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Where and Why Disruptors Fail in Ecosystem Fit

(Image by Pete Linforth)

For Maturity Level 3 an offering must achieve Ecosystem Fit meaning it provides alignment with and even incorporation into offerings of other market players. Startups commonly fail in achieving Ecosystem Fit and here is why.

Resource Allocation Conflict

Ecosystem Fit is required to cross the chasm into the Mainstream Market. It must be built at a time when a Disruptor is busy winning additional Early Market customers. There is an unavoidable conflict between expanding the direct sales force built for Level 2 and establishing the partner management for Level 3 not immediately yielding returns in form of incremental partner-induced revenues.

This is often caused by investors still demanding wins of “New Logos” as a sign of go-to-market traction, and sales management chasing an ambitious growth target.

To prevent this the Disruptor’s executives must monitor the sales pipeline for first Mainstream Market customers indicating that these are getting ready to consider a splash into their new innovative solution. Additional signals for this shift are provided by analysts and potential partners. As soon as the signs for the market shift solidify Ecosystem Fit must be established.

Conflicting Development Priorities

To achieve Ecosystem Fit the offering must meet requirements from partners to incorporate it into their own offerings.

A great example is partner managed services in a sell-through scenario. Here the Disruptor needs to provide the partner with an integration into their operations management so they can efficiently provide the service within predefined SLAs. Developing this functionality can delay the development of features asked for by direct sales.

As a result, the Disruptor must make a conscious decision to sacrifice short-term gains from features customers ask for in return for long-term gains from increased partner-driven revenues.

Scalability Limitation

Once the incumbent ecosystem understands the new value proposition the Disruptor brings to the market, partners line up to join the new ecosystem. Disruptors are frequently overwhelmed by the resulting demand for contracting, onboarding, and education of partner resources. 

To prevent this the Disruptor must build the entire partner lifecycle management for scale starting with well designed standard contracts meeting industry and legal requirements, a prescriptive onboarding program with clearly defined requirements for partners to meet, and a complete set of training programs enabling partners to handle the disruptive innovation at their customers.

Partner Conflicts

As the ecosystem grows chances for conflicts between partners will inevitably increase. A common mistake Disruptors make is missing to standardize partner relationships and to stick to these standards.

To be sustainable, partnerships must be built for mutual value and, as a result, partners must accept certain deliverables in return for partner benefits. One example is the quality and quantity of resources handling the disruptive innovation at customers. To avoid conflicts between partners the Disruptor must clearly describe the qualification criteria partners must meet, e.g., training and certifications.

If these standards are not established and enforced, partners will be treated differently depending on their relationship with the disruptor’s organization. Partners feeling mistreated will leave the ecosystem and work with the disruptor’s competition.

Lack of Executive Sponsorship

As a result of the risks and obstacles described above, the disruptor’s management must understand the establishment of Maturity Level 3 as a major, potentially disruptive change to their organization.

Building the Partner Management is not just another sales expansion, it is a fundamental new capability the organization must develop in order to compete with incumbents and other disruptors for Mainstream Market customers representing 84% of the Total Addressable Market.

Going for Ecosystem Fit is a one-way-door decision, once you started you cannot unwind it without fundamentally damaging your entire brand in at least the target market segment you intended to address with it. And as with all one-way-door decisions you must communicate it internally, make clear that failing with it is not an option, and that the entire organization must stand behind it.

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