Let’s Go Back
It seems like just yesterday. 2006. My graduation year. The year British mathematician and marketing executive Clive Humby boldly proclaimed,
Data is the new oil.
We were at the beginning of a massive change. Cell phones went from luxury to ubiquitous. SMS became our primary method of communication with friends and family.
The world’s information was now at our fingertips and in our pockets.
Myspace ruled the social zeitgeist where relationships and communities were built. Everyone was a creator. I was recording and “mastering” tracks from my band Prophecy for the Damned. (Ask me about that over drinks sometime).
For the first time, the experience of sharing and discovering online became normal not only for me, but for all of us. Clive Humby was right. After his prophecy, the race for digital value was on. Mass quantities of data were mined, centralized, and monetized.
Not just by private companies, but also governments. Remember the Patriot Act? The NSA? Wikileaks and Edward Snowden?
Everyone wanted the digits.
And the winners reaped mass rewards. Both B2C and B2B businesses alike. Amazon shares traded at around $30 in 2006. In 2022, they traded around $3,000. A 10,000% increase in value. Salesforce shares traded at $6 in 2006. In 2022, $300. A 5,000% increase in value.
For B2C and B2B, data really was the new oil.
That is, until data polluted the world. What was once signal, became noise. What was once convenient, became inconvenient.
Data was the new oil. Until data lost our trust.
Now, trust is the new data.
The Changing B2B World
Before the Digital World was normal, we lived in the Brand World.
In the Brand World, B2B companies primarily relied on indirect channels. For example, telecom companies dominated the business landscape like SaaS companies do today.
For them, “going to market” required a deep understanding and partnership with the indirect players. Back then, B2B companies could hardly measure the ROI of direct marketing. Furthermore, access to their buyers was full of gatekeepers. Therefore, partners played an essential role in acquiring, selling, and servicing customers.
For many of us who have lived in the B2B SaaS world for the past decade or two, “indirect” hasn’t been our normal. Simply put, indirect channels weren’t needed during the shift to the software-eaten, data-driven world the same way they were in the past. B2B companies could acquire new customers cheaply and efficiently. Data amassed by Google, Facebook, and others allowed companies direct access to new customers with high margins and low acquisition costs.
Platforms like Salesforce precipitated the centralization of customer data and begat entirely new categories of sales digitization and marketing automation, further accelerating the arms race for digital oil.
The origins of “indirect,” “channel,” or “business development,” as it was taught for other industries wasn’t the world that SaaS natives grew up in. SaaS companies, instead, could control their own destiny, it seemed, without reliance or partnership with third parties.
After 20 years of SaaS models, less than 30% of SaaS sales are indirect, and most of those are through a small number of global enterprises like Microsoft.
Sirius Decisions predicts indirect sales will continue to shrink every year for the next decade. And yet… Salesforce claims they will recruit 250,000 new partners over the next four years while at the same time effectively shutting down their reseller program. And yet… Even with all of the centralization of and exploitation of data, according to the WTO, 75% of trade is still indirect.
Wait, what? What gives? Something must be changing. Again.
B2B SaaS companies with enduring aspirations must recognize that what got them here will not get them there.
The Three Eras of B2B provide a lens to look back in order to look forward.
● The Era of Sales Digitization (2000’s)
● The Era of Marketing Automation (2010’s)
● The Era of Partner Ecosystems (2020 +)
The first two eras were underpinned by one dominant concept. Data.
The “cloud” democratized access to read, update, and analyze data at scales previously unthinkable. Entire industries were born and others entirely disrupted. For the first time ever in sales, everything could be tracked to the decimal. And then for the first time ever in marketing, everything could be automated.
For the past decade, we’ve been living in this era of marketing automation. A time defined by technology and direct access to a new market of customers. When one growth channel stopped producing ROI, new channels seemed to emerge to fill the void.
Methods and access to market were innovating so rapidly that legacy indirect channels failed to adapt at the same pace. New technologies empowered a new generation of companies and jobs where they could build, market, sell, deploy and retain directly.
In the Era of Marketing Automation, digitally native B2B SaaS companies had little to no indirect business. Data was the fuel. Automation was the accelerant. Heck, large swaths of B2B companies even have it in their category names! “Digital Acceleration,” “Sales Acceleration,” “Revenue Acceleration.”
But now, consumers are sick of the acceleration.
We’ve been polluted.
There have been some exceptions. SaaS and Marketing Automation natives like Salesforce, and more recently HubSpot, leveraged and adopted indirect relationships and interdependence to grow their market presence and establish industry dominance.
But they did it differently.
As they grew, their partner models looked less like their predecessors (IT channel of old) and a transformation of traditional partner channel began.
Jay McBain (formerly of Forrester and now Chief Analyst at Canalys) summarized this transformation as the trifurcation of the channel, where partners began to affect different parts of the value chain.
He summarized the trifurcated channel as the Influencer Channel, Transactional Channel, and Retention Channel.
1) Influencer Channel
With buyers spending 68% of their journey digitally before speaking with a salesperson (direct or partner) and an astounding 71% of them reaching vendor selection after a digital-only journey, brands are wising up to the importance of getting in front of customers early and often. The “influencer channel” is made up of affinity partners, referrals, advocates, agencies, ambassadors, and alliances. Unlike channels of the past, these partners influence the buying process but are not involved in the transaction.
2) Transactional Channel
The traditional “transactional channel” doesn’t go away. In fact, partners that have spent years on the “long-tail” list may actually find a home somewhere else in the program that has, up till now, only pushed them to resell. Tweaking channel data management, automation, insights, onboarding, incentives, co-selling, and co-marketing will determine winners and losers in this era.
3) Retention Channel
Knowing that the customer journey never ends in a subscription scenario and that brands need to re-earn a customer’s business, partners that can drive adoption, ongoing customer experience, and the ability to upsell and cross-sell become critically important as the “retention channel.” These partners appear as consultants, integrators, adjacent ISVs, digital agencies, etc.
Channel leaders of the past expected their partners to execute all three. Until they didn’t.
Today, some partners affect one motion sometimes, and other partners affect others at other times. The lines have blurred. Jay’s Forrester research predicted them to blur further. And they did.
His prediction from a few years ago about millions of shadow channels entering the market came true. When looking through his trifurcated lens, more than 80% of (potential) partners are showing up before or after the sale, breaking the transactional mold.
Even Brand World natives with legacy channels like Microsoft, Adobe, Oracle, SAP, and Intuit are changing their indirect motions for this new era. As Jay pointed out, Microsoft in 2019, “[A]nnounced that 7,500 new partners were joining their program each month. What it didn’t announce is that 80% of those partners were nontransacting.”
In the Era of Partner Ecosystems, enduring B2B companies won’t rely on traditional transacting indirect channels. Goodbye phrases like, “partner sourced,” and, “partner sold.” And goodbye easy access to direct channels from cheap data.
In the Era of Partner Ecosystems, enduring B2B companies won’t rely on data. In the Era of Partner Ecosystems, enduring B2B companies will rely on trust.
The winners will rely on partner ecosystems.
The Era of Partner Ecosystems
In the Era of Partner Ecosystems, enduring B2B SaaS companies create, nurture, and leverage their Ecosystem as core to their business. They value their Ecosystem the same way they value their customers, their products, and their team.
For these companies, Customer Experience and Partner Experience require the same standards. As the world exits the Era of Marketing Automation, it’s time to codify what it means to live in this new world.
My former boss and founder of Drift, David Cancel, often claimed the leadership principles we aspired to were, “Simple, not easy.” We experience his words first-hand and daily. He’s right. But most first principles are much simpler to understand than they are to live by.
Yet the inverse feels more true for building partnerships and communities in the Era of Partner Ecosystems. “Complex, not difficult,” might be how best to describe it. While building for or in ecosystems today isn’t rocket science, there are dozens of incalculable elements.
Partners of all types need to be prioritized, found, recruited, onboarded, educated, trained, incentivized, motivated, loyal, and have the I.P. and tools necessary to promote, transact, or service a product.
It’s complex but comprised of all things that great SaaS companies strive to be great at. Complex, but not difficult. The challenge is that our Ecosystem is not on payroll. The impact won’t easily flow through financial models and spit out clean forecasts.
That’s not to say we won’t look to leading and lagging indicators of success or projections/analyses of investment, profit, and loss, but that the investments and contributions require a different lens and model to create and understand its impact. And new technologies to help.
The 2021 Channel Technology Landscape from Forrester showed a fast growing $5.7B market in channel technologies. Scott Brinker covered it 2022 under the wider lens of partner technologies as the fastest growing technology sector in B2B, with 487% growth.
High performers are prioritizing partner ecosystem strategies.
In 2021, IBM’s Institute for Business Value surveyed over 3,000 CEO’s at high performing companies and found that building new ecosystems and partnerships was their top priority for enhancing customer experience and trust over the next 2-3 years (48%).
Underperformers, on the contrary, ranked it last (24%).
Dedication to partner and business ecosystems are changing the game for all. From executives, to managers, to individuals, all must incorporate how they contribute to and leverage Ecosystems as a core part of their day, week, month, quarter, and year-in-the-life.
What are Partner Ecosystems?
So what are partner, B2B, or business ecosystems anyway?
We can look to ecological systems to start. Natural ecosystems. Good ol’ Mother Nature here on Earth. The simple definition:
An Ecosystem (or ecological system) consists of all the organisms and the physical environment with which they interact. These biotic and abiotic components are linked together through nutrient cycles and energy flows.
Ecosystems with higher biodiversity tend to be more stable with greater resistance and resilience in the face of disturbances, or disruptive events.
In ecosystems, both matter and energy are conserved. Energy flows through the system—usually from light to heat—while matter is recycled.
Let’s break down what this means for B2B ecosystems – and attempt to define B2B partner ecosystems fully:
B2B Ecosystems manifest in the form of Partners (accounts) and Communities (individuals) that either directly or indirectly benefit the end Customer (user) of the B2B Ecosystem parent.
Partners are companies with a shared commercial interest. Communities are individuals with a shared professional interest.
The environments in which they interact are defined by markets and often (but not always) segmented by vertical (industry), horizontal (persona), segment (size), and territory (geography).
These components are linked through flywheels of commerce and information.
Like ecological systems, the greater the diversity of a B2B ecosystem, the greater resistance and resilience in the face of company, customer, partner, community, market disturbance, competition, or other unforeseen disruptive events.
In B2B ecosystems, cost and time is conserved.
Information flows through the system – typically from influence to commerce – while trust is recycled, preserved, and grown.
Where there are ecosystems in B2B, they should mirror systems of ecology. The reality is, ecosystems are everywhere. They are base to life. And the more stable, the more they thrive.
In this new world, the currency isn’t data.
The currency is trust.
A Crisis of Conviction
Trust is increasing in value. There’s not a lot of it to be had these days. An undeniable shift, everywhere.
Trust in the old institutions like governments, major media, and official experts is waning. Trust in new tools and tech platforms is also waning. Trust in strangers is low.
What's that mean if you're a stranger to your customers, partners, or colleagues? To win a market, you have to be part of that market. You have to be known in that market. You have to be trusted in that market.
The crisis of trust is both a danger and an opportunity. Decreasing trust can cause people to tune out, go too inward, retreat, shrink their networks, and reduce their world and the opportunities that come from a broader experience.
If they trust and get burned, they retreat further. That's the danger. But opportunity is there too. A crisis of trust isn't all bad. It's a needed correction to curb the excesses of The Infocalypse and abuses of power.
It brings some welcome discipline to markets and culture. In an increasingly virtual world, it demands the real. The human. The genuine.
It demands a lot out of your company too. But that will help you in the long run. No matter how strong your willpower and company culture, you will be shaped by the incentive structure you're in.
A world that doesn't trust easily forces you to be better.
Our Call to Action
PartnerHacker exists to create a world where everyone can succeed, together. A mission whose time has come. And that’s why I am so excited to launch PartnerHacker.com with my co-founder Isaac Morehouse and a great team.
Rather than duplicate or compete, we want to highlight the best, and be a meta-resource that curates, connects, and comments on all the great stuff that's out there. We have deep conviction in this "partnerships moment.” And it’s not just us. Even the old guard is throwing away the old ways.
The Author of arguably the most influential B2B Sales Book of the 2000’s, The Challenger Sale, Brent Adamson recently published Traditional B2B Marketing and Sales are Becoming Obsolete.
And he didn’t publish it on some no-name blog. This was published in Harvard Business Review (HBR). So what was Brent’s prediction in HBR on the future of B2B sales and marketing?
The future of B2B sales and marketing? An end to B2B sales and marketing.
He didn’t mince words.
Why this shift? We’ll say it again.
Trust is the new data.
Data helped us automate and create efficiencies. Data helped us find, track, and target customers. But we're now awash in data and customers are exhausted by being served up algorithmically-determined content and crammed into impersonal funnels.
The noise is overwhelming the signal.
Customers are people. They have info fatigue. They are looking to trusted influencers and communities to help them make decisions and purchases. They want a seamless experience that fits the rhythms and patterns of their own lives, rather than being bombarded with attempts to fit them into a company's pipeline.
A partnerships and ecosystems approach is the remedy.
It has the power to combine the best of the digital world in all its scale and efficiency with the best of the organic, natural, human world of rich, deep, overlapping networks and nodes of trust.
Welcome to the new world.
Where signal can rise above noise. Where relationships are required for action. Where trust is the new data.
This is our manifesto. A manifesto for the partnerships moment. Where we build robust, complex, and sustainable business ecosystems. Where we partner and win.
Welcome to PartnerHacker.com – the frontline in the era of partner ecosystems.
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