- July 26, 2024
- Posted by: Larry Walsh
- Category: Blogs
This is the third and final blog in a series on ecosystem pillars.
By Larry Walsh
In their book, “The Ecosystem Economy,” authors Venkat Atluri and Miklós Dietz talk about how the collaboration between companies to address a customer’s need results in an equitable production of value to all involved. In other words, everyone makes money.
The question is how to divvy up the spoils of an engagement.
As discussed in the previous blogs in this series, ecosystems require three core components to make them viable to participants: opportunity, trust, and monetization. Opportunity is the chance to engage. Trust is the assurance that everyone in the ecosystem will act in good faith. And monetization is knowing that everyone will make money.
A sales engagement should result in revenue. Ecosystem revenue is a bit harder to calculate than revenue for a conventional transactional sale. When you have multiple parties involved, the monetization can get complicated. Let’s look at a couple of scenarios.
- Single points of sale: One benefit of ecosystems for customers is having a single point of sale for an engagement. While this is convenient for the customer, it makes one party responsible for collecting money and disbursing funds to the other parties. Does everyone get an equal share?
- Concert engagements: Ecosystems don’t need to go through a single point of sale; each party may have a separate agreement with the customer. However, if the customer’s budget isn’t sufficient to pay for all the products and services, some partners might need to discount to make the deal happen. How much each party discounts — and what remains in profit — is the issue.
- Compensating influencers: Not every party in an ecosystem engagement is transacting; some are just influencing. Influencers, particularly global systems integrators (GSIs), have tremendous sway over the customer’s product consideration and decision-making. Should they receive a share of the deal? If so, how much should they get and who’s responsible for paying them?
- Disaggregated sales: In ecosystems, not all sales happen at the same time. By definition, an ecosystem engagement is complex. Some parts of an opportunity may sell faster than others. Consequently, other partners could be left waiting for their deals to close or, in some cases, see their opportunities evaporate.
Vendors do have options for helping partners navigate the monetization of ecosystems.
- Create reference architectures: Vendors can aid partners in the development of revenue-generating coalitions by providing blueprints that define the components of common ecosystem engagements.
- Establish best practices: By providing partners with formulas and benchmarks for understanding the economics of partnerships and ecosystems, vendors can clarify the value that comes from collaboration.
- Manage ecosystems: Vendors can take a leadership role in ecosystem engagement, acting as a control point and coordinating the pricing and compensation process.
- Offer incentives: In rewarding ecosystem participants for closing deals and completing projects, vendors make monetization a little easier to visualize.
As with all things in business, there are no guarantees that an ecosystem will produce a monetary benefit to one or any of its participants. Vendors and partners should work together to define the economics of relationships and engagements, resulting in transparent roles, responsibilities, pricing, and profit.
Larry Walsh is the CEO, chief analyst, and founder of Channelnomics. He’s an expert on the development and execution of channel programs, disruptive sales models, and growth strategies for companies worldwide.