Monetizing Tech Partnerships - What ingredients are necessary to make that special sauce?

This is the second article in a series that focuses on a quick list of prerequisites companies should consider before figuring out their monetization approach.

Check out Part 1 here.

The goal of this series is to look more deeply into the topic of tech partnerships, building on a series of conversations Allan Adler had with Avanish Sahai on Tidemark’s The Platform Journey podcast: Part 1 - Monetizing Technology Partner Ecosystems.

Before companies begin figuring out how to monetize their tech partnerships, they really need to consider 5 key prerequisites — the table stakes that must be in place to succeed.

Here’s a list of table stakes:

• First and foremost, the product organization has to have the right mindset. The product organization has to wake up and say: “Oh my, look what would happen if I worked with all those other tech companies! I could lower my R&D costs, I could increase my return on investment, and I could extend, complement, and complete my solutions! Yes, it would be a splendid idea to have an open API with published data on how people co-innovate with me…” 

If this isn’t in place, anybody who’s running partnerships is going to bump up against serious headwinds.  

• There’s also a serious technology requirement. This could also be called a “light platform requirement.” We use the word light platform because it doesn’t require a full-blown platform but rather just a set of published APIs. If this doesn’t exist, then partners can’t really build quality data flows, and our business process integration won’t work. These APIs are essential.

Getting these in place is hard from a cultural, budget, and strategic perspective. To a certain extent, the CEO has to wake up and go to the CPO and say, “I know that we have a road map, and all these constraints, and all our money is going to our road map, but we need to put some resources into the API.” 

Of course, this means the product org won’t be able to build as many product features, and that’s the trade-off. Ultimately the product may have control of fewer features, but there will be many more built into the ecosystem.

That’s a better outcome. From a portfolio perspective as a CEO, it’s better to bet on an open API, as opposed to focusing only on working within the organization’s own little four walls.

• Once the right mindset is in place, with an organization that has at least started the journey, the next step is to figure out what small number of integrations will have the highest potential to yield value.

This means talking to sales reps to ask which products complement, extend, and complete the company’s solution. This is a pretty easy exercise because, at the end of the day, you just ask the customer, what do you need this to integrate with? They’ll say if it doesn’t integrate with X, I won’t buy it. That will drive behavior change.

• And then, with integrations in place and validated, it’s time to make sure you’re creating better together stories with your partners. These essentially tell customers that the joint solution worked really great and lots of customers bought it - e.g., reference points and customer case studies. With materials to support these stories, a company then has what we would call the foundation for monetizing tech partners.

Without them, your sales rep won’t know what to do with the partnership joint offering, and your customer success team won’t know how to position it. 

• And finally, a really important foundation is nurturing the sphere of influence that surrounds the customer and driving partner referrals at scale.

Because if this whole thing’s going to work, we have to get the partner to bring us in. That’s the whole go-to-eco model; you go to the ecosystem so that the partner will bring you to the market. 

Now–it’s time to dance

This requires answering the simple questions—“Why would the partner bring me to the dance? Why will they let me into the tent?”

It’s really important to be able to have a convincing argument about why you should be brought in. This might include:

• We’re less expensive and more productive.
• Conversion rates are 70% higher. 
• ACVs are one-third bigger. 
• Close times are 50% less. 

What CRO would say, "I don’t want that?"

Check the boxes first, monetize later

This quick list is perhaps the key foundational requirement for effectively moving forward with monetization. And it’s a waste of time to start monetization if you haven’t checked these boxes.  

In our next article, we’ll dig into the actual monetization models themselves, including:

• Understanding the three buckets of tech partner monetization.
• Understanding taxation, reciprocal, and mutuality models. 
• The role of NRR and ARR.
• The “stickiness” justification when monetizing tech partnerships.
• Understanding universal success models.
• The evolution of monetization models.