Welcome to The Partnered Podcast Episode 084 with The Ecosystem Heavyweight Championship (“the fight of the year”) between Jay McBain, Principal Analyst at Forrester, and Allan Adler, Managing Partner at Digital Bridge Partners.
Join host Adam Michalski as he referees the The Ecosystem Heavyweight Championship (“the fight of the year”) Jay McBain, Principal Analyst at Forrester, and Allan Adler, Managing Partner at Digital Bridge Partners.
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[00:00:00] Adam Michalski: All right, awesome. Thanks so much for everybody for joining today. What I like to call the ecosystem heavyweight championship or. Otherwise known as the fight of the year here between two of the heavyweights Jay McBain and Alan Adler before we kick things off just wanted to discuss a couple of rules of engagement.
So first off we're gonna be talking about SAS and mostly SAS. It doesn't mean that we can't discuss legacy legacy technology, but I want to make sure that this is forward thinking. And we'll be primarily discussing, you know, software as a service on that. Next big one is we're gonna be talking all about ecosystems.
There's no surprise here. Ecosystems, obviously in the title, we're talking about the ecosystem heavyweight championship. So we're going to be talking about everything, ecosystems which leads me to my last point. What we want to basically be discussing is I want us to push. To be talking about what's really coming here.
I think what's great about having both of you here is you're both on the cutting edge of thinking about all of these tectonic shifts that are happening out in B2B. And with all of these changes, you know, come a lot of different things that all of the companies who are in this space are thinking about from a software solution.
All of the folks who are practitioners are thinking about consultancies. So this isn't, you know, We know cop-out so talking about stuff that everybody knows is, you know industry wide terminology. It's really more about what's actually coming both over the coming year and beyond last but not least we planned to go the full 60 minutes here, unless there is a knockout.
So I don't envision a knockout. I don't think Vegas has those odds either, but but yeah, we're going to go to the full 60. Cool. So with that, what I'm going to do is share this. We are going to witness
[00:02:21] Jay McBain: the most dependence match in the history
[00:02:24] Adam Michalski: of professional wrestling, heavyweight
[00:02:27] Jay McBain: championship
wrestling fans are
[00:02:36] Adam Michalski: the thousands in attendance and the millions watching around the world from the Capitol
[00:02:40] Jay McBain: city of the United States,
[00:02:42] Adam Michalski: Washington, DC,
[00:02:43] Jay McBain: ladies and gentlemen.
[00:02:49] Adam Michalski: All right.
[00:02:50] Jay McBain: Cool. So let's
[00:02:52] Adam Michalski: kick things off. Start super high level. Let's do a quick introduction, Jay. You want to kick up?
[00:02:58] Jay McBain: Ladies and gentlemen, it's the rumble in the jungle. It's the boom on zoom. My name is Janet Bain. I'm the principal analyst for partnerships, channels, ecosystems at Forrester. And I'm really glad.
[00:03:13] Adam Michalski: And I think Vegas has the odds slightly in your favor right now. So for anybody who hasn't met yet, you can check out a DraftKings or FanDuel. I'm pretty sure we got that live odds going at the moment. Alan just slightly behind slight underdog, but tell us a little bit about.
[00:03:27] Allan Adler: Yeah, Alan has a free digital bridge.
I think I'm a big underdog, so I'm hoping to survive without needing to get the cut team over here. You've got a pleasure to be here. I run digital privilege partners with a group of great partners and super excited to talk about my, my favorite subject. Good. Very cool.
[00:03:44] Adam Michalski: All right guys. So let's let's first question here.
Let's start personal. Why does eco-system matter to you? Like why I want to kind of establish the baseline here on why this is important to both of you. We all know that you guys are cutting edge and you're thinking about this on the cutting edge, but why what's the why for both of you,
[00:04:01] Jay McBain: I'll kick it off for me.
It started before the pandemic and you know, I've, I've been in chance for, for 27 years, but Accenture when asked every CEO. Every industry, every geography, every size of company and 76% of them came back and said their current business model will be unrecognizable in five years. And ecosystems are the number one reason why.
So if they sell pharmaceuticals, if they sell cars, if they sell air conditioners or software, they're all thinking that their current business model, they can't do it alone. And they've got to rethink their. They got, gotta rethink their routes to market. They've got to think really deep inside their company at the third parties that are going to frame up success for them in the years
[00:04:50] Allan Adler: going forward.
That was brilliant. That was really an I agree with everything you said. I think for me ecosystems come down to two inexorable trends that are taking place in the world. The first is the rise and dominance of digital transformation. And the second is the crisis that the world faces and in my mind, ecosystems are the fastest and best way to attend to an opportunity opportunistically take advantage of digital and the best way to help companies transform to be steward leaders and to leverage the trust-based cities in partnerships to make the world a better place.
[00:05:27] Adam Michalski: Very cool. Yeah. So, I mean, clearly you guys are both in this for the broader picture, which is what I mean, I think makes you so great. But let's, let's start with defining ecosystems. I think one of the interesting things is that we're all out there talking, preaching, you know, and understand largely, you know, otherwise, most folks wouldn't be on this call, that ecosystems are the future.
But what does that actually mean? Like what are
[00:05:46] Jay McBain: ecosystems? I think I, I differ a little bit than Alan here. I don't think this is a new concept for. Working with third parties, building partnerships, building alliances has happened since the startup capitalism, you know, we've been doing this forever.
And so when I think of channels, you know, I think of the flow of money. I look at every industry and 75% of the $86 trillion of GDP. Last year, when indirectly you bought your last car from a dealer, you bought your last TV from a retailer, you bought your last jar of peanut butter from a. Companies have always had these groups of people that have helped them get their product to market and help them transact in the market.
It shifts. Now we're starting to think more broadly than the transaction. You know, we have a changing buyer, we have new moments, those moments are expanding, you know, digitally and digital only. And we're starting to look at partners in a different frame who can help us get the customer to the day. Who can help them get on the dance floor.
And that was everyone is going subscription and consumption. You know, that first dance is only 30 days now who can help every 30 days, forever adoption integration, stickiness who can help long-term and upsell, cross sell and enrichment this customer journey. Now never grants our partnerships on top of every one of those.
Our critical, they're critical in three stages, there they're critical for the broader alliances we need to get to market. And they're broader in terms of the platforms and the developers and the builders, the co-innovation, the value creation and the network effects. This is such a broad topic now, but I think it spawns outside of something that company's already.
[00:07:36] Allan Adler: I actually agree with you more on that Jayden than you think. I don't believe because systems are a new thing. I think they're just a changed thing. And when I look at ecosystem, I put the definition in the chat, you know, tried to come up with like one sentence rather than all this consulting blog about what ecosystems are.
And I think they are the orchestrated alignment of innovation across interdependent participant. And all those words are really important. Like ecosystems don't just happen. They usually have to be orchestrated in an environment where you have a bipolar. Based ecosystem, you have something called the Keystone species.
And the Keystone is, is called that because it's, you know, in a cathedral that, that stone that sits at the very top holds the entire system in place. So like in an, in an environmentally consistent, you have beavers and beavers make dams and Dan's create all these things in the business world. The Keystone species is the ecosystem orchestrator, which you, your number one trend.
Right? And they're the folks who will allow. Innovation across interdependent participants. And that's what an ecosystem is, but where we're aligning on this actually is that the channel which proceeded say all the digital SAS to SAS stuff in our space and our go to market space was actually still an ecosystem.
The difference is, is that with SAS, which we're going to talk more about today, it's digital to digital. So when a SAS company comes in, And it says, I want to integrate, it's integrating with another SAS company, whereas the channel is more digital. Meaning that the channel's role historically has been proximity.
It's been a proximity. So the only real difference between the channel ecosystem say of a vendor talking to a channel and a vendor talking to another vendor who is an ISV is they're more digital to digital in nature. And the reason this is important is because digital. Is really where the market is going.
The market values digital far greater than it does physical. And that's where the great opportunity for digital transformation comes in is digital to digital connections, which is why SAS companies are so provocative about integrating with each other because they create so much value. And that's how I see.
That's how I see the ecosystem.
[00:09:41] Jay McBain: Yeah. So I agree. I agree with the second part. I don't agree with. There there's no Keystone here. There's no pyramid or hierarchy structure to an ecosystem. Now, this idea that there's one stone that creates layers, it creates this triangle. This is a human element that we always try to look at things and classify them and build out, you know, things from the ways our brains work, where an ecosystem is silent.
And when you look out in the sky, it's infinite, you don't know where it ends. You also understand that there are big galaxies, you know, in the stats world that Microsoft owns one of those and AWS and other and Google and other, and you know, the Salesforce and there's an emerging really fast growing galaxy over in HubSpot.
These galaxy leads overlap these interdependencies overlap, but there is no umbrella. There is no key. In an ecosystem and for SAS companies that are growing, they have to understand which communities which constellations, you know, you're hearing your spaceship and you're trying to direct your spaceship out there.
And these decisions are celestial in nature. You've got to figure out where the stars and moon align for you, but you can't just go out to one place and figure out where you are somewhere lower in that.
[00:10:58] Allan Adler: So I'm so glad we're talking to celestial. Cause it's my favorite metaphors is that when I look at the SAS world, let's just take SAS because we been talking about that.
So 10 years ago, there were 10,000 SAS, B2B SAS companies. Now there's 185,000 and you're forecasting that by 2030, there'll be a million. So there's massive proliferation of SAS companies. Think of them as planets, suns and moons in various different configurations today. Predominantly those companies orbit in what I'll call a somewhat disorderly.
That's a function of all the poor integrations that take place and customers having to hold all the crap that comes from SAS companies, not integrating. Now what's happening is to ask companies have woken up and say, I don't need a roadmap. I need an ecosystem roadmap. I need to figure out who I'm going to integrate with and how I'm going to facilitate better customer outcomes through those integrations.
What that is is that as a gravitational pole around bodies that have more or less gravity. So for example, take HubSpot, cause you mentioned them right? HubSpot. And orbiting around HubSpot are hundreds, thousands of companies who rely on HubSpot as. Keystone or the orchestrator to facilitate a whole variety of customer mediated, modular yet interconnected outcomes, which is what ecosystem is delivered.
So you're correct in your starvation that the Keystone species does not own the ecosystem, nor does an ecosystem orchestrator own the ecosystem. It's just that the gravitational pull of the largest bodies, we call sons in the orchestra. Kind of environment of gravitational pull have a relatively more influenced and what you have to do if you're a company is figuring out a couple things.
Number one, who do you orbit around? And number two, who do you want orbiting around? Because at the end of the day, the only way we survive and the only way ecosystems thrive and stance is if the suns and the planets and the moons start working better together, forming these interconnected intergalactic relationships, because something you said, I also be with this, it's not a hierarchy.
But it is dynamic and it is gravitational. So for example, HubSpot is going to talk to planets and moons in its ecosystem, and that we should talk about what it means to be in your ecosystem because that kind of gets confusing, but also talks to other stuff. And so it's not as simple as, you know, there's my ecosystem and your ecosystem.
They are highly overlapping, highly dynamic, highly interconnected. But as leaders, we have to create our own little galaxies around which we can identify, whoever is around us and who we orbit around. And if we get that right, we serve the. Because that's how customers are going to get value is by companies figuring out how to build ecosystem roadmaps.
So the customer doesn't have to figure out the last mile, it's our job as leaders, technologists to figure out the last mile. Yeah. So
[00:13:43] Jay McBain: somebody asked in the comments, you know, is there a middle ground? And I think you just nailed it in the last sentence. The customer is the middle ground. And we know some things about SAS other than how many SAS companies there are.
We know that 65% of SAS today's bot outside of. So we're starting to learn more about the head of marketing. Now that now spends in many companies more on technology than the head of technology themselves. We're starting to understand the heads of HR and the heads of operations and finance and sales and customer success, all of the lines of business.
But when we anchor around the customer when I did some back of the napkin type of math and I looked at the 297, 7 industries, When I looked at that 197 countries, when I looked at the segments, sectors and sizes of each of these companies, when I looked at the 250 product areas around SAS, it created 35 million permutations of what we define as a customer.
But we do know that when that customer starts their journey and bumps along 28 digital moments at the point of vendor selection, the average customer today by seven layers of. And this is the interesting to go back to the celestial mode. As you know, someone in that ecosystem, if you're not HubSpot there is a good chance.
There's a billion chances that that customer is going to start with HubSpot. But there's 200 billion other chances that they don't in that at the end of those 28 precious moments, if they were guided and influenced and they end up starting with HubSpot. Now, the question is who's going to integrate that and implement that.
Who's going to secure that who's going to make that compliant. Who's going to do the data, the automation. I mean, there's so many dozens of wonderful spread by the way, it's $5 and 80 cents that the ecosystem earns for every dollar that goes to ups. But if the customer does, can start with HubSpot and they decide to start with Marketo or Eloqua hard-on or others, this idea of being glued in or the gravity into HubSpot you're, you're somewhat reliant on them earning that first layer of that seven layer cake.
And so, you know, ecosystem players are a bit more fluid and it's not like a planet like earth. Can't just jump out and start circling another stuff. If we feel it's a bit hot or we don't like the, the atmosphere, you know, here's where, you know, I have to be customer centric, customer obsessed, and I have my certain value that I add into that chain early, mid, late in that customer's journey.
You know, I'm less reliant again on a higher, I'm less reliant on a specific Keystone and I'm more reliant on. Customer obsession or my center of gravity is their
[00:16:27] Allan Adler: outcome. Well, I think you're absolutely right. There's no question that even a sun, like a HubSpot relies on its plans to moons because on your 26 points of customer journey, they're probably gonna run into if HubSpot's done its job properly and has an ecosystem roadmap, it is aligned to the customer's needs.
They're going to run into all those other moons and plans. So those new moves and planets aren't aligned, then the likelihood is that HubSpot doesn't get the value of its ecosystem roadmap. So but I think that's something that we're aligned on big time, which is that customer. Mediation customers are going to mediate which modules in this giant ecosystem.
And they're going to pick, and ultimately it's, it's our job as leaders to ensure that there's as much integration and there's as much interdependence amongst all the participants. The customer doesn't hold the bag, because one of the things that's scary is that if you look at the, you know, state of the SAS report, you know, from bliss and they talk about how many SAS applications, the average enterprise has like 130 SAS applications.
And they know what they know about. And the scary part is they're turning over 50% of them are turning over every two years. So there's a lot of. And the churn is problematic for all of us, because it means we got to start all over again. Right. So the real value of the ecosystem from an a SAS players perspective.
Create greater value and greater stickiness, not only for the selling mediation process, but for the value mediation process. So when the customer sees our related connected point, they bring us in, we bring each other in and when the customer integrates all those applications together, they stick with the applications and all the boats rise.
And that's the power of ecosystem is that it facilitates not only the selling and the marketing, but also the customer value realization. Experience of the customer gets enhanced when we go to ecosystem versus going to market. And I, I think we shouldn't have a little conversation about that, that one, because our, our, you know, we have a strong opinion about this, right?
About going to ecosystem as being, as being the new. And
[00:18:32] Jay McBain: now
[00:18:32] Adam Michalski: you that point, and I want to get into that because what I want to do is talk a little bit more tactical here. Like I think one thing that you're both in agreement on is that ecosystems are beneficial across the entire business. There are beneficial to the product organization.
They're beneficial to sales, they're beneficial to marketing, they're beneficial of the customer success. Alan you've put out, you know some really interesting writing on this around Cobell cov retain Cosell. Each one of those like, and Jay, I don't think you're too materially off in your same thinking.
But a lot of folks that are here today are basically, you know, they've, they definitely understand that ecosystems are the future. I want to talk a little bit about how do you prepare your organization? Like how do you actually prepare whether it be go to market or even broader than that your organization for this future
[00:19:12] Jay McBain: that's coming.
The first thing is it's all about timing, you know? So I spent, you know, many decades doing this and the SAS model. There was always this point of French. You know, when do I franchise my business, I have to sell more hamburgers. I'd have to sell more donuts. I have to sell more cups of coffee in the ones that decision to put a restaurant on every street corner in every town, you know, on the planet.
And so right now, out of 175,000 SAS companies, 17,000 of them have now hired a channel chief. They've built out a minimum, minimum viable channel program and NBC. They bought their first piece of channel technology, which is over my shoulder. There's 183 companies buy in for that first purchase. And you'd say that they've now moved into this idea of a franchise officially working with third parties, you know, to, to add different value.
But so for so long it's been really around that point of sale. You know, you grow up as a direct organization. You have to work through the initial moments to get product. You have to get a sales and marketing approach that's repeatable and scalable. You know, if you watch the McDonald's movie with Ray crock, you know, the first half of the movie was about that kitchen.
You know, getting that fry later, you know, moved over one millimeter to increase efficiency, 1.6%, which today drives billions of dollars. For McDonald's, but it wasn't until they started putting a restaurant around the world. So that's what the SAS model that's the go-to-market model is. When is that right time in your board, your venture capital board, your private equity board, whoever you report to is helping guide you to that moment where today the big difference is every company.
Should be thinking about ecosystem out of the gate and whether you ever choose to resell your product to have somebody else take the customer's money can come late. And we know like we watched zoom grow and we're on zoom right now. We watched it grow as a product led growth company without any direct sales, direct marketing or channel and achieve, you know, a huge Heights in evaluation.
But at the same time, they recruited over a hundred thousand. They don't need them to resell. There's so many other elements. We've seen the big SAS companies, the stars that the future trillion dollar value Salesforce actually shut down their resell program. Two years ago, on the same day, they announced the recruiting 250,000 new partners, HubSpot, which has a $47 billion valuation on $1 billion of revenue.
Also shut down their recent. Oh, they're bringing in 200,000 digital agencies. They're bringing in 8,000 MarTech companies to integrate API APIs. So this point of ecosystem is in your original business plan. It's on the CEOs mind from the first day that you go to GoDaddy and get your URL as opposed to some point in the future.
And that's when channel's been synonymous for 40 years. As the point of sale and now ecosystem is synonymous with how you build a business, how you build your.
[00:22:31] Allan Adler: So I think one of the places where we disagree a little bit, Jay, and maybe we don't need gloves for this, but we could just Russell is on the question of the difference between ecosystems that are tech partner oriented and ecosystems that are channel oriented.
And I'm not, I'm not saying that they, they don't, they don't exist. They have no co-exist because any mature star in our constellation or sun in our constellation metaphor is going to need. Right. However, what makes SAS interesting? I formed with my partners, digital bridge partners to recognize the fact that there were two sides to the digital bridge.
One side was the legacy side, which comes from all the folks that were around before SAS and before cloud computing, who essentially. It introduced the world to digital, right? We didn't have SAS. We didn't have digital 25 years ago. Right. We had digital, but we didn't have SAS and we didn't have eyes and we didn't have I think the set, you know, sadness came at the end of the nineties with Salesforce.
And then, and then shortly after the turn of the millennia, we saw the introduction of IaaS with AWS and then certainly thereafter, Azure and GCP. Nevertheless, the key distinct. That makes the crossing of the bridge over to the SAS world, distinct from the legacy is the prioritization and title. Of the ecosystem priorities.
So for example, in, on, on the on the legacy side of the digital bridge companies made products and then they needed routes to market. They needed people to sell those products. On the other side of the digital bridge, the same is true, but the order of priorities. If you take the average SAS company, when they start thinking ecosystem, one of the very first thing they think about is who do I integrate with?
So it's more tech partner centric than it is channel centric. And the reason that's an important distinction is because in my view in SAS world, it's the tech detect partner. That lifts all the boats. In fact, I would even argue that it's very troubled, very challenging for people in the distance, on the SAS side, the digital bridge to stand up a channel because in many ways, SAS.
So I call it, I call SAS basically the, the, the killer of the channel. Until stem events happen, it's not profitable for the average SAS company, all by themselves with no planets around them to get a channel, to make enough money, to want them to sell. And we can talk about that. You know, the economics are fairly straightforward, we know about them, right.
But at the end of the day on the SAS side of the world, the ecosystem priorities in our view, almost always need to start with integrations with tech partner Ditech partner, and it's only then that the ecosystem lifts up and has enough value for a channel to come under. And to really make money. And so that's really the big difference.
And in fact, if you, if you pull channel chiefs on one side of the dynamic and the other side, oftentimes it can't even talk to each other because they have a completely separate debt vocabulary. Their orientations are different, their priorities are different. Everything's different. So I think our job as analysts is to help bridge that digital bridge with clarity about what's unique to legacy what's unique to SAS.
And how do we learn from.
[00:25:26] Jay McBain: I think tech partners are absolutely important. It's one of the five, it's not binary. There there's five different elements, you know, to build a, you know, a channel. One of it is transactional. One of it is digital and, and, and building out tech partnerships. I talked about that influence channel, right?
Getting your customer to the dance. During those 28 moments, we talked about the 30 days after driving adoption and integration sticky. There's that retention share. There's a whole set of Alliance, strategic Alliance professionals that are critical to a platform. I mean, Microsoft might be your tech partner, but they're also a strategic Alliance.
They're your son that you happen to be drafting, you know, behind. So there's five different elements of an ecosystem here, but let's go back to the. In the end to build a business, you can have all the integrations. You can be the Zapier of whatever industry that your last mile that you're trying to solve for.
But if you don't sell something you know, feces are not going to be all that interested in your business and you're not going to be able to pay the bills. So when I looked at the SAS market and I look at the hundreds of billions of dollars that are sold today, one third of it is resold. It's sold by others.
That's the way the customer. Wants to spend their money. One third of it is going to go via marketplace that this decade, because it makes sense when you buy seven things to procure and provision in one place and to cash and enterprise. And to do that and finish a digital only journey with a digital transaction.
And maybe by the end of the decade, you'll be spending digital money crypto, who knows. But the point is this, there's no reason that we go through this digital journey to buy a car and then end up physically at a dealership where, you know, customer experience that's
[00:27:11] Allan Adler: one-third of the
[00:27:12] Jay McBain: SAS market will also be.
And that'll be direct e-commerce, it'll be obviously direct marketplace or, you know, signing an EDI purchase order. Direct that the fact of the matter is I have a market town, you know, my market town as a SAS company paving the last mile might be a billion dollars and I've got to make a choice because if 500 participate in one third of that market, In other words, that's my emotion to market.
I got a third of them that want to buy through Larry and the white van. I've got a third of them that want to buy on AWS or, or the app exchange. And I've got a third of them that want to buy direct. It's I gotta make a choice at some point what market I'm competing in. And again, I'm running parallel.
All these applications, I'm building out API APIs and SDKs. I'm building tight technical integration. I I'm building that as part of my. But again in parallel go to market is always part of the equation and the routes to market underneath that are critical to growing a business, especially.
[00:28:14] Allan Adler: So I think I'd have another place where we disagree.
You talk a lot about transacting. Who's transacting this much marketplace, this much direct as much channel. I think that's the wrong question. The right question to ask isn't who's transacting. The right question to ask is who's adding value, value. Add is what customers. Customers don't wake up every day and go, oh wow.
I transacted this this way. That's why it's important. That's not important to them. What's important to them. As value creation, ecosystems are about value creation. They're about innovation. They're about offering this interconnected interdynamics participants, the opportunity to innovate around modules that are customer mediated and drive customer outcomes.
In my definition of ecosystems, the word transaction doesn't. Transactioning is important because it's how we measure things at the end of the day. But the big problem that most channel people have, and the reason they having trouble really moving into the ecosystem mindset is they're too focused on who's delivering the ACV.
So a wrong question to ask the right question to ask is how do we increase our relative influence? How do we create influence currency influence synergies with the number of planets and moons that are floating around who transmit. That's the little lever. And you talk a lot about that. Like how much money flows through, why don't we, instead of focusing on how much money is transacted focused on who's adding value and how to create more of that.
So you you've
[00:29:36] Jay McBain: just kind of snuck back up into consultant talk and you know, you're, you're letting your Harvard MBA sneak in here for a minute. You know, I don't have an, a Harvard MBA, but I do know. After I walk into a car dealership, I know more than the sales person, because I've spent the time on YouTube.
I spent the time reading magazines. I spent the time talking to my neighbors and my friends and social media. I spent those 28 moments wisely. I downloaded the invoice price. I know what the backend rebates are. I know within a hundred dollars, but when I stepped foot on that dealership and they sent me down for eight hours to get me.
In a completely breaks my customer experience. I would say it's very valuable to me, the point of transaction and there are, and the reason why these points of transactions are a huge part of value creation is back to the way the customer wants to do it. Larry, in the white van, it's not just Larry in the white van.
Larry is doing a ton of work before, during, and after that transaction to make it successful. Yeah, that's not a huge amount of value. And therefore the transaction would be along the lines of influence retention, tech, partners, and alliances that are one to five critical value creation motions that every company needs to look at.
And we do need to talk about transaction. Inside an ecosystem because by the way, that's what makes your company work. That's what brings in the revenue and that's what allows you to grow. And you can build all the value creation charts you want on PowerPoint, but you're going to put your venture capital pitch deck to sleep on chart
[00:31:11] Allan Adler: number three.
Yeah. So there's no question about the fact that I'm not going to get my next traunch of money from the VC. If I say I don't care about trends. And there's no questions about the fact that if I can't prove that I increased revenue through the various routes to market, that I have I'm in deep do-do.
However you said something, which actually makes my point, and it's the data point that everyone's talking about now, people will make decisions before the sales rep gets. Right. So in the past, I would argue that the transacting vehicle, the proximity value, how close you were to the customer, the classic channel purpose back in the day, what was that ch that VAR?
What, by the way, I grew up in. So I know this business like you do, the VAR was close to the customer, proximity value, physical logistics, the VAR would come in and would help the customer make the decision that was back in the day. When the customer didn't know anything, they couldn't go on the internet.
You can do all those 26 points of contact and couldn't make their decision before the sales rep showed up. So the value is shifting from physical and proximity to digital innovation. The value shifting, you still have to transact. You still have to know which channel it's going to go through. You still have to have routes to market, but the value it creates is less today than it was in the past.
And that's why, you know, SAS is essentially re-imagined routes to market reimagine the go to market, and we all have to adapt to those reimagined realities and my, my perspective on ecosystems. And if you're running an ecosystem is if you're not focusing most of your energy on customer, And so I'm on transactions, but mostly on customer value, you are missing the boat because the customer wants value creation, not ordered to take it.
And back to your point, Adam, which I think is really important because we've dodged your question. How do you help as a channel leader, as a product leader, as a marketing leader, how do we help our organizations go to ecosystem and a real blog this week on embedded? I said that the most important thing a partnership leader needs to do equally important with going out and having the right program and having the right business development relationship is going backwards into his organization and helping each department to understand why partners matter, how they can share KPIs and how they can go to market.
Go to ecosystem, got a point the right way better. And every single department I think is actually six. Groups that need to go to ecosystem, product marketing, sales, customer success, the partner program team, the ones who are responsible for it and CEOs all six of those. But we're launching a, a goatee ecosystem live event in the new year.
That's going to be focused on each of those six streams to help companies. What GoTo ecosystem means. And so I agree with you. Transaction's important. Customer value is more important. Okay.
[00:34:02] Adam Michalski: I J I want to get your take on this because I think that this point that Alan just made is particularly fascinating is like for way too long partnerships in a lot of organizations have kind of lived in their own silo.
Like, you know, whereas the point that Alan and correct me if I'm wrong here, that I think you're trying to make is that in order for ecosystems to really thrive you really need to be embedded as part of the way that a salesperson says. I'm going to market and the ecosystem is my number one best way for me to close this deal or marketing is thinking, Hey, I need to get in front of this customer and leveraging my ecosystem is the best way for me to do that.
Same thing for customer success. They're thinking about basically mitigating churn and making sure that they can secure, you know, that next year or the next 30 days, Jay, as you put it. What do you think about that? And like, what does that look like? Because I think for, for a very long, a lot of companies have basically made it so that, you know, the, the partnership team is basically.
Partner marketing partner sales partner, this, you know as independent as opposed to being embedded. And I think that this is a really, really key point that Alan brings up here. So it'd be curious to get your take
[00:35:02] Jay McBain: well that's absolutely is. And we're seeing this everywhere. You know, I used the example of Microsoft.
Who's done a little bit of marketing sleight of hand in the last couple of years, you know, the second most valuable company on the planet would always say that over, you know, 90% of their sales were partners. You know that they relied on partners, but that was, you know, talking transactionally. So to Ellen's point today, they talk 96% of their business is partner assistance and they can measure that they know the attribution, they're doing data, sharing that scale.
They understand all the moments and where partners are, whether it's transactional non-transactional and you can't hear for Microsoft anymore, what their partner source now. Because back to my earlier point, only about a third of Azure, which is growing at 50% of your quarter dually and AWS and Google, you know, inside a pandemic is through the channel, but they recognize that partner value.
And they're as an organization, whether you're in marketing, whether you're in sales or customer success or product, whether you're in finance or operations, it doesn't matter who, whether you're in the mail room or the CEO. You understand that Microsoft is kicking out trillions of dollars of ecosystem opportunity and whatever your role is, and whoever you report to you always walk in with that culture that DNA built in.
And, you know, I think SAS companies can look up to the big $5 trillion companies evaluate value companies and look at they're all ecosystem companies. If your company is going to be wildly successful, that's where you're going to have. And, and the chances are you gonna wait to some point in the future or you're going to start to embed this in your culture today or right out of the gate, if you're starting a new.
[00:36:42] Adam Michalski: And now, Jay, you just said something that could really go come across as SAC religious to a lot of folks. I'm Nicole, when it comes to actually measuring your partner program, like you said, Microsoft went from partner source to partner influence. Now, you know, a large swath, if not the vast majority of companies right now.
And thank you, Matthew for posting this. Are basically, you know, tracking partner source. Why? Because it's easiest to track partner influence and partner, assistant, whatever you want to call it is extremely difficult to track. But when I think when it comes back to the way you guys were describing this earlier, thinking about it as the customer journey and influence the combination of both of those means that there are going to be points in that customer's journey where the influence is going to rub off on them.
Therefore, You know, changing their decisions on what they're actually going to purchase. Long story short is if you're not part of those conversations, you know, a high likelihood that you might not even get the chance to actually bid on that business before, and you might not even know that that business occurred.
So the question is, is like do companies and I want to keep this as black, as white as possible. Do companies need to transition to a partner influence slash partner assisted model versus the legacy, you know, model of just only really focusing on partnerships.
[00:37:48] Jay McBain: The one angle that I take into this answer which most people don't, it's the technology answer.
When I talk about the decade of sales, the decade of marketing, these were all technology led decades, and now we're in the decade of the ecosystem. It's a technology led decade, you know, this you know, idea that we're going to have our opinions, you know, we're going to have you know, kind of our own navel gazing and how all this is going to work.
It's already in front of us. And for me, it's in 183. By the way 150 of them are helping on the transactional side. They're kind of in that previous generation of what Alan called legacy, but there's a new category called ecosystem management, which earlier this year I broke into five categories. And when you're, you're talking about attribution, for example, this comes out of the consumer world.
And when you buy a Kim Kardashian and ed for a million dollars, you kind of want to know that you're getting that money back. The companies that you would have hired to do that for you with Kim are companies like impact and partner of rice and a win the raising hundreds of millions of dollars right now to move that technology into B2B and B to B to C, and I'm watching those roadmaps very carefully and I'm talking to their customer.
How they're leaning into these new technologies. You know, you've gotta be able to share data now in a protected, secure data, escrow kind of format. You know, you don't want to share data at the best of times with a transactional partnership. You're never going to want to share data in a non transaction.
But if I can do that in a double-blind way, I'm watching that subcategory and I'm watching those roadmaps. I'm watching $76 million go into one of those companies a couple of weeks ago, by the way, backed up by. Salesforce HubSpot and Okta ventures. These are the kinds, there's a billion dollars that have come into this tech stack this year, and I'm watching those dollars.
I watched the pitch deck on the one side. I watched the investment and the use of funds on the other side. And I am watching that 18 month roadmap, very carefully to see where we're going. And there is so much activity around allowing companies today to move from a partner sourced set of KPIs and metrics.
And start to move to measuring moments and measuring all these five different parts of the ecosystem
[00:40:01] Allan Adler: effectively. I want to come back to something. I think that will kind of bring this into some cohesion. I think that the focus is on sourced, I think was a time when we saw the ecosystem as being predominantly a sales function.
That's the history of the. Most channel chiefs report to sales. Most channels predominant function is driving a CV, but didn't use to be called it PCP or whatever it was called revenue, right? Influence is not a sales function. Measuring influence is a team sport. It has to happen across the organization.
And we're, we're aligned J is that at the end of the day, the value that ecosystem provides is across the entire customer. Not just in influence and awareness, but all the way down to customer value realization and all the way back to the beginning of the funnel, because we never stopped selling, given that influence is a team sport.
And given that every part of the organization has to go to ecosystem. It's incumbent upon all of us, not to think that we have an ecosystem team, but that our company. Is facilitating and orchestrating that ecosystem. We go to ecosystem because ecosystem is how we go to market. Say that again, we go to ecosystem because ecosystem is how we should go to market, which means that partnering, which is a verb let's go partner, right.
Is not a function. Of course, partner leaders. We all part of partnership leaders in CSA have to have. But at the end of the day, partnering is at least as much a competency as it is a function. And it, although there is a swim lane called the ecosystem swim lane, the channel's swim line, the partner's swim lane, whatever you want to call your group of partners.
And you're the partner leader, and you go down your little swim lane, as important as that is partnering cascading across the entire organization. Ecosystem ecosystem has to happen in every department, starting with. If that doesn't happen, partnership leaders will inexorably be air traffic controllers, running around, dealing with standard operating procedures that don't work for the.
And invariably underserving the customer. And this is the big sea change as we move from source to influence that leaders, particularly in the SAS world, but across all the digital bridge, have to understand that if we don't go to ecosystem across our organization and our CEO doesn't list ecosystems a top three priority, we will not be as valuable or as an important.
In the future as the person who does that as the company that does
[00:42:37] Jay McBain: that. All right. So we, we got 12 minutes left. Here's the knockout blow go. The ecosystem is not the right approach. We're not here to create new taxonomy, new lexicon. We're not here to create a new acronym. You know, we'll let you know consultants and we'll let academics go and, you know, play around with with that kind of stuff.
10 years ago, you know, when I was raising money in a SAS company that I was building in, no people wanted to hear at that point, what new market, what new acronym you were going to invent and go when you know, the lion's share of 80% share in your own little new category. And what we found over the next few years is that none of these companies are funded enough to build a new capital.
And you're not funded. Last time I checked enough to run a Superbowl ad this year to make, go to ecosystem a thing. So we already spend as channel per partnership ecosystem leaders. We already spend the first 10 minutes of every meeting explaining what we do and how this connects and, and how we got to do the last 45 minutes.
I don't want to spend an extra five minutes explaining what do to eat means as compared to GTM and everything. What people want to hear now, if you build a SAS company, what market are you going into? What problem are you solving? What outcome are you in? And how big is that town? And what is your plan to go get your fair share of that Tam that is already being.
So I'm not ready to go out and explain to people in my back-to-back meetings all day. I only get 30 minutes with each person. I can't spend five minutes talking about goatee ecosystem and how cool that sounds and how go to market has been around forever since the start of capitalism. And it's better when people understand what that means.
And when I talk to a sales, I was in the go to market games yesterday, Eastern. And I didn't want to go and explain for the first five minutes to sales experts and marketing experts and customer success experts, what this new acronym and why they should care. I had to go intercept something that 76% of CEOs believe into that.
We're out of to take a word from one of my competitors. We're out of the hype cycle. Now we're in the point of the vice presidents, that report to that CEO, making sense for this. What it means to partner and how they can build an ecosystem within their own department, within their own culture, build it within the DNA.
Do they have the people, do they have the processes? Do they have the programs and do they have the underlying technology to be successful in this decade of. The last round,
[00:45:28] Adam Michalski: he just threw a haymaker. So
[00:45:29] Allan Adler: want to say, I'm not knocked out yet. However I'm going to strike back with vigor. Our job Jay is to create clarity about what is critical and to guide companies so that they don't screw it up in seeing what the future looks like.
And the kids, he says that 30% of all revenue in the global market. Go through ecosystems, not transact. The value creation 30% and that's up 15 X or 30 X in four years. By 2025. Ecosystems are critical. That's why we're here now. Clarity on ecosystems words matter. And the words that we use to explain ourselves to each other, help us make good decisions.
The reason go to the. Is helpful is because it gives everybody CEOs, marketing, product, customer success. Everybody clarity about what go market is all about. Go to market. Has historically been, since it was invented a go at alone thing. The company in my four walls go to market. The digital transformation has completely broken the walls.
Now, companies who want to be successful need to design technology that ecosystems want to innovate around so that we can create a force multiplier. And it can create those constellations that we're talking about. That's why ecosystems really deliver value because they bring participants together in an interconnected interdependent.
To innovate on modules that the customers can pick. It's still in an interconnected way. And so when we tell companies that you shouldn't just have an ecosystem team or a product, a sales team, or a channel team, or a partner team, you should go to ecosystem across your organization. It is clarity on what is critical, which is, and this is the punchline.
Here's the Fontainebleau. If. Product sales and customer success and a CEO, those five groups don't go to ecosystem. Any company, any company who is looking at them, we'll beat them. If they do the companies that don't go to ecosystem will fail the companies that go to ecosystem a win. And unfortunately, and unfortunately, last point, most of it, legacy ideation around channels has been.
Our swim lane and we go to market, the swim lane needs to shift across the departments, not just going straight. And that's why I go to ecosystems criticals. We need to teach every organization starting with the CEO. Why ecosystems is the top three items. And if every department has a KPI for ecosystem, That is agreed to in our OKR, ours, the company wins the ecosystem.
If every department doesn't do that, if sales doesn't have that, if marketing doesn't have that, if product team and the customer success team don't have shared ecosystem metrics at their departmental level will screw up ecosystem. That's why you have to go to ecosystem. Yeah.
[00:48:32] Jay McBain: So I think, I think you're preaching to the choir.
76% of CEOs going into the pandemic. And I want to go rerun that research because it's probably 86 to 96% today already agree with you. And so all the time spent on wordsmithing and creating new pithy, you know, type of acronyms in an industry that doesn't need more accurate. What you said in the 90% of your response was we need to engage.
We need to get and find these intersections where we can add value to the conversations. That is a hundred percent correct. We shouldn't be spending a nanosecond, trying to go rebrand or rethink or re you know, build out a new taxonomy here that we're going to. You know, caused us to, to miss important minutes in the conversation,
[00:49:24] Allan Adler: but I would interrupt you.
But they have not promulgated partner friendly standard operating procedures throughout their organization. Why? Because each organization's standard operating procedure does not operate on ecosystem attic, friendly basis. Those standard operating procedures have to change by the way, all that money that's going into the ecosystem management stuff.
If the standard operation procedures don't change, it's a waste of money. We have to transform the standard operating procedures of sales mark. Customer success, the product, those four groups have to be transformed. The only way to transform it is to introduce clarity on what is critical to say. Here's very explicit when I wrote it embedded.
It's not a conceptual thing by a consultant who wants to invent new terms. It's a practical guide for how to show every organization, why ecosystems are critical and how to get them to own the KPIs for the ecosystem. So I think you're right. CEOs say things, but they say a lot of things and they do different things.
The bottom line is that most CEOs do not understand how to be ecosystem attic. Most departments do not know how to be partner friendly, and that's why every partner leader on this call can feel what I'm about to do. How many times do you tell the partner you're going to deliver value and go back to your organization.
Find out that our standard operating procedures are partner unfriendly, and then you have to run around like a crazy person trying to convince people to change. That's not going to work. Our SOP is have to become ecosystem, mediate, ecosystem, and friendly, or we're going to fail. There's a lot of changes.
Lot of change management.
[00:50:55] Jay McBain: So we overestimate what's going to happen in two years and Andre estimate what's going to happen in 10. The reason I talk in decade long phases is that things to move down and through the organization. To get the people in the skills to get the processes and workflows and business logic built to get the programs created and to get the technology underneath it and to fund it to the point of being able to manage and measure and monitor all of this doesn't happen in two years.
We're two years into the decade of that ecosystem. Again, we're through the hype cycle. So let's move on to year two. Which is let's move into acceleration mode and help these leaders through that. And that's where I think we need to think about 20, 21 going into 2022. We're going from year two to year three of the decade of the ecosystem, which has got to make sure where we are and spend less time in the hype cycle and, and figure out how we're going to engage for all of us to get into the conversations, more conversations.
You know, add value and see the results, you know, in later years for all this great work
[00:52:07] Allan Adler: that we're doing today. And we're both still standing and we're
[00:52:10] Jay McBain: both still standing that I
[00:52:12] Adam Michalski: think we can add on that because I think we can both you know, we can all agree that yeah, all of this is changing. And what I wanted to do is thank you guys for pushing the conversation forward.
Like it's conversation. This, that actually allow folks to basically have the frameworks that they can wrap their minds around. And you know, as you guys are both, you know the cutting edge of basically thinking about these concepts, sharing that in particularly a public forum, like this is extremely helpful.
So thank you both. We're going to chalk this one up as a draw for now. Although you guys went all, you guys went all nine we'll have to have a rematch sometime next year, you know, which will be well anticipated. But in the meantime, Thank you again and wishing you as well as everyone on the call, the attended happy holidays.
Thanks. Thanks all.
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