it benefits from them helps develop a sustainable perspective that helps us see these loops, examine their asymptotes and thus, allow us to better understand how these asymptotes will influence ours. Similarly, spotting an ecosystem loop inside of our products might help us realize that the value of our product loop is now buoyed by something we no longer have direct control over. And conversely, having even a rough sketch of these loops would help us avoid counting on the miracle of constructing an ecosystem loop from whole cloth.
Fascinating! One thing about ecosystems - they also create at least two dimensional selection pressures: one dimension is the environment itself (the climate, say) and the other is _everyone else_ -- this is one possible explanation for fairly constant extinction rates in some of the fossil strata: you may adapt to the environment, but then you have to adapt to all of the other bastards who are doing the same thing! I think we often model businesses along the environment dimension but not the competitor dimension. The Red Queen problem is one aspect of this: often it takes all the running we can do to remain in exactly the same place. How would this affect the loops?