What are the building blocks and driving forces of a successful ecosystem
Ecosystem is an innovation partnership focused on generating value to the end customer.
These are the four building blocks of a successful ecosystem:
Business Approach, Collaborative Culture, Inclusivity, Radical Changes.
In this article we will discuss what each of these blocks means, what are the driving forces of an ecosystem, and what are the steps you need to take when forming a partnership.
What do these blocks mean and how can they be helpful to establish the foundation of your ecosystem?
Business Approach
You need to consider that you might need to change your business approach. You are part of something bigger, so you need to think bigger. The purpose of your business is to create value for your customers, and it is highly likely that you won't be able to do it on your own, so you need to open yourself up to new technologies, capabilities and ideas.
Collaborative Culture
Creating a culture that supports your ecosystem strategy is paramount to building a long-lasting relationship with your partners. The cultural side of partnering is often a huge barrier, as more than half of the surveyed companies say there is a general sense of skepticism about it across the business. Finding a common ground to work together and acknowledging that it’s a win-win situation where both sides need to bring value in order to succeed is a crucial part of your ecosystem strategy.
Inclusivity
Being ready to work with relevant partners regardless of their size is critical for your growth. Small and medium size partners will create relationships with small/medium size clients, but large size partners will expand your product to large accounts. Opening your doors to different sizes of partners will accelerate your growth faster.
Radical Changes
Radical changes are or will be required if you want to develop an agile ecosystem. You need to build strong business foundations to support it. Administrative and legal topics shall be taken into consideration, for a functional and healthy relationship among parties. Legal agreements such as IP and profit sharing, training and monitoring can be very tricky, so you need to pay attention and diligence while drafting these binding legal agreements.
What are the driving forces behind an ecosystem?
1. Incentives
Offering a competitive incentive program is crucial to your ecosystem. Encouraging partners to operate and perform better will bring fruitful results for your company. But the incentives have to be adapted to today’s selling environment, current needs and trends. The incentives have to promote the end-to-end sales process (e.g. marketing funds, training, certifications, client support) in order to maximise your partners’ retention.
2. Partner Mix
As mentioned in our previous blog post, there are different types of partners, so choosing the right mix of partners is crucial to your business growth.
Source: USA Today
First and foremost, you need partners who will increase your revenue. In order to do this right in a competitive market, they will need to understand your product and business thoroughly; ”What is the problem your product solves?”, “How will your partner extract this value and communicate it to the end customer effectively?”
Another factor of your decision making process is to see how easily the partner can aggregate solutions, integrate them into one bundle offering and offer it to the final client. Each client has very different and specific needs, thus a tailor made solution will be required. Does your potential partner have in his/her portfolio other solutions that can be bundled together to satisfy customer needs? If yes, is your partner able to understand the potential of bundling?
The current state of the market is highly competitive; there are many solutions out there, out of which a lot of them are pioneers in their industry. How can you stay afloat? Influencers are an efficient way to do it. Influencers can help with the promotion of your products as well as closing opportunities without reselling your solution. They have the domain knowledge, network and portfolio of clients in specific submarkets. The benefits of using influencer marketing is a faster time to market.
3. Partner Program Brand - Structure
The framework that will formalise and contractualize the principles, rewards, and obligations of all parties involved, is called the Partner Program. Your partners are the most significant component of your indirect Go-to-Market strategy. You should walk them through your strategy and why they should engage with you.
Your partner program must provide clarity and transparency, without creating any confusion in the minds of end customers. At the same time, it should motivate the partners who want to focus on specific areas of the business. As mentioned earlier, we live in a high-specialisation era, consequently, you should follow this principle in structuring your program.
Tiering your partner program based on specific criteria like company size, geography, revenue and the solution each partner offers is the most efficient way to identify the right competencies and award them accordingly. The final customer also needs to know which partner is able to address his/her needs and what kind of capabilities the partner has.
Top-tier partners (those “Premium” or “Platinum” ones) shall not only generate significant revenue for you, but also have the skills and capabilities expected at this level. By tiering the partners based on capabilities, their retention rate will increase, making your growth more sustainable and scalable.
While structuring your program, keep in mind that a partner usually wants to spend the minimum effort on managing this relationship. Keep your program simple and easy to understand, your partners will thank you for that . The administrative burden of managing claims, payments, reward caps or MDF (market development funds) extensions shall be addressed before onboarding your partners. By doing this, they will be more productive and will bring more added-value for you.
4. Constant Engagement
Changes in the tech sector are very frequent. While your business has to continuously adapt to these changes, keep in mind that your partners must be kept in the loop. Don’t forget to communicate any changes to them along with the timeline of their implementation and the potential impact they can have on your product, their sale process or their reward.
Maintaining a fully operational relationship that is beneficial to both parties requires constant engagement with your partners, and some hard work. Furthermore, changes can be initiated from your side by leveraging the experience of field teams and advisory boards. This feedback can be incorporated into your processes and test proposals.
It is paramount to always lead strategy and sales initiatives. There shall be a constant demand generation process for your partners to fuel them with potential clients, and sales support to administer issues that might arise.
Four legal steps you need to take when you start a partnership
The relationship with a partner starts with the understanding of the objectives of each side and what each of them brings to the table. The best practice is to formalise these understandings in a legal document. For instance, you should consider potential overlaps with your partner’s existing portfolio of products and services, decide how you want to handle those cases, and agree on it in writing to avoid future misunderstandings.
The more your business grows, the bigger and more complex your ecosystem will become and the more you will feel the need to have some legal support. There are usually four phases in a partner’s relationship life cycle, from less to more mature, and you need different agreements at each stage:
1. Mutual Non Disclosure Agreement (NDA):
The purpose of this document is to protect important business information such as customer lists, business plans, know-how of both parties involved. NDAs are used at the beginning of a partner relationship when it is required to exchange ideas or technology details.
The main purpose of this document is to enable you and your partner to talk freely and discover if there is a potential collaboration between you and the new partner.
2. Single Client Teaming Agreement
Once you decide the potential partner is a good fit, you want to proceed with the execution part, and it usually starts with some small collaboration that will put the relationship to test. In this phase, both parties need to sign the Teaming Agreement. This agreement covers the execution part for a specific project of a single client.
It addresses expectations for teaming and may also allow resale or the receipt of marketing assistance compensation. It can be also standardized as a template, accelerating the sales team's effectiveness by reusing it multiple times.
3. Simple Alliance Agreement
Next step of your relationship with a partner is the simple alliance agreement. This type of agreement is ideal for building solution specific relationships. Your partner can offer your solution to multiple end customers based on simple commitments.
In this agreement, you have to agree on mandatory things such as the business scope, addressable industries, roles and responsibilities, required resources, marketing sponsorship & business development initiatives, right to resell & respective fee, training, and potential option of preferred discount.
4. Complex Alliance Agreement
This step is the last one. By now, there is already trust and a structured collaborative framework between you and your partner and you want to expand the collaboration even further. You could be proceeding on a joint initiative to cover cross-industries, if applicable, and different geographies, built on multiple commitments both in strategic and monetary level.
Signing this agreement requires both parties to have agreed on the building blocks of this relationship such as, the administration of this venture and internal operational model, required investments, co-branding, skills and expertise required, and profit sharing scheme.
Conclusion:
Tydex has designed a new partner program framework, including the assessment of existing partners. As we mentioned previously, partners must fulfil certain criteria in order to join your program. On top of the design and execution of your ecosystem strategy, Tydex designed an operating model, adapted to the needs of each technological company, in order to offer an end-to-end model. Contact us if you would like to learn about how we can help you build your business ecosystem.