The proliferation of digital products and services has encouraged an entirely new business model that increases the value of tech partnerships. While traditional businesses rely essentially on their resources to operate, tech companies go beyond and plug their partners into their value proposition. Therefore, the value of the company is no longer defined by what it can provide but rather by what its ecosystem can provide.
Many SaaS (Software as a Service) businesses now depend on well-connected ecosystems that help them scale. Today, these platform-based companies include some of the biggest brand names in the world and represent a combined value of over $7 trillion.
Why are platform ecosystems so important?
Companies need tech solutions to run their business. Many use hundreds of apps that don’t always work well together. When it comes to software products, this lack of integration can decrease value, until making the product nearly useless.
Platform ecosystems aim to integrate a variety of solutions. Usually, the integration between two solutions is achieved through the use of application programming interfaces (APIs). Those APIs are then embedded in software products to provide a specific function, such as processing payments or facilitating online storage.
For many big players in the tech industry, these APIs are crucial. For instance, online payment processors like Stripe and PayPal provide APIs that developers can use to integrate payment services into their apps and websites. Slack integrates with online storage services like Google Drive and Box to add a file-sharing layer to their business collaboration platform. HubSpot has hundreds of app partners to integrate sales and marketing functions across different custom and off-the-shelf enterprise apps. The list goes on.
Fundamentally, this interaction between different platforms eases the transformation of technology from siloed processes to a shared ecosystem that delivers greater value to end-users. It provides tech companies with unprecedented opportunities to scale by becoming a vital part of the wider software ecosystem that so many now depend on.
How can platform ecosystems build a better business?
Seven out of the ten world’s largest companies are leveraging the platform business model, and use it to achieve exponential growth.
Building great tech partnerships makes other products or services relying on yours. Organizations that are part of the ecosystem streamline business processes with a mutual exchange of value. This is a win-win model.
While the platform economy can inevitably be challenging, it also brings real and viable opportunities to tech companies. With the right partnerships, companies from small startups to established firms can bring new products to the market in a short time, and become a fundamental part of the wider ecosystem. This way, the success of tech companies is mainly defined by the value of their partnerships. If Amazon is one of the world’s most valuable companies it’s because millions of other businesses depend on its services, which are deeply integrated with their technology.
”With the right partnerships, companies from small startups to established enterprises can bring new products to market in a short time and become a fundamental part of a wider ecosystem. This way, the success of tech companies is mainly defined by the value of their partnerships.
How to get started in the platform economy and tech partnerships?
The platform business model depends on establishing strong partnerships with organizations whose products can serve or enable one another. Tech partnerships range from high-level platforms to lower-level solutions that provide specific features.
The first step to making a foray into the platform economy is to determine wherever your offer fits in. You need a clear picture of why developing a platform ecosystem is important to your company. Only then can you prospect for new tech partners. You must also ask yourself why a partner would want to build something using your API in the first place.
Ultimately, any partner program should be structured based on the needs of end-users. After all, the success of your partners is what drives your success eventually.
If a partnership can help your partners expand and enhance their offer, attract customers, or measurably improve efficiency, then that’s the sort of relationship that encourages both parties to build a stronger and better business.
How to measure value in a platform ecosystem?
One of the silver linings of the platform ecosystem is that it enables businesses to cocreate value. Unfortunately, it can be quite challenging to quantify and qualify that value.
The platform economy is based on the network effect. It’s the business of enabling interactions of which you need to track, measure, and identify bottlenecks. To achieve this efficiently, you need to define the most important interaction(s) that your platform enables. A platform like PayPal, on one hand, might just proceed with an online payment. Content platforms such as YouTube or Quora, on the other hand, define user attention as the core metric.
The ability to measure the value that a partner ecosystem generates is vital for success. But you should always anticipate potential issues with trust and data abuse. This is why tech companies need to be upfront with their prospective partners on the sort of data that their APIs collect and the reasons for it. These factors must be made transparent in all policies and contracts.
How to avoid the pitfalls?
Technology is changing so quickly that tech organizations need to approach their partnerships with value creation in mind. And not just the integration of two systems. Furthermore, every company that makes up the platform ecosystem has different goals and requirements. So, they shouldn’t all be managed in the same way.
Lack of clear communication is one of the most common pitfalls to avoid in any partnership. This frequently occurs when companies consider such agreements as purely transactional when they should be based on a more consultative approach. Companies need to establish a consistent value-driven agenda and align with each other’s cultures and decisions.
In the platform economy, strong partnerships are everything. They help startups and small businesses become more competitive and position themselves as recognized standards in their industries. The success of many innovative tech startups lies in the way their products confer intrinsic value to those of their partners. In other words, their success is mostly or fully driven by the success of their partners.