The Digital Ecosystem Advantage for B2B Companies

AppDirect is a Business Reporter client.

A digital ecosystem strategy is a must-have in the digital economy. Here are the capabilities needed for success.

In today’s market, consumer subscription companies such as Netflix, Hello Fresh and Birchbox grab all the attention. But something interesting happened while no one was looking: Almost every B2B company—95%—now offers a subscription-based product. It’s a huge milestone for the $13 trillion B2B market, and it has big implications for the way that B2B companies develop, market and sell their offerings.

“We’re operating in a different world now,” explains Dan Saks, co-founder and Co-CEO of AppDirect, a company that offers a best-in-class subscription commerce platform. “The near-universal availability of B2B subscription products means that digital recurring services are table stakes. You need subscription-based products to help you tread water, but the companies that are really thriving in this new environment are creating ecosystems.”

Over the past 12 years, AppDirect has played a key role in much of that success. The San Francisco-based company has helped enterprises around the globe—including Vodafone, Deutsche Telekom and ABB—build and launch market-leading ecosystems. As another example of success, Saks points to Salesforce’s AppExchange, the company’s ecosystem of digital add-ons.

AppExchange gives customers access to thousands of complementary recurring services, while Salesforce saves on development costs and generates revenue for itself and its partners. “Today, it’s no longer the company with the best product that wins—it’s the companies with the best ecosystem of products that add the most value to a core platform,” Saks says.

According to Saks, the key to creating an ecosystem that delivers value is making sure to have the right mix of technology, strategy and expertise to help ensure that it all works together seamlessly. “Once you start getting into the details, the complexity of an ecosystem model might seem overwhelming,” he says. “But a successful digital ecosystem is within reach of any company. You just need to make sure that you understand your organization’s goals for an ecosystem and that you have the right capabilities to reach them.”

Three must-have capabilities for successful ecosystems

Depending on the business case, there could potentially be dozens of requirements for a company’s ecosystem. Drawing on his decade of experience with digital ecosystems at AppDirect, Saks outlines three main priorities that every organization should figure out before launching an ecosystem strategy.

The first is the customer experience. “Unlike one-time transactions, an ecosystem can involve multiple handoffs between providers and customers,” says Saks. “All of those transitions must be seamless and invisible to the end user. Your platform should be able to support a robust, digital marketplace that showcases and monetizes your digital products while providing an easy, intuitive experience for customers.”

Next, partner onboarding is an obvious yet often overlooked capability that many companies struggle with. “Without satisfied partners, an ecosystem won’t last very long, so the partner experience needs to be top of mind as you plan your strategy,” says Saks. “Think about how you can streamline and optimize the experience and processes for selling through resellers, referral partners, distributors and other types of stakeholders.”

Lastly, Saks points to one fundamental capability that digital ecosystems cannot survive without: automation. “If any of your ecosystem processes have to stop because a person needs to come in and take an action, it’s a huge red flag,” Saks says. “The seamless operation of your ecosystem, and more importantly, the customer and partner experience, depend on automating your workflows. You need a robust billing engine, along with the ability to efficiently connect to internal systems such as CRM, ERP and other business-critical tools.”

Static e-commerce versus dynamic subscription commerce

This gets to the heart of the biggest difference between standard B2B transactions and true ecosystem-based subscription commerce. “For many companies, their commerce systems were built around the idea of a product-centric go-to-market strategy, with a catalog of goods that were sold and shipped to customers,” Saks explains. “It shouldn’t be a surprise, then, that their back-end solutions, like billing tools and ERP systems, were built around the concept of products, catalogs, inventory and one-time transactions.

“B2B subscription commerce, on the other hand, is dynamic, and it requires different technology and a different mindset. You have to think beyond one-time transactions and build a strategy around easily supporting customer relationships that change over time. The companies that understand this difference and use it as the foundation of their digital ecosystem strategy end up seeing the most value.”

Today, six of the world’s top seven companies are ecosystem-based, and a recent Accenture survey found that more than eight in 10 executives believe that ecosystems are critical to their success. Digital ecosystems with subscriptions at their core are a clear path to company growth and success in the digital economy.

To learn more about the capabilities you need for a successful digital ecosystem, and how to launch and scale a recurring revenue strategy, read The Definitive Guide to Subscription Commerce, a comprehensive deep-dive into subscription technology, strategy and best practices from AppDirect.