4 Ways Product Managers and UX Designers Can Monetize Ecosystems
For Product Managers and UX Designers, developing strategies to overcome growth challenges, especially in an ecosystem, is what keeps them up at night.
At the 2019 IoT Expo and Conference, I had a chance to observe how IoT companies manage growth within their ecosystems and learn how different companies developed different strategies to overcome them.
The IoT industry is, in my opinion, an ideal space to learn effective growth strategies since it encompasses Software and Hardware, Product Management, Pre-selling, Sales, After-Sales Service & Support, Joint Proposals, Manufacturing, Shipping, and Distribution.
Here are some of the practical growth insights I’ve learned.
Why Ecosystems?
For ecosystems to be successful, ecosystem members have to gain value from participation and from each other. This means companies have to integrate with partners effectively to monetize new relationships and capabilities. Only then are companies able to extend their value chain without incurring its cost and, through partnerships, create a network of external partners partners that can[1]:
- Extend market reach into vertical and horizontal markets
- Acquire new customer insights to develop new products and services
- Access new orders or new joint orders not possible otherwise
Successful ecosystems require a critical mass of participants. The more complementary partners a company has, the more it is able to transform Fixed Costs into Variable Costs[2]. For example, companies can reduce the need to maintain teams of programmers, inventories of hardware/equipment, infrastructure, tech support, etc. Instead, these can be obtained from partners on a Just in Time, customer by customer basis.
Economies of Scope can be achieved as a large number of partners empowers an organization to be able “to deploy and activate assets firms neither own or control”[3] without the Capital Expense. (In fact, one way to increase growth rates without increasing sales is to change your cost structure so that Capital Expenditures and Fixed Costs are lowered). Cooperation in ecosystems, however, can be difficult since member companies can be motivated to compete with each other lead by a Winner Take All mindset.
As such, organizational behavior, value creation, and community building are essential since you are dealing with people interacting with other people — for profit. Product Managers and UX Designs are best positioned to create and develop new pathways for ecosystem members to find and reach one another.
Monetizing Ecosystems
Here are 4 Strategies for Product Managers and UX Designers to drive growth within ecosystems:
1) Hold online/offline workshops/webinars/symposiums/roadshows on topics that provide value. Provide micro-credentialing. Attendance lists can also be harvested for lead generation opportunities.
Ie. Caliper provides free webinars that teach users how to leverage its software in new ways to obtain GIS data insights[4].
Harvard Business Review provides FREE 60min webinars on a variety of business topics which serves to reward existing customers while also enticing other attendees to become new customers[5]. Watch the FREE Webinars here.
2) Create events and invite guest speakers to share their insights and expertise.
Members can share and obtain new business, industry and customer insights, question assumptions, identify new partnership and business opportunities, strategically influence perceptions, and of course, brand build.
Ie. Lululemon creates customer focused events sometimes led by prominent people such as former Iron Man Champion Amber Wanless[6].
Hootsuite Academy is a series of paid sophisticated training events where participants learn social media tools and are influenced to become future Hootsuite customers. Hootsuite also gains as each “class” is essentially a disguised customer focus group to obtain customer insights and sales leads to advance product development and conversions[7]. Currently, there are 280,000+ participants “educated” and 880+ schools enrolled. Not bad for a sales prospecting, lead generation, and conversion tool.
3) Use White Labelling in ecosystems.
At the 2019 IoT Expo and Conference, I was impressed with how many companies already engage in or were ready to leverage White Labelling to drive growth. White Labelling is when one company creates a product which is then sold by another company under a different brand. This can occur all along a company’s value chain from the Front End(product) to the Back End(manufacturing, warranty/repair, after sales support). The end customer often doesn’t even know or even cares that the item purchased is a White Label product.
Here are 5 additional advantages of White Labelling especially relevant for SaaS and Tech companies[8]:
- Companies can extend their reach into new markets and segments without incurring the cost or risk of failure; the risk is born by the White Label client
- Reduced Development Time and Time to Market. White Label clients benefit since they only need to modify an existing product rather than Building from Scratch and having to deal with bugs, edge cases, and unknown set of problems that comes from complexity
- Empower sales growth through Strategic Experience Generation. This lesser known yet powerful tool can help your sales team win clients and achieve higher conversions
It can be near impossible for B2B software sales reps to achieve conversions when industry sector experience is considered table stakes. Very few business clients will risk selecting a software vendor for an ERP solution if that software vendor has never built an ERP and has no prior ERP experience.
However, through strategic White Labelling its services for other ERP vendors, a company can gain the ERP experience vicariously. This experience can then serve as critical proof points for sales to win clients and achieve conversions.
- White Labelling partnerships can generate Non-Operating Revenue, through sometimes sporadic, that can Cross Subsidize other business units, cover business costs, and contribute to Top Line growth. Furthermore, White Labeling revenue from one customer can help compensate for price concessions made to another customer — a major competitive advantage.
- Companies using White Labeled products benefit from End to End service and support infrastructure that’s already maintained and operated by the White Label vendor. As such, companies are spared from implementing and maintaining costly after sales services such as technical support and warranty/repair. Companies no longer have to bear the administrative burden and costs of investing in and managing inventory, supply chain logistics, and transportation. For companies using White Labeled products and services, there is no need to re-invent the wheel.
4) Engage in Shared Value Creation, Gain-Sharing, and Risk Sharing.
Shared Value Creation
Shared Value Creation[9], as defined by Michael Porter of Harvard Business School, is about developing strategies where companies can improve societal issues and simultaneously generate economic benefits.
Well known, real world examples of Shared Value Creation are:
- Fair Trade ecosystem
- Adidas partnering with Grameen Bank to manufacture a low-cost shoe for the poor in Bangladesh[10]:
- Etsy, an ecommerce marketplace website for selling handmade, vintage, or unique items. Etsy focuses Shared Value creation on employees, community, and planet[11].
Gain-Sharing and Risk-Sharing
These can be done via using Joint Proposals with partners as well as bundling together products and services from a pool of different partners to meet customer needs. Gain-Sharing, popularized by Dell Computers, is a powerful strategy that links one company’s growth with the goals of a partner’s[12]. Example here.
Siemen’s Business Services and National Savings established a gain-sharing agreement whereby National Savings would share in Siemen’s success and revenue growth. As Siemen’s becomes more successful, National Savings would receive a portion of Siemen’s revenue[13]. Example here.
Licensing, royalties, and fees are other examples.
Key Takeaway
Within an ecosystem, Product Managers and UX Designers must establish value creating partnerships and affiliates — crucial in enlarging prospecting territories, expanding lead generation, and increasing conversions.
Sales of one product can create “Pull Through” demand for complementary products and services. “Spill over” demand can result when the sale of one ERP, for example, opens the door to demand for additional modules and add-ons which other partners can provide[14]. Here are 6 additional ways to capture value in ecosystems.
References and Resources
All resources listed are FREELY available via your Public Library or University Library. Use EBSCOhost, Business Source Premier, or ProQuest to find them.
[1] PwC Strategy& Global Digital Operations Study 2018
[2] https://www.sciencedirect.com/science/article/pii/S2212827116311568
[3] Kelly, E. (Host) Business ecosystems come of age.[AudioPodcast]. Retrieved from https://www2.deloitte.com/us/en/pages/operations/articles/business-ecosystems-come-of-age-podcasts.html
[4] Caliper Software. (2019, Feb 10). Maptitude Video Tutorials. Retrieved from https://www.caliper.com/maptitude/mapping-software-video-tutorials.htm
[5] Harvard Business Review. (2019, Feb 8). Webinars. Retrieved from https://hbr.org/webinars
[6] Lululemon. (2019, Feb 5). Rockies Run Collective. Retrieved from https://info.lululemon.com/stores/ca/banff/banff/events/rockies-run-collective
[7] Hootsuite. (2019, Feb 5). Hootsuite Academy. Retrieved from https://education.hootsuite.com/
[8] Gainor, D. (2014, June 3). Why A White Label Solution Is Easier Than Building Your Own. [Web Log Post]. Retrieved from https://www.forbes.com/sites/theyec/2014/06/03/why-a-white-label-solution-is-easier-than-building-your-own/#462039b3dd9e
[9] FSG [FSGImpact]. (2011, Dec 21). Creating Shared Value: Connecting Business, Societal Value and Opportunity [Video file].Retrieved from https://www.youtube.com/watch?v=kF3wsT7FG7k
[10] Klein, P.(2011, June 14). Three Great Examples of Shared Value in Action. [Web Log Post]. Retrieved from https://www.forbes.com/sites/csr/2011/06/14/three-great-examples-of-shared-value-in-action/#de883a8595db
[11] Etsy. (2014). Etsy Progress Report 2014. Retrieved from https://extfiles.etsy.com/progress-report/ProgressReportPDF2014.pdf?ref=progress_report_download
[12] Engelking, S. (1994). Sharing the gains of growth: A creative approach to incentives. Economic Development Review, 12(4), 72.
[13] Institute for Public Policy Research. (2001) Building Better Partnerships: The Final Report from the Commission on Public Private Partnerships. London, England: Author.
[14] James Williamson, P., & De Meyer, A. (2012). Ecosystem Advantage: How To Successfully Harness The Power Of Partners. California Management Review, 55(1), 24–46.
Disclaimer:
The content of this post is for informational, educational, and entertainment purposes only and is not to be viewed as recommendations or advice from the author.
