The first two articles in this series examined core concepts of a platform and ecosystem and different strategies for building a platform. This article will dive further into the strategic aspects of platform strategies to look at the “how:” How do you create a platform and ecosystem strategy? What do you need to know about your primary users? How should you measure your progress?
Successful platforms and ecosystems require patience, investment, and thoughtful strategies. The information here reflects what I have learned working at leading platform companies to help you jumpstart your journey.
What should you ask yourself as you consider how to build a platform + ecosystem strategy?
There are many key questions you should address as you consider your platform + strategy. While answers vary by situation, tackling these questions upfront will help you build your platform + ecosystem fit for your purpose.
- Who are the primary users?
- Will they use the offerings internally or expose them externally?
- Is there an API strategy in place?
- What’s the API management approach?
- What types of documentation are required?
- Do they need a development environment? Yours or theirs?
- What other systems/data do you need to coexist with?
- What type of packaging/distribution do they require (e.g., a Marketplace or an OEM strategy?)
- What’s the business model/monetization strategy?
- Who’s doing the billing? Metering it?
- Who owns the data?
- What limitations will be set on partners?
Once you have answers to the above questions, you’ll want to consider what requirements and success look like for each type of platform strategy. As discussed in the first article, defining which approaches are part of your platform and ecosystem strategy is important. Consider the following approaches, which build on each other in terms of their sophistication and complexity.
If your platform...
1. Makes it easy to do something
- Define the audience very clearly. Identify if you will support internal developers or enable third-party partners, e.g., System Integrators (SIs).
- Create a clear API strategy. What are the APIs that you’ll expose? How will they be maintained? What levels of documentation and sample code will you provide?
- This approach also requires you to invest in hiring tech-savvy internal teams to support developers and be very engaged with that community.
- To measure success, focus on (a) adoption rates of the offering by key constituents, e.g., developers, and (b) ultimately tracking monetization strategies; how they make money and share money with you.
2. Gives access to valuable data
- The audiences, in this case, may expand from developers and SIs to include other software vendors (ISVs) who may be building complementary offerings alongside your complete product and are looking to extend their offering through your ecosystem.
- In addition to a clear API strategy, this approach often requires clarity of thinking about the organization's overall product strategy because it carries the potential for conflict. What happens if developers or ISVs build something that may compete with your plans? How are you communicating product roadmaps? If you are going to compete with your partners, how are you identifying and communicating changes that may threaten the ecosystem?
- The required skillsets for this approach change because it is not just you selling your offering. You and your partner are selling offerings that use common underlying data and help your customer solve a more complex problem. You’ll need to invest in a team that can help position, recruit, onboard, build, and develop potential go-to-market (GTM) models with the partner ecosystem. How do you and your partners sell together? How do you educate the market? Also, consider the different needs of developers, from a self-sufficient one to an ISV or SI that may require much more sophisticated documentation and programs to adopt your data/technology.
- Measure success by how often end customers are adopting the combined solutions that you and partners are delivering. Track the type of revenue retention and growth the joint offering can drive. This is an important metric to monitor because we have consistently seen businesses that have partner + ecosystem attached outperform net retention by 10%+.
3. Builds a flywheel (by automating a process and driving more value)
- In this case, the priority audiences are typically ISVs and SIs, rather than developers, that build around the core platform and extend it, helping to create a seamless experience for the end customer.
- Here, you’ll have fully built out an integrated workflow, making the alignment of product roadmaps even more critical than in the second scenario. Workflows that integrate and work together will invariably become apps. It’s then a question of who is building those new or complementary apps and how broad the “gray zone” is between the platform provider and their ecosystem partners.
- This more complex approach to a platform + ecosystem has the highest potential of creating conflict and confusion in the marketplace. It’s essential to have a very clear product roadmap that demonstrates your understanding of all the elements of who your potential partners are, how you may benefit or compete with them, and how you think about it in terms of resourcing and product engagement.
- There is a definite need for a recruiting effort with ISVs and SIs. Generally, you’ll find an expectation that combined offerings will be available through marketplaces or other similar distribution mechanisms. It’s also important to define how your ecosystem will maintain confidentiality with respect to data sharing and ISVs and SIs partnerships.
- Success is measured through joint development, joint selling activities, and often a revenue share between the partners and the platform provider, which helps defray various development and joint GTM program costs.
Regardless of the approach you take to building your platform + ecosystem, a common denominator of all types is the cross-functional engagement model within your organization. No single team can figure it out in a silo. Creating a platform + ecosystem involves product, engineering, marketing, etc. These teams need to collaborate in terms of resourcing, defining explicit dependencies, and investments.
Another point to keep in mind is that building a platform + ecosystem is a long-term play. Even at the board level, it should be thought of as an investment and not an initiative to deliver immediate returns or replace your core sales and marketing efforts. Think in terms of years for the build-out. For example, a three-year plan could include Year 1 - build the platform, Year 2 - gain early adopters, Year 3 - scale to potential monetization.
As you hone in on your build-out plan, here are some common questions that can help to narrow in on where you need to focus your cross-functional alignment:
- What are the investment and return time horizons? Developing the platform strategy and the recruitment and onboarding of developers/ISVs/SIs is a long cycle and requires a sustained effort that will not yield immediate results.
- What resources and commitments are required to execute? Building a platform and ecosystem strategy is, by definition, a cross-functional effort. Thus, technical, resourcing, and business dependencies across teams (R&D, marketing, sales & pre-sales, partnerships) must be identified, funded, and tracked.
- What are the key milestones and checkpoints? Throughout the extended cycle described above, there needs to be a program management mindset that tracks progress across all functions and adjusts expectations and requirements to reflect the state of the offerings, market requirements, competitive landscapes, etc.
What I find most exciting about building a platform + ecosystem is that there isn’t a one-size-fits-all approach. In this article series, I’ve endeavored to capture the basics as a starting point as a resource for organizations looking to create their platform + ecosystem approach. As you think of your unique situation, it is helpful to draw from the many excellent examples of companies that have navigated different approaches to building successful platform + ecosystem businesses. I welcome your thoughts on the learnings and strategies we've discussed.