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Today's enterprising entrepreneurs build ecosystems, not products
THE year is already shaping up as one where the headlines will write themselves: markets second-guessing a return of policy tightening by the Fed, a Brexit deal or no deal, company downgrades from trade tariff uncertainty, and oil prices running roughshod.
To stay competitive in such times, one must constantly grow and evolve. In the wealth space, our advice to clients - regardless of the cycle - is to diversify and hedge their wealth against market swings. For many of our clients who are entrepreneurs, diversification is absolutely relevant to their businesses too.
There are many classic business diversification tales. The most recent success is Netflix.
A decade ago, if you wanted to catch your favourite show, you would probably have to be in front of a television and sit through commercials. Fast forward to 2019, Netflix has allowed us to stream content whenever and wherever we want, from multiple different devices. And to think the entertainment giant started out as a DVD postal delivery service about 20 years ago. Already, it's evolving from a content aggregator to a producer as illustrated by its 11 Oscar nominations in the past week.
Underpinning the diversification dividend is a digital age that is casting a plethora of choices to consumers at ever increasing speeds. Staying ahead of this need to constantly respond to consumer expectations for new products is a daunting task for any business - in fact one that is probably impossible to sustain.
So instead of simply churning out new launches, perhaps a mindset change is needed where the focus is understanding customers' lifestyles rather than their needs within an immediate, current and narrow space.
One business that has successfully built up this approach is Razer, which started out as a gaming hardware manufacturer in 2005. It was founded by Singaporean entrepreneur Min-Liang Tan and his partner Robert Krakoff.
Speaking to an audience of budding entrepreneurs, Lee Li Meng, chief strategy officer at Razer, shared how the company managed to transform from a startup making gaming peripherals into an entire ecosystem of hardware, software and even services.
More than a decade ago, Razer made a splash when it launched its first high-end gaming mouse, which quickly became the bestselling product in its category. The company then went on to produce gaming keyboards, headsets, laptops and even phones.
After Razer found success with hardware, the company then added a software layer to provide access to digital content to gamers everywhere, as well as services like a virtual credits system for purchasing games and items from different online and offline distribution portals.
By diversifying, the company was able to grow exponentially.
The fact is, if a business only looks to grow in one area, you're actually restricting your own company's growth. If Razer had stayed a hardware company, it would have been quite limited as there are only a certain amount of new gaming peripherals a business can come out with in a year.
Instead, Razer focused on their customers' lifestyle and developed a new portfolio of products and services.
The company has grown and managed to integrate its hardware, software and service segments into a seamless ecosystem, creating a virtual cycle for gamers that they won't ever have to leave.
For example, gamers use Razer hardware that provide the best experience with their favourite games, and they can use Razer services such as Razer Gold virtual credits to buy content from the same games.
And this strategy has obviously worked for them, as the startup managed to achieve a valuation of US$1 billion by 2015, just 10 years after launching its first product.
One thing that particularly struck me was when Li Meng said: "We produce products and services that are wrapped around the gamer."
And this is really what all entrepreneurs need to be considering. When you have this mindset, you won't get caught in the rat race of simply pushing out more products. It allows you to grow your business in an organic yet limitless way.
But to do so, you need to think big, anticipate all of your customers' lifestyle needs, and have patience. After all, building a business around your clients takes time.
Creating an ecosystem also means that you have to grow with your customers and their evolving lifestyle needs to entrench yourself in their lives.
Razer shared that its future plans include expanding into broadcasting and streaming to target a larger part of the entertainment pie, and continuing to work with more gaming developers. They already have partnerships with major telcos and internet entertainment services, and have ambitions to continue to diversify.
The key to building an ecosystem, and not just sell products, is to understand your customers' lifestyle. Perhaps Li Meng explains it best when he simply said: "We call ourselves a gaming lifestyle brand, not a gaming company."
Just like how you would want to insulate your core assets against market volatility, entrepreneurs should also think about diversifying. It can be a tough call to make and may even be up against naysayers, but looking to build an ecosystem around your clients only deepens that relationship with them. After all, it's always about the people, not the product.
- The writer is head of global private banking, Southeast Asia, HSBC Private Banking