Applying a simple formula can balance platform partner risk and opportunity.
By Hugh Durkin
The list of ‘product’ companies that have committed to become ‘platform’ companies is short. The list of ‘product’ companies that have successfully become ‘platform’ companies is even shorter. Mature partnerships — and partner programs — are common trait of those rare successful platforms.
Partnerships bring risks along with them, particularly when the partnership involves relinquishing control over your customers’ experience to platform partners.
Their customer experience becomes yours. Your customers become their customers. Often, your revenue can become their revenue. Coopetition can become competition. Frenemies can become outright enemies.
However, these risks are vastly offset by the opportunities platform partners provide — the opportunity to enhance your core product value at a minimal cost, the opportunity to scale growth to more customers in more markets, and the opportunity to grow meaningful new lines of revenue.
By managing risk and opportunity well, ambitious technology companies stand a strong chance of emulating successful platform companies like Facebook, Google, and Slack. Risk management starts with risk measurement. To steal a phrase from Peter Drucker “what gets measured gets managed.”
So, for platform companies with partnership aspirations, what gets measured? How can the risks and opportunities be managed and measured to equally benefit consumers, businesses, and platforms?
Most successful platforms measure and manage platform partnership value in three simple ways.
Every platform partnership and strategy should be focused first and foremost on creating utility value for customers of both platforms. For B2B platforms, this means creating utility value for businesses, and for the people working for those businesses. For consumer platforms, this means creating utility value for people who interact with or through that platform. Under-utilised partnerships always fail.
Utility value can manifest itself and be created in many ways. Developing and implementing social share buttons removes friction from the process of sharing content. Automating repetitive tasks through bots can save people time. Integrating and embedding simple task-based workflows into the many products and platforms people already use can help them get work done faster.
Measuring and managing utility value is pretty simple — if people aren’t making use of it, it’s not creating utility value for them.
If they initially make use of it, then stop using it, it’s clearly not creating much value either. Successful integrations lead to lower customer churn across both partner platforms, increased usage and time spent by people in both partner platforms, and faster adoption of both partner platforms for new users and groups of users. It’s a win-win-win.
Platform partnerships initially make sense when there is some commonality across customers groups of both platforms. Creating quick win utility value is faster and easier, as mutual customer problems are understood more quickly and clearly — and the newly created value is easier to communicate to overlapping customer groups. However, this is rarely a 1-for-1 match. There will always be some of your customers who have no previous interaction with the partner, and vice versa. This gap provides a latent, usually significant opportunity.
Understanding the size of the distribution opportunity new partners bring, and prioritising partners based on it, is the key to unlock top-of-funnel growth for platforms.
Understanding the size of the opportunity you make available to partners is also key. Mutually beneficial value exchange drives mutual partner success.
Those platforms that invest in value exchange mechanisms — partner directories, app marketplaces, contextual discovery experiences, and co-marketing programs — always reap significant returns on that investment.
Measuring and managing distribution value happens in many ways. Could a new partnership feed top-of-funnel activity for your business, driving user and customer growth over the long term? Is there an opportunity to drive increased awareness of your offering in new markets, through co-marketing activities with new partners? Can partners drive awareness of your platform to other partners, by telling the world how you’ve helped them scale? The answer to each of these questions unlocks ways to measure the distribution value you provide to partners, and that partners provide back to you.
Ultimately, the ‘magic metric’ for every business in business is revenue. It’s the oxygen that every business needs to survive, grow, and prosper. Revenue is also a clear indicator of how effective platform partnerships are for everyone involved.
Creating utility and distribution value through partnerships tends to have a compound positive effect on revenue.
Early in their life cycle, Google made widgets available to publishers to provide search features, creating utility value for customers and publishers, and distribution value for Google. Eventually, this created revenue value for both publishers and Google through the creation of Google Adsense and Adwords. Every new search brought with it a new opportunity to generate and share advertising revenue. This smart, simple partnership strategy put Google on a path to potentially become a $1trillion company.
Revenue value can be measured in multiple ways, at multiple levels, directly or indirectly. SaaS platforms may notice customers who activate many partner integrations churn less, and spend more. Consumer platforms may notice people who pay for partner-built games by using the consumer platforms’ own payment method use that same payment method to pay for other products and services. And both consumer and B2B platforms can create their own marketplaces to drive discovery and purchase of partner-built products — keeping a fee-based share of the proceeds in the process.
It’s a simple formula, but equally applicable for consumer or business platforms, early or late in the platform development lifecycle, and independent of any vertical considerations. Each of these value areas can be measured and managed in isolation, in combination, and in sequence or in tandem.
Through applying this formula, in whatever way you choose, my hope is that your platform partnerships prosper and generate utility, distribution, and revenue value for your platform, your customers, and your partners.