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5 Infections Business Networks Need to Master

The previous blog (Can a business network go viral?) discussed the difficultly that business networks have in achieving the purest form of a viral infection.    That being the ability to have an organization who is invited to participate on the network, convert into a ‘host’ organization that will in-turn invite others to join.    Although this would be the most powerful infection leading to organic growth and broad adoption, all is not lost.  There are five other viral infections that business network platforms should proactively manage in order to maximize their network growth:shutterstock_131189879

#1 – Host-to-Participant Connections

This is typically core to the network platform’s success and therefore at the forefront of operational strategy.  Simply, this is the infection from the main ‘host’ to the invited organizations that will participate due to this host joining the network.  An example would be a network platform providing supply chain transparency for certifications, compliance, etc.  Typically the host is the ‘buying’ organization that is trying to increase the visibility and compliance within their supply chain.  To achieve their goal, they invite as many of their suppliers as possible to join the supply chain network platform.  As the number of participants (suppliers) increases, so does the network effect and hopefully the revenue and profit of the network provider.  Ways to optimize:

  • Dedicate an adoption team focused on participant on-boarding
  • Define best practices that the hosts can leverage in order to influence their participants to join
  • Define standards to minimize friction and increase the network effect

#2 – Host-to-Host Referrals

This type of infection is not exclusive to network specific platforms but still needs to be a focus and can sometimes be more powerful in network businesses.  In markets where the hosts do not see their network usage as a competitive advantage, they may be encouraged and willing to provide referrals in order to increase the participation on the network and ultimately the value they receive from the platform.  In addition, I would suggest that most organizations do not fully exploit the community power of their customers and  should develop a formal plan to ensure they maximize the referrals and introductions they can farm from their customers.  Although all organizations will capture positive case studies, record quotes, publish press releases, host webinars and get their best customers to present during conferences, I would suggest there is still more that can be done.  Here are some suggestions:

  • Rollout creative incentives so that your customers will make introductions and referrals to other potential hosts
  • Define and track referral targets with your delivery and customer support teams who work with your clients every day
  • Help facilitate a scalable way for your customers to voice their success publicly.  For example, create LinkedIn community groups, best practice chat rooms, etc.

#3 – Participant-to-Host Referrals

This infection is about harnessing the voices and relationships of the participants and ensuring they are being leveraged to influence new hosts to join the network.  Although the amount of leverage will vary widely depending on the business process being facilitated by the network platform, this can be a very strong and sometimes necessary influence on new host adoption.  Understanding the different types of relationships, who holds the power and the different levels of influence is a key in knowing how to exploit this type of infection.  Some participants will hold significant influence on new hosts joining while others will have no voice at all.  Potential ways to promote:

  • Similar to host-to-host referrals, provide creative incentives for your participants to provide introductions and referrals to other hosts they have relationships with
  • Bundle participant voices together for increased leverage with the hosts
  • Remember that due to departmental fragmentation the first introduction you probably need to promote is to the ‘other’ departments within the participant’s own organization

#4 – Participant-to-Participant Influence

Although this infection won’t have a direct impact on new hosts joining the network it can positively impact network adoption and the first infection type discussed above.  Peer pressure can be one of the most powerful forces that triggers action and network businesses should leverage this to drive higher participation by the invited organizations.   In this case, competitive forces may work in favor for the network if participants have an impression that they need to join the network in order to stay on par with their competition.  Network businesses should consider the following:

  • Create case studies that illustrate how participants are better equipped to service the hosts by participating on the network platform
  • Create community groups for the participants allowing best practices and experiences to be shared
  • Potentially create incentives for participants to invite other participants to join

#5 – Regulatory Mandate or Influence

This infection involves working with regulatory authorities, standards bodies or government organizations who control or influence how hosts and participants communicate and work together.  If achieved, this can be one of the most powerful infections leading to quick adoption and a strong first mover advantage.  This can also have a positive impact in creating defined protocols that will reduce the variance in how organizations communicate with each other, thereby reducing the friction for adoption and increasing the network effect.  Potential ways to leverage:

  • Network businesses should be fully aware of the different regulatory organizations that can positively or negatively impact how hosts and participants need to work together
  • Work with the regulatory organizations to try and define best practices and standard protocols that will reduce friction in adoption
  • Potentially lobby for compliance and mandates for participation if possible

Although it is very difficult for business networks to achieve the purest form of viral growth (where ‘invitees’ convert to ‘invitors’) there are five other ‘infections’ that can have a very positive impact on the platform’s growth.  To what extent and how they can be harnessed will vary from platform to platform but all five should be proactively considered and leveraged when possible.  Social networks have mastered many of these infections triggering incredible growth.    Business networks need to do the same!

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Can a business network go viral?

“Going viral.”  Certainly it is the  dream of every network and is the single  biggest reason some of the most popular social networks  grew to millions of participants in a relatively short period of time.   A viral platform leads to faster growth, significant participation and higher economies of scale for new customer capture.

So what are the mechanics of going viral?  Probably the most pure definition is that the initial carrier (person or organization) infects a new host  that in turn infects another person or organization.  The key is that a person or organization that becomes ‘infected’ can also infect others therefore continuing to allow the network to organically grow. 

We have all participated in this model.  At some point we were invited to LinkedIn or Facebook.  We saw value  in the platform and then started to invite others to join.  We became agents in spreading the virus.  It worked the same way in other networks platforms like eBay and Craigslist.  We initially started participating as a buyer or as a supplier, and then probably flipped to become agents in promoting participants on the  others side of the equation. shutterstock_116742970

This is the most ‘pure’ form of how a Viral Loop works.  But can this same mechanism work in the B2B world with business networks?

Unfortunately the answer is that it is very difficult.  The problem in B2B platforms is that the viral loop gets broken due to the departmentalization of business functions within organizations.  It is very  rare that an invited participant or department to a network platform could in turn become the ‘inviter’ triggering other organizations to join.  In essence, the infection rarely continues and is only one level deep therefore dramatically reducing the speed of which the network can grow.

This impediment is certainly relevant in any commerce related network platforms targeting processes such as eInvoicing, supply chain, eSourcing, etc.  Let’s look at eSourcing as an example.  An organization leveraging eSourcing will ask their suppliers to participate in online sourcing event such as a RFQ.    A sales rep or sales department will be the function that participates from the supplier’s organization.  Regardless of how much value the sales department sees in the on-line sourcing network, they will have little influence on their own organization adopting the same platform for their eSourcing  needs.  The same departmental barriers appear in eInvoicing and supply chain platforms.

In addition, business networks have to deal with typically slow gestational periods to both capture new customers (i.e. sales cycles) and get customers live and transacting.    Typical enterprise sales cycles might take anywhere from 4-12 months plus the additional time to get the customer successful and in a state by which they can infect others.  By comparison, social networks that have gone ‘viral’ can capture new users and get them live within minutes, show quick value and have the ‘invitee’ converted over to an ‘inviter’ all within the same day.

There is some hope, however.  Many of the viral triggers that have worked for social networks will still provide positive growth and adoption influence for  business networks.  I’ll discuss the concept of viral hooks  and other infectious strategies in a future post.  In addition, there are some business functions that can play both roles. i.e. infected participant and infecting host.  IT, Risk Management & Compliance and Treasury are three examples of departments that are more suitable for viral loops.

What does this mean to your business network strategy?:

  • Don’t assume different departments in the same organization communicate to each others.  Your targeted prospect may not even be aware that their organization is already participating on the network in a different function.
  • Proactively help your customers bridge over to other targeted departments.   Provide the tools and collateral to have your participants help sell the other roles and departments in their organization.
  • Get on the radar of executive sponsors who can help bridge to the other targeted departments.  IT, Finance and compliance will all serve as good ‘bridges.’   Sell the value of platform consolidation.  This will not happen on its own.
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Fragmentation – Good or Bad?

By definition, the primary purpose of a network is to connect organizations, businesses or people to each other.   It is intuitive that the value of the network would increase in fragmented markets where there are many participants.  Although true, there are a couple other forms of fragmentation that should also be considered when determining your network go-to-market strategy.   Let’s look at the top 3:shutterstock_74595271

Fragmentation of participants - as mentioned above, having a high number of participants in a market usually creates a ripe environment for network platforms as they can help automate the interactions between the participants and therefore drive positive network effects.  It is pretty simple to understand that as the number of participants increases, the value of a platform to facilitate connections will also increase.  As an example, Yelp becomes more valuable to the consumer when there are more businesses in any relevant search.  In other words, if there was only one restaurant in town, who would need Yelp?

Fragmentation of relationships - this is defined as the number of connections between different participants i.e. the number of existing or potential ‘relationships’.  This form of fragmentation creates a critical market condition for network platforms as it has a direct impact on the network effect and the value the platform provides.   Simply, the more connections between participants, the more valuable a network platform becomes to the users.  Let me use Yelp again to illustrate.  As we know, consumers are constantly seeking to find new restaurants and new local businesses.   This willingness or need for consumers to have many connections with local businesses is key to Yelp’s value proposition.    Conversely, you could have 1000′s of restaurants and 1000′s of hungry people but if consumers stubbornly only ever wanted to eat at one or two of their favorites restaurants, the value of Yelp’s network would dramatically decrease.

Fragmentation of connection types - this is where we cross over to some of the barriers in the B2B network world.   Connection types or business processes are ‘how’ one connects from participant to participant.  Ideally this would be consistent across all participant relationships in order to create the maximum network advantage.   If the processes for communicating between the participants differs across relationships, this will dramatically slow down the speed by which the network will grow and therefore decrease the network effect.  However, network platform providers can combat this negative influence by creating standards and best practice templates by which participants interact.  This will have a direct impact on reducing the friction and effort to create new connections and therefore increase overall network adoption.  For example, eInvoice vendors like OB10, Ariba and Tradeshift would benefit in trying to establish standard eInvoice templates in order to drive consistency in how suppliers invoice their customers.

So what does this mean for your go-to-market strategy?

  1. Focus on market segments that have many potential participants and where there is a high degree of interoperability between participants.
  2. Target participant aggregators i.e. those participants that have a relatively high number of connections.    These organizations are valuable to your network in capturing new participants and driving interoperability.
  3. Avoid business interactions that are highly customizable between participants.  Although you may be able to automate it, there will be minimal network effects and the speed of adoption will be similar to normal software automation solutions.
  4. If possible, create standards and best practices for connection processes between participants.  This will dramatically increase adoption and the growth of connections.
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Do you behave like a network company?

So you have a B2B network and a community of participants that you can potentially exploit to help grow the business and foster a ‘network effect‘.  However, does your company really operate any differently than a software company selling enterprise automation solutions?  Have you taken advantage of proven network growth models and injected a ‘network’ DNA into sales, marketing, customer success, product management, finance, etc.?

Here are 5 things that every business network solution provider should be doing in order to exploit the network advantage they possess:

  1. Define participant value and benefits – regardless of whether the network charges one-side of the network or has a multi-sided commercial model, it is critical that the solution provider understands and explicitly defines the value for all participants on the network.  Not only is this fundamental for any internal pricing discussion (i.e. who and how much to charge), it is very important to openly discuss value to all users and ensure the benefits are transparent for all participants.  After all, their participation, and hopefully positive experience, is the single most important thing you want to promote and harness for growth as a network company.
  2. Understand and teach the network effect – defining the network effect value is not the same as defining the automation benefits for a participant.  Rather, it is defining the value that the size of the network or further network growth would have on the participants.  For example, it may be defined as speed of implementation due to current registered users, lower adoption risk due to solution familiarity or additional value that could not be achieved without other participants already on the network.  A common way of teaching this is to show a prospect how many of their business partners are already on the network.  However, this is just the conversation prompter.   You then have to define the impact and link this to a benefit that is tied to the participant’s interests.  Key point – don’t just assume your prospects and users understand the differentiating value your network provides over a point-to-point or internal process automation solutions.
  3. Invest based on potential community leverage – this includes investments and resource allocation in sales, marketing, product development and customer success.  Network companies always have to be asking themselves ‘how will this decision impact my community leverage now and in the future’.  The network advantage centers on leveraging the community power.  As you make decisions on new solutions, acquisitions, resource allocations, strategic plans, etc., make sure you are evaluating the impacts on growing the community of users and harnessing their power.  You might be surprised to find that some very profitable solutions or traditional areas of focus will have very little impact on growing your network or providing new participation paths.
  4. Optimize pricing and revenue cycles in order to build communities – this is perhaps one of the most complex riddles networks have to try to solve.  Good thing is that we see lots of great trials and experiments in the consumer world as consumer network models are often very attuned to building a community as fast as possible through viral strategies and commercial incentives.  PayPal, Amazon, Amex, eBay, plus hundreds of others have been trying to master this in their own domains and networks.  Bad thing is it is very complex especially in fragmented markets with multiple entry points, different value propositions, various economic buyers, etc.   Books have and will continue to be written on this subject so my value-add is simply to suggest that this has to be a critical debate within the go-to-market strategy for the network business.   Networks have to try to evaluate the trade-offs between revenue, community growth, competitive barriers to enter and the voice of participants with an eye on the objective of building a powerful network community.
  5. Analyze network metrics  – I will admit to being somewhat analytical so I could have easily put this one at the top of the list.  It is critical that in addition to the normal list of key sales and marketing metrics that enterprise software companies should be analyzing, they need to fully monitor network metrics around connections, relationships, participation, etc.  However, in talking with multiple network companies about the key metrics they monitor, it is evident that many network solution providers are missing key inputs that should certainly influence their messaging, sales and customer success programs.  Participation directly influences future growth and the network value proposition.  Therefore, network business must study how participants are engaging with the solution, who they are connected to, how many connections and relationships they have, what potential relationships can they have, etc.  Look for more on this topic in the future, but the key point is that this needs to be an on-going study within your organization.

Some of the suggestions in the above list may seem simple and completely intuitive but habits and established perspectives are hard to change and most enterprise software solutions are not network based.  Therefore, business network providers will have to make a conscious effort to think differently and ensure they are proactively tweaking their go-to-market strategy to fully develop their network value and network advantage.

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B2B Networks – the advantage

Social networks have certainly created a buzz around the  term ‘network’ and for very good reasons.  For over a decade now, many of those that mastered the power of network effects, community leverage and viral growth have built incredibly fast growing enterprises with truly amazing valuations and trajectories.  Some have crashed equally as fast or never lived up to their initial buzz, but there is no disputing that ‘network’ models have given many of these companies an ability to grow faster than traditional methods.

So what are the key differences that allow network models to have an advantage?    Understanding the differences is the first step in consciously exploiting the powers of network business models.1-shutterstock_82267102-001

There are many difference but I would suggest the following four have significant impacts on go-to-market strategies:

  1. Cumulative value for participants – often referred to as a network effect or a positive network externality.  It means that the value of the ‘solution’ to existing participants increases as the number of participants grow.  i.e. bigger really is better which leads to several advantages.
  2. Multi-participant – by definition, business networks facilitate communication and automate interactions between enterprises.  For this reason they have the ability to grow their user community and potential revenue generating customers much faster than non-network models.  For example, signing up a new customer may automatically mean other new participants will join or have to join the network.  Higher number of  participants = higher potential.
  3. Community leverage – inherently a network is about enterprises communicating with each other.  This automatically creates a foundation for community conversations, knowledge sharing and significant leverage when exploited correctly.   A great example of this leverage is how quickly LinkedIn was able to get traction with their newsfeed type service because the community already existed.
  4. Viral growth potential- building on points 2 and 3 but important enough to emphasize by itself.   Network participants can influence, directly impact or become  new customers.   Think infections.  Harder in the B2B world for reasons I will explore in future posts but still a powerful force.

These four differences can have huge impacts on the business, but only if the network platform provider proactively manages, thinks differently and exploits them to their advantage.

When network businesses take advantage of these key differences,  they can reap huge rewards such as:

  • Higher rates of growth
  • Lower cost of sale and participant/customer capture
  • Scale to grow beyond traditional reaches

In future posts I’ll explore specific strategies that network companies should evaluate and consider to take advantage of these differences.

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Introduction

The purpose of this blog is to share some ideas and thoughts about Business-to-Business (B2B) networks.  ‘B2B networks’ being defined as platforms and solutions that:

  1. Automate business processes between organizations
  2. Leverage technology and operational models allowing participants to connect to multiple entities (vs peer-to-peer connections)

Although I may touch on several Business-to-Consumer and Consumer-to-Consumer models for example purposes, I’d like to focus on strategies and techniques that will help B2B networks thrive and grow.

I expect to post in four general categories but suspect this may evolve  over time.  The categories are: Strategy, Sales Effectiveness, Marketing and Community Success.

I of course encourage conversation and would love to share ideas!   Please feel free to comment on the posts or e-mail me directly.   Also, please recommend this blog to anyone who you think might find it interesting.   Thanks!

Ken