18 Nov How Partner Ecosystems Ate the Channel
November 18, 2021
Partnership Leaders and executives at B2B SaaS companies understand that going to market is all about GTM and Partner Ecosystems. Organizations are even building #Ecosystem orgs and proposing EcosystemLoBs.
But there’s still a lot of confusion out there about what this means, and the term “Channel” continues to be used in the same sentence. For example, thought leaders like @JayMcBain announced the decade of the channel ecosystem. We want to challenge Jay and others, that putting these words together confuses the audience.
In today’s SaaS world, Ecosystems are eating the Channel. This paradigm shift is driven by three fundamental business transformations:
-SaaS has altered the customer experience
-Partner roles are evolving from partner types to partner functions
-Technology and platform business models have redefined ‘the product’
Understanding these transformations will help leaders think differently about their business, and move away from a “channel” mindset to the new GTM Ecosystem reality.
SaaS Customer Relationships
The Land, Adopt, Expand, Renew (LAER) model is now a commonplace framework for thinking about how we go to market with cloud solutions to drive net new ACV, lower CAC, manage customer retention and endeavor to maximize LTV. Vendors have shifted from a ship and forget model to having a maniacal focus on customer experience and life-time value. In the process a diverse ecosystem of customer value influencers and contributors have emerged.
Channel folk, seeking to explain the phenomenon, call these new players the shadow channel. This is a completely incomplete characterization, as they continue to add value across the entire customer lifecycle, fragmenting the traditional indirect channels’ initial hold on the relationship.
The SaaS imperatives of fast time to market and rapid value delivery shredded the indirect/sourced channel model and replaced it with a co-sold/influenced ecosystem model. This turned stove pipes into flywheels, changing virtually every part of the partnering dynamics and experience Ecosystems create broader and more encompassing customer value based on new and improved interactions between SaaS companies, partners and customers.
Partner Roles Based on Function
The second transformation is that partners are no longer managed according to ‘type’ (ISV, VAR, MSP, SI, etc.). The priority today is thinking about partners based on their function, which speaks to how they build, market, sell, support, or manage shared customers. In a modern partner program, partners select the function they want to perform and programs respond with supporting value. This approach has a number of benefits:
-New partners emerge to leverage one or more functions, especially if new partners are connected to low-cost, easy to consume programs that require minimal time and investment to garner partner attention and adoption. Sometimes these new partners are customers!
-Partner-to-Partner (P2P) becomes more common and easier to facilitate. Modularity invites greater partner collaboration as partners appreciate that network effects and openness trumps traditional protectionist attitudes. As partners realize that no one owns the customer, we are better off winning with other partners than going it alone.
-Influence becomes more important than sourced. Perhaps the biggest and most impactful shift in the paradigm shift from channel to ecosystem is that sourced revenue (long the gold standard for partnering) gives way to the importance of influence. Unlike sourced revenue, influence applies to revenues, but it also applies to all the functions in partnering and the need to influence the customer across the entire customer lifecycle. Ecosystems live and breathe on influence currency and good partnerships thrive on the creation of influence synergies.
The modular approach allows for greater variability, complexity, and adaptability, much like a dynamic living organism. Which is why the term Ecosystem is so appropriate.
Technology and Platforms Business Models Have Redefined ‘the Product’
I am a big fan of platform business models, maybe because they are redefining what it means to crush it in business. A few stats:
-Six of the world’s 6 most valuable companies run platform business models.
-The percentage of global economic activity is predicted to be mediated by platforms in 10 years’ time: 30%
-The percentage of the ‘Unicorn’ billion dollar start-ups are platform businesses: 30%
Platform business models are ALL about GTM Ecosystems. The whole idea of platforms is to get other people to add value (produce on the platform) to drive network effects. In B2B platforms, most of all the producers on the platform are also partners.
This then brings us to the third and probably most important reason why the Ecosystem paradigm is so important in guiding GTM decisions: partners are your product, not as in the channel mindset, people who only sell your products.
In our work with product leaders, who get the importance of building compelling IP-based partner ecosystems, we always ask “what is your ecosystem-product roadmap”, which obviously goes beyond just a company’s product roadmap. This is a crucial question because, at the end of the day, for partner ecosystems to truly thrive, they must be directly connected to and have an influence on your company’s product strategies and roadmaps.
The most dominant and highly-valued B2B SaaS companies drive a significant % of the value that they create for their customers by leveraging their partner ecosystems to engage as follows:
-Build IP on behalf of joint customers which means that your B2B company builds both products that integrate with partners but raises the bar when you offer platform features that get partners to build their IP on top of your platform. This is how partners become your product vs. just someone who just sells with you.
-Treat you and your partnership as a strategic and vital part of their business. We all talk about strategic partnerships, but how many of your partners wake up every morning and focus on how to win in-market with you. The more integrated we are with our partners at a product level, the more likely it is that just as much as your partners are your products, your partners see your product as their product. These are the ultimate partnerships.
-Engage the whole company in support of the partnership. We’ve often said that managing a partner ecosystem is a team sport. Gone are the days when partnering focuses solely on net new ACV. If you have organized your #EcosystemLob to operate on all cylinders, you have convinced your product, marketing, sales, and customer service organizations to co-build, co-market, co-sell and co-retain customers with your partners. For all this internal collaboration to pay off, your partners need to do the same in return. One sure measure of the power of you GTM Ecosystem is when a large % of your partners work on the relationship not just PAM to PAM, but where each company is working with each other across multiple parts of each company’s org; product-to-product, marketing-to-marketing, sales-to-sales, etc.
To sum it all up, if you’re a modern SaaS company with an appetite for growth and market success, you need to think strategically about GTM Ecosystems and leave outdated channel models behind. You can be assured that your competitors are already managing their businesses through the lens of a GTM Ecosystem. And if your CEO does not have GTM and Partner Ecosystem success as a top 3 priority, you may want to consider shorting your stock or quitting your job!