According to a study by Accenture, 76% of execs believe that most of today’s business models will be unrecognizable within the next 5 years.
The cause for change is the rise of ecosystems. Gartner defines a digital ecosystem as “an interdependent group of enterprises, people and/or things that share standardized digital platforms for a mutually beneficial purpose (such as commercial gain, innovation or common interest). Digital ecosystems enable you to interact with customers, partners, adjacent industries — even your competition.” The IDC estimates that businesses who adopt an ecosystem busines model will grow 50% faster over the next two years than those who don’t.
…they have to become willing participants within open, flexible and sustainable ecosystems.
It’s also true that every company is becoming a technology company. By extension, almost all companies will become participants within some or other digital ecosystem. As Forbes points out, “Today, no company can make, deliver or market its product efficiently without technology.” Take for example John Deere. Its origins are in the manufacture of agricultural machinery sold entirely to farmers. Today you’d be forgiven for thinking that John Deere is more of a tech company at heart – using cloud computing and big data to provide agricultural management solutions. In today’s non-linear and complex world, no business is able to compete in the market on its own. To grow and prosper they have to become willing participants within open, flexible and sustainable ecosystems. For the ICT channel, it’s essential that participants tap into ecosystems that bring together buyers and sellers. Ecosystems have proven to deliver business value, resilience and stickiness and the ability to target connections and collaborate across platforms.
The purpose of a digital platform is to automate the matching of suppliers to customers…
Digital platforms (as the heart of the digital ecosystem) automate the intermediary, broker or marketplace functions. Common examples are Uber for rides, Airbnb for accommodation and PayPal for payments. The purpose of a digital platform is to automate the matching of suppliers to customers ideally in a manner that can be monetarized. In addition, digital platforms need to exploit Metcalf’s Law, which suggests that the value of a network is in direct proportion to the number of nodes or connected users.
A platform must also meet 6 unique platform traits:
- Agnostic: any supplier should be able to list on the platform.
- Unbiased: to get to the top of the product page, the supplier simply needs to work harder than their competitors.
- Tech-driven efficiency: the tech must be simple to lower friction.
- Continuously improving assets must be created and improved in relatively short sprints.
- Support marketing: the platform itself shouldn’t promote on the supplier’s behalf but it should provide the means for them to do so.
- Ecosystem player: the platform itself should link into the broader ERP and tech landscape in the spirit of reducing friction.
More than this, a solid, end-to-end platform nurtures the ecosystem and ensures that it is adaptive and long-lasting.
What does this mean for channel businesses?
Several realities face channel businesses in the traditional channel environment. Distributors are faced with tighter margins and more pressure from VARs and SIs to add value. This adds pressure from a profitability point of view as adding value normally involves adding skills at substantial cost. Distributors need to add sustainable value while operating at lower costs, hence the drive to automation and customer self-service.
Disruptive channel forces highlight the need for distributors to rethink how they service their customers…
Distributors are also faced with the risk of their services becoming commoditized and from service brokers who can easily establish similar service aggregation capabilities.
The channel has come a long way from the days where deals were predominantly struck up based on box shifting. In 2020 there is more diversity in the way the channel community works together leading to a far more open channel ecosystem. Disruptive channel forces highlight the need for distributors to rethink how they service their customers by re-aligning their businesses to optimize operational efficiencies and drive customer satisfaction.
An ecosystem is only healthy and sustainable if it connects a wide range of partners….
Ecosystem participation requires significant organizational change. The HBR suggests that ecosystem participation is predicated on an outward-facing culture and the ability to collaborate easily with a host of ecosystem complementors. For established channel players, this doesn’t happen easily as businesses tend to create either vertically integrated and highly controlled networks or provide a platform for open innovation leaving ecosystem management to the users.
Customer centricity underpins healthy ecosystems. An ecosystem is only healthy and sustainable if it connects a wide range of partners and caters for fast evolving customer demands. Increasingly, customer want to streamline and minimize friction in their purchasing processes. Platforms achieve this by providing a comprehensive buying and evaluation process. This complicates the go-to-market strategies for many product companies who must now create value and differentiated in a highly commoditized channel.
About the author:
Dave Smythe is Head of Marketing at ChannelCenter. ChannelCenter’s fully digitised customer platform is uniquely positioned to help ICT resellers and customers engage and transact. Although we believe in the plug and play nature of our platform, we partner with you and do much of the heavy lifting to ensure hassle-free integration and successful platform adoption.