BMT 003 | The rise of ecosystems

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Ecosystems are forecasted to reach $70 trillion in value in the coming years and the B2B segment along is heading towards more than $17 trillion. In this episode, Juan and Scott unpack the rise of ecosystems, and the winner takes all dynamics and the tradeoffs and benefits of a web that's increasingly organized around platforms. We also touch on the continued growth in the retail media space, Slack and Salesforce product announcements, and the challenges of data anonymization.

In another BIG week in Martech:

🗞️ The Headlines

Retail media is changing: New research from GroupM on growing spending in the retail media space. We ask the question - will it be effective?
Slack gets new tools and Salesforce deepens its CDP commitment: Do we need more productivity tools and what does the new Salesforce announcement of "Genie" a real-time data activation platform mean for the industry?

💁‍♂️ The Big Chat

The rise of ecosystems: Ecosystems are becoming a more central aspect of the web. From platforms to communities and services, there's an ecosystem for everything. Even McKinsey analysts think that the B2B marketplace industry is worth more than $17 trillion. Juan and Scott talk about the trade-offs, benefits, opportunities, and risks of working in a "world of ecosystems."

⚡The Shoutouts

Gartner names HubSpot a Leader in Marketing Automation: Gartner is increasingly evaluating marketing automation platforms by the ecosystem they provide.
Why data anonymization doesn't work: An interesting thought piece on Adtech and their efforts to balance privacy with tracking. Is anonymizing customer data delivering on both?

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📚 Talked About On The Show

📖 Read The Show: The rise of ecosystems

Juan: Let's jump into our big chat this week. Scott, you are, I have to say, an ecosystem fanatic. You've done an amazing piece just this week around partner operations, the role and rise of these ecosystems, and exploring all the different ecosystems in the tech landscape. So, let's jump into the big chat. What are the ecosystem trends that you're seeing at the moment?

Scott: Yeah, I am happy to chat about this. And of course, my work at HubSpot is I'm the VP of platform ecosystem there. So, surprise, surprise that I would be an ecosystem advocate.

But it's not just me. I remember when I joined HubSpot in 2017 and they let me pick my title and I'm like, all right, I want platform ecosystem and the people inside HubSpot and people outside HubSpot were like ecosystem - what? You mean predators and prey and fish and flora and fauna? And I'm like, well, yes, but the digital metaphor for that, you fast forward five years and so much of the conversation inside the C-Suite has shifted to this concept of ecosystems around companies, around markets.

The classic linear supply chain and linear distribution chain have been blown apart by the digital world. Well, even across our suppliers and the ways in which we reach our customers, there's often this entangled web of many different providers and possible different substitutes for different customers.

They might be working with multiple different partners. They might be connecting through different channels, and starting to look at this not in a linear fashion but as an interconnected ecosystem. This really seems to be from the highest C-level shift in strategy.

When we talk high-level C-suite strategy, of course, we'll bring up something from McKinsey. I'd just been reading an article from them the other week where they had quantified the size of these ecosystems around major markets where B2B marketplaces are already a 17 trillion market.

We were talking earlier about, you know, the size of the B2C eCommerce space. Well, the B2B marketplace is huge. Collectively, all these different marketplaces, all these different ecosystems around, whether it's B2B products or services, or corporate services or even as you start to move out into the whole world of you know, the health economy public services - collectively it's $70 trillion!

So what do you do with all these ecosystems? How do you manage it? Well, it turns out there's a whole wave of technology. I'm going to call this marketing technology. A Fellow named Jay McBain, who used to be with Forester, is now at an analyst firm Canalis, has been tracking this specific collection of capabilities.

So it's things like the products you use to launch your own marketplace. Products you use to find and discover partners and the way in which you handle incentive management inside your different channels. Data sharing is another exciting aspect of ecosystems. There are some interesting steps in this space with companies like Cross Beam and Reveal and Partner Tap, so that you can do account mapping across different partners within an ecosystem.

You know, I could go on. It's definitely a landscape worth digging into, but the part of what I want to shout out about this is, you know, it's not just the technology. As with everything else in MarTech, the tech is a tiny piece of what really needs to fit into a larger view of our strategy and operations.

How do we win with ecosystems? And so we've all talked about marketing ops and sales ops, and the combination of these things under revenue ops and in many ways, partner ops is kind of a part of that whole revenue ops landscape, but it hasn't gotten as much love and it hasn't gotten as much attention.

And I actually think this is a really great opportunity for people in MarTech because just pick something like I mentioned before - data sharing. Among partners in an ecosystem using things like Crossbeam or Reveal okay, yes, that's useful for how partner ops teams can like match data, between their company and their partners.

But when you think about it from a marketing ops perspective, oh my goodness. To suddenly be able to get data, into our MarTech universe, is probably some of the most valuable second-party data, that a company can have. And so, you're able to now from a marketing ops perspective, be able to start creating lists to identify, oh, well these folks who are a customer of our company, and they are a prospect of this other company, and perhaps they're already an open opportunity for this new upgrade.

To be able to systematically identify that and start to work it into our automation cadences is incredible stuff. And so, I think one shout-out here is to marketing tech, and marketing ops folks to get more familiar with this space.

I think this is a great leverage point. And the other thing I would say is broadly about the ecosystem and the ecosystem thinking is bringing up my old graph of you know, Martec’s law, right? This idea is that technology changes at an exponential rate. Organizations do not change at an exponential rate.

And so we always, have been in this struggle of, you know, the gap between those two curves, the blue and the yellow. And there are a few things we can do. We can never entirely close that gap, but we can be very strategic about which changes we embrace. We can do things like you know, adopt agile management practices to accelerate the rate of change within our org.

Can we be faster than our competitors? But I'd argue that leaning into things like community-led growth ecosystems, these actually also become a way of boosting our organizational change because it opens us up to being able to not just have the thinking that's inside our four walls, but to get better and better at collaboratively thinking and collaboratively going to market.

With a much broader set of partners allows companies to adapt much more quickly. And so that's another huge benefit of leaning into the ecosystem side of things. So what do you think of this?

Juan: Well, there was one quote that really grabbed me from the article. And I do recommend people who are working in marketing ops to check it out. I think it's a really awesome summary of the changes in thinking about ecosystems, partner operations, and even marketplaces as well.

The quote is this: “When you hear people talking about community-led growth, that's an ecosystem. When you hear people talking about second-party data, that's an ecosystem. When you hear people talking about marketplaces, that's an ecosystem.”

I think it's an interesting shift. And just to play on what you were saying earlier before Scott - why would you use this word “ecosystem” that is used for how you describe nature, right? An ecosystem is about ecology as this whole domain of like protecting wildlife, right?

Why would you use that for technology? Well, we love using nature metaphors for tech, don’t we Scott? That's number one. But number two I think is that if you extend the idea of the ecosystem to the food chain, then you get this interesting concept, which is, well, in the food chain there are creatures that get eaten and there are creatures that eat.

There are people at the top of the ladder and there are people at the bottom of the ladder, and that's just the food chain. I think you can extend the concept. When we think, when we look at ecosystems, you've got the big players, we've got the Salesforce app exchange ecosystem. It's huge, right? And it's massive. And that's why, Dreamforce is such a big event. It's because the ecosystem is the community that drive that value for Salesforce. I've been in numerous buying decisions for CRMs, and Salesforce comes up because of their ecosystem. It's a value proposition.

I know HubSpot has done an excellent job. They've created this huge ecosystem, not just of other software that integrates, but also of partner services, consultancies, and practitioners that plug into the HubSpot world and use the tech in a specific way.

So, the ecosystem is, there are great benefits of that. I think it gives technology companies the ability to grow and scale fast, especially as they're coming to market. Great for GTM, but there is the food chain aspect as well, which is, well the winner takes all type concept. I mean, it's very hard to recreate a Salesforce ecosystem, which means they get the lion's share of value.

But one aspect of this I want to share is that, well, if you look at Microsoft, their way of doing ecosystems is super interesting. So, when they announced Windows 11, they also announced that they are actually now cutting off any take rate from developer apps within the Windows 11 app store.

So Apple takes 20% of all revenue from apps generated within the app store. Windows have gone the other direction completely and said, if you are developing an app in the Windows ecosystem, we won't take any revenue out of that total picture. It all belongs to the developer. And Windows are being very careful about its ecosystem and how the incentives that they create for people building software and services within its environment.

So I do think, maybe we could extend it out a bit. The ecosystem is one aspect and I think there's these growing go-to-market movements around the ecosystem, but we need to also think about the winner takes all dynamics as well for the companies that establish and maintain the ecosystem. But for me, I'm always jumping on this tightrope and thinking, well, what are the trade-offs? What are the benefits?

I think Windows is a really great model for thinking about how do you give as much value back to that community as possible, and for the people who are building apps and services.

Scott: I couldn't agree more, you know, I suspect these take rates out of ecosystems was sort of like a more of the exception rather than the rule.

And to be honest, yeah, you know where the value in the ecosystems is from that cohesion. That is the winner take all capability. And in a world where let's face it, you know, as APIs become more open, we were just talking earlier about how the data layer is becoming somewhat universal.

It's going to be harder and harder for people to like keep the walls, around a particular walled garden in B2B software. What's going to hold people together is actually this more organic force of the ecosystem itself. So, Yes. Feed and nurture your ecosystem!

Juan: And they don't, they don't happen overnight, Scott.

HubSpot have applied consistent effort over many, many years to get to where you are now, and these things don't happen overnight. And while we do have some of those bigger players in B2B ecosystems I think it's a great time to be building your own ecosystem as well.

I think there's, you know, there's so much opportunity in this space, It's massive. And yeah, I highly recommend checking out Scott's article. It's a great deep dive, and a great way of thinking about ecosystem and the role it plays in our tech industry right now.