Platform Partnerships That Get Measured, Get Managed

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.

Platform 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. Co-opetition can become competition. Frenemies can become outright enemies.

However, these risks are vastly offset by the opportunities platform partnerships provide — the opportunity to enhance your core product value at a minimal cost, the opportunity to generate revenue from more customers in more markets, and the opportunity to grow meaningful new distribution channels and lines of revenue by collaborating with complementary partners.

Understanding Platform Partnerships

Platform partnerships are collaborations between platform companies that share technology, go-to-market capabilities, and access to mutual customers. These partnerships offer numerous benefits, including access to advanced technologies, expanded market reach, and enhanced customer experiences.

By leveraging each other's strengths, partner organizations can create innovative solutions that drive growth and improve overall performance. These collaborations enable companies to stay competitive in a rapidly evolving market, ensuring they can meet the ever-changing needs of their customers.

Benefits of Collaboration

Enhancing Innovation

Platform partnerships enable companies to drive innovation by leveraging each other's strengths, such as technology, distribution channels, and market reach. By combining their expertise and resources, platform companies can develop innovative solutions that might not have been possible alone.

This collaborative approach fosters a culture of continuous improvement, where partners can learn from each other's successes and failures. For instance, a company with advanced technologies can partner with another that has a robust distribution network, creating customer experiences that benefit both companies and their customers.

Expanding Market Reach

Partnering with platform companies can help businesses expand their market reach by accessing new customer bases, distribution channels, and geographic regions. This can be particularly beneficial for small businesses or those looking to enter new markets.

By partnering with a platform company, businesses can tap into their existing customer base and distribution channels, reducing the need for costly marketing and advertising efforts. This strategic approach enables companies to achieve faster time to market and reach a broader audience more efficiently.

Challenges and Considerations

Navigating Competitive Tensions

One of the challenges of platform partnerships is navigating competitive tensions between partners. When partnering with a platform company, businesses may be concerned about losing control over their core competencies or compromising their competitive advantage. To mitigate these risks, it's essential to establish clear boundaries, define intellectual property rights, and set operational guidelines that ensure the platform partnership aligns with the business goals of both companies.

Effective governance and open communication are critical in alleviating fears of losing control or competitive advantage. By establishing the right balance of robust data-sharing protocols and defining sensitive data, partners can maintain strategic control and ensure that sensitive information remains protected. Regular due diligence and open dialogue can help navigate challenges collaboratively and address concerns early, strengthening the relationship and building trust between partners.

Ultimately, the success of platform partnerships depends on the ability of partners to work together effectively, drive innovation, and enhance customer experiences. By understanding the benefits and challenges of platform partnerships, businesses can make informed decisions about how to leverage these collaborations to achieve their strategic goals.

What gets measured?

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.”

Data breaches, for example, are a significant risk that must be diligently assessed to ensure robust data governance and security measures are in place.

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.

Utility value

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 innovative solutions 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 by leveraging new technologies.

Measuring and managing utility value of customer experiences is pretty simple — if consumers aren't making use of products, they're not creating utility value. If they initially make use of products, then stop using them, they're clearly not creating much value.

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.

Distribution value

Platform partnerships initially make sense when there is some commonality across customers groups of both platform companies. 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 expanded market reach that new platform partnerships bring, and prioritising the right innovative solutions 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 of platform partnerships can happen in many ways. Could new platform partnerships 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 platform companies, by telling local customers 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.

Revenue value

Ultimately, the ‘magic metric' for all platform companies 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 platform partnerships tends to have a compound positive effect on the ability of each partner to generate revenue.

Early in their life cycle, Google made widgets available to publishers to provide search features, creating utility value - better customer experiences - 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. Every new search brought with it a new opportunity to generate and share advertising revenue. This smart, simple platform partnerships 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 e-commerce platforms to drive discovery and purchase of partner-built products — keeping a fee-based share of the proceeds in the process.

Utility + distribution + revenue = partner organizations' platform partnership success

It's a simple formula, but equally applicable for consumer or business platform companies, early or late in the platform development life-cycle, 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 create utility, distribution, and revenue value for your platform, your customers, and your partners.