“I know it’s counter-intuitive, but try to wrap your brain around the notion that this increasing asymmetric market dominance by an elite contingent of cross-category superpowers may actually bring increasing market opportunity for the ISV “great unwashed”—-If that great unwashed can shed certain marketing illusions holding them back in the age of the software superpowers.” Asymmetric Marketing: Tossing the ‘Chasm’ in the Age of the Software Superpowers, Joseph E. Bentzel
In Part 1 of this series, I show how the “Disrupt or Be Disrupted” mantra popular in Silicon Valley is a false choice and marketing illusion for tech startups—-and that the “3rd way” of monoculture-advantaged partnering (MAP) was successfully used by the early Microsoft, Google, RedHat, VMware, Adobe, and others as their go-to-market strategy.
In Part 2, I take it a step further and describe the Superpower Pattern—-the lifecycle of market dominance that is activated by startups that execute a monoculture-advantaged partnering strategy. The Superpower Pattern is the upstream alternative to the downstream-focused “technology adoption lifecycle” or TALC.
In Part 3, let’s look inside the Superpower Pattern and explore the role of alpha partner “DNA inheritance” in driving exponential growth for upstream-focused startups.
Your First Upstream Partner Deal Provides a Growth ‘DNA Inheritance’
Unlike downstream ‘market of 1' sales approaches, upstream partner deals with existing monocultures and centers of market gravity are not simply ‘funnel’ or revenue events. They are much more than that.
When an innovative platform startup successfully executes its first upstream partner relationship with an alpha player—-a relationship in which the innovator’s platform technology or service is incorporated as an ‘ingredient’ inside the alpha player’s app, cloud, network, system, solution or experience—-a growth and market power upgrade is ‘downloaded’ to the platform innovator.
I call this market power upgrade an alpha partner DNA inheritance.
This DNA inheritance supercharges the growth of those platform innovators that intelligently capitalize on it, and is in evidence in the wake of your first deal.
Moreover, when effectively capitalized on, it is this DNA inheritance from Deal 1 that sets up the follow-on stages of the Superpower Pattern.
For example, after Microsoft did its MS DOS deal with IBM, every PC cloner competing with IBM saw MS DOS as a must-have ingredient in their system. And after Google did its ‘Powered by Google’ search deal with Yahoo, every other portal competitor of Yahoo rapidly plugged in Google as their search ingredient.
Alpha partner DNA inheritance takes multiple forms—-from public validation of a platform marketer’s offering by an alpha player, to permissioned access to the alpha player’s customer/partner ecosystem, to positive brand association, to new funding opportunities, and more.
Here’s a representation of 10 common ‘strands’ of alpha partner DNA inherited by a platform startup in the wake of executing an upstream ingredient partnership with an established center of gravity or monoculture.
Market Validation: Ask any B2B or B2D sales or bizdev professional—While an end customer or end user reference is powerful form of market and industry influencer validation, an alpha partner reference is a 10X force multiplier of that. When an alpha partner validates your platform as an ingredient of their offering, you have moved well beyond general ‘product/market fit’ to product/partner fit. This form of market validation will also attract analyst, journalist and other industry influencer interest in your platform and drive your visibility far beyond ‘Deal 1'.
Permissioned Customer Access: When your platform ingredient is incorporated into an alpha partner solution you gain follow-on permissioned access to their installed base of customers for both support and upsell/cross-sell opportunities. Try entering the market of an alpha player without market permission and you may find your offering in the cross-hairs of the alpha player’s installed base defense programs.
Developer Ecosystem Access: Alpha player monocultures already have established networks of developers and ISVs. When you execute an upstream partnership with an alpha player you also gain access to these networks as your potential partners without having invested a dime in developer evangelism.
Brand Association: An upstream deal with an alpha partner associates your brand and their brand in the minds of future customers and partners. This kind of brand building and brand buzz advantage could cost your company its profitability if you had to build it directly using paid advertising. When you successfully execute an upstream model, it is free.
Roadmap Access: An upstream deal with an alpha partner provides you with deeper access to their future product roadmap (perhaps even across multiple LOBs and product families) giving you a time-to-market and feature innovation advantage in your own platform development and competitive differentiation.
Event Participation: By participating in industry events, trade shows and webinars with your upstream alpha partner, you multiply your opportunities for both future deal flow from that partner, new partners and major end customers with special requirements that you are in an optimal position to provide.
Downstream Channel Access: As with developer networks, many alpha player monocultures have established downstream channel relationships—-from VARs to consultants to systems integrators—-that will now be open to your value proposition and see your ingredient as a platform for expanding their reach and incremental revenue.
Senior Executive Networking: In terms of beefing up your future management team, an upstream deal enables you to grow a wider and deeper network of executive contacts and referrals, as well as ‘advisory board’ participants.
Investor Access: Most major tech players now have their own VC arms, and/or VC firms they have formal or informal relationships with. Additionally, angel investors can also be found among your upstream partners.
Attract Competitors of Alpha Partner 1: Last but not least, your DNA inheritance from Alpha Partner 1 serves as a market magnet—-attracting new partners that directly compete with your first alpha partner and want to benefit from access to your platform. A recent high profile example? How about Docker. After Docker pivoted from its original ‘DotCloud’ PaaS business to become an upstream ‘containerization’ ingredient for other providers—-it announced a deal with RedHat for inclusion in OpenShift. This one deal accelerated tremendous follow on adoption and growth of the Docker developer network among RedHat competitors and others in and around the RedHat & OpenStack center of gravity.
The alpha partner DNA inheritance that flows from upstream marketing success is the ‘gift that keeps on giving’. Here are 3 takeaways relative to DNA inheritance.
1. Partner Business Development is Ground Zero for Growth
When one looks under the hood at the evolution of the industry’s largest and most dominant players, one finds partner business development at the core of growth.
This is counter-intuitive to today’s focus on direct sales and inbound marketing automation. It is partner business development that provides the ‘human intelligence’ (HUMINT) to close that first upstream deal that triggers DNA inheritance and all its follow-on benefits.
2. DNA Inheritance is a Logical Foundation for Marketing Programs
When one really takes the time to understand the various strands of alpha partner DNA inheritance listed above (and there are more not listed), it’s easy to see that that DNA inheritance provides a structured framework for outbound ‘bizdevops’, i.e. the marketing support programs that help the partner bizdev team do their job.
3. It is DNA Inheritance That Drives Lower Sales & Marketing Spend
While the direct sales model has many benefits, it is expensive to execute. For example, Salesforce.com still spends 50% of top line revenue on sales and marketing, and for that reason struggles with profitability even after a 15 year operating history.
And even SaaS marketing ‘automation’ vendors, e.g. Marketo spend more than 65% of revenue on sales and marketing. This is prohibitive for many SaaS, app and ‘anything-as-a-service’ (XaaS) startups and their investors.
By contrast, the upstream ingredient model I advocate historically enables a much lower cost of sales and marketing precisely because so much of your future marketing musculature is ‘inherited’ from your alpha partners.
In Part 4, I go into how the kind of upstream partner marketing model I’ve outlined in Parts 1-3 can be creatively applied in today’s ‘anything as a service’ (XaaS) economy by cloud microservice and API-as-a-product startups.