By Larry Walsh
While in London last week, I attended a dinner with about two dozen channel professionals hosted by our partners at Channelscaler. It was an evening of directed but casual conversation, with everyone around the table asking questions and sharing perspectives on the issues and trends affecting the channel today.
Toward the end of the night, one attendee said something truly provocative.
“I think we should just get rid of the word channel. Toss it in the bin. It’s antiquated. We’re in a world of ecosystems.”
Another attendee quickly followed: “I second that idea. ‘Channel’ just doesn’t reflect what we do or how we operate.”
It wasn’t the first time I had heard such a notion. In recent years, people operating in and around the channel have embraced the ecosystem as the model through which we address the total available market and meet customers’ needs and expectations. The word “channel,” they argue, reflects a more constrained, linear motion that fails to encapsulate everything being done by the multiple partners engaging with a customer.
First, I completely agree with the premise behind that argument. I’ve increasingly told vendors and channel professionals that no matter how good their products are or how broad their portfolios may be, no single company can solve all of a given customer’s needs. Every technology product depends on products and services provided by other companies to create systems whose value is greater than the sum of their parts.
Interestingly enough, that’s the very definition of an ecosystem.
In his 1993 Harvard Business Review article, “Predators and Prey: A New Ecology of Competition,” business researcher James Moore was among the first to use the word “ecosystem” in a business context to describe companies working in concert to serve a mutual customer.
But Moore didn’t stop there. He argued that customer success depends on the contributions of other companies outside the immediate transaction, including competitors. While Moore applied the word to the business model, he didn’t invent the underlying concept. The collaborative model in which two companies use their respective strengths to offset one another’s gaps or weaknesses has existed since antiquity.
While channel and partnership professionals at vendors have embraced the word “ecosystem,” they often don’t practice it particularly well. Many people in the channel now refer to the resellers, integrators, service providers, OEMs, ISVs, influencers, and consultants with whom they maintain relationships as their ecosystem.
That isn’t entirely untrue, but it isn’t accurate either. A roster of logos isn’t an ecosystem.
By Moore’s definition, an ecosystem exists only when those companies work in concert, offsetting one another’s gaps to build something the customer values more than anything the individual participants could deliver alone. Just because multiple companies work with you doesn’t mean they’re functioning as an ecosystem, any more than owning a number of musical instruments makes you an orchestra.
Call me stubborn or old-fashioned, but I respectfully disagree with my British friends that the word “channel” is antiquated. “Channel” and “ecosystem” aren’t competing terms; they just describe different things.
In a business and sales context, “channel” describes the path through which a sale moves, either directly or indirectly. A vendor can route a sale through a direct seller, reseller, retailer, distributor, service provider, or marketplace.
Ecosystem describes something else entirely: how value is created through the combination of complementary products, services, capabilities, and expertise. When multiple partners come together to produce that value — the ecosystem effect — the resulting sale still moves through a channel.
Eliminating the word doesn’t elevate the model. It simply leaves us without a way to describe how the sale actually moves.
One of the biggest challenges channel professionals face today, and will continue to face in the near future, is effective ecosystem orchestration. As technology becomes more complex and customer expectations for value-producing systems increase, vendors will need to cultivate fast-acting ecosystems capable of assembling, diagnosing, and solving for customer needs with minimal friction.
That’s a tall order.
Most vendors don’t like having other vendors involved in their deals. Partners often have misgivings about working with overlapping or competing companies. And rarely does everyone agree on the value of their respective contributions or the compensation each participant deserves.
Vendors and partners must overcome the communication, trust, logistics, and economic challenges inherent in ecosystems if they want to remain competitive and relevant. Only by embracing the power of collaboration, reinforced by mutual trust, will vendors and their channel partners continue to deliver meaningful value to customers.
But again, the fact that ecosystems are becoming imperative doesn’t negate the channel.
To reiterate: An ecosystem is how value is assembled; the channel is how that value reaches the customer.
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Larry Walsh is the CEO, chief analyst, and founder of Channelnomics. He’s an expert on the development and execution of channel programs, disruptive sales models, and growth strategies for companies worldwide.