Gain a competitive advantage with an App Marketplace

It’s a jungle out there. Customers and clients want more from products. Competitors are moving faster. Development teams are spread thinner and thinner.

The constraints, and the range of options, can be paralyzing for technology companies. In order to stay competitive, companies must to adapt to a diverse set of needs across different verticals, while the product remains simple enough to plug-and-play. Such a balance is difficult, but possible.

The market demands that we marry speed with versatility in an intuitive, elegant package. But with limited resources and the unstable terrain of technology, how can start-ups topple larger, entrenched competitors? How can fortune 500 companies pivot to keep pace with a world that is changing faster than ever?

Over the past few years partner marketplaces (commonly known as app stores) have made a big impact especially in SaaS, wearable technology and the internet of things. Some of the world’s most advanced startups, like Hootsuite, Thalmic Labs, Oculus Rift, and Desire2Learn, are using this growth hack to out-innovate the competition with great success. After all, for every app, plugin or extension that is built on a competitors marketplace, that’s another feature that will be quietly stealing users away from you.

As partner marketplaces become more common, companies that ignore this trend will be at a dangerous disadvantage. Here’s why:¬†

1. Nothing innovates faster than a Developer or Partner Community

By definition, a partner marketplace lets companies crowdsource innovation and features. No matter how big a company, no matter how much money is in the bank, no matter how many MIT developers they have, no company can innovate faster or more efficiently than the developer community.

Salesforce¬†recently celebrated the 3rd anniversary of their AppExchange, its partner marketplace where developers and partners alike can build apps for Salesforce. With 3,000 apps available, the AppExchange has given Salesforce an insurmountable competitive advantage over any other CRM. In fact, Salesforce spares no expense when it comes to partnerships and as a result, has been rewarded with the largest largest software conference on earth — Dreamforce.

The 21st century Apple success story, while one of the most overused anecdotes in Silicon Valley history, is nonetheless a perfect example of the power of partner marketplaces. They democratized product development. Vision, foresight and the developer community helped turn the telephone from a single function device into a platform with near limitless potential.

2. Simplicity is the ultimate sophistication

It starts off innocently enough. A few customers ask for a new feature and you are more than happy to oblige. After all, the more features you build, the better your product becomes. Right? Wrong. The product becomes more complicated, users (previously delighted with the product’s simplicity) become increasingly confused and frustrated and the growth that was experienced early on begins to slow as users churn. It’s a sad story that plays out every day and most products can end up becoming a victim of feature creep in as little as two years.

“Do not try and do everything. Do one thing well.”

–Steve Jobs

Feature creep has been the Achilles heel, and even demise, of many technology companies. Myspace’s struggle to keep up with Facebook in it’s twilight days was a very clear instance of feature creep. Although they’d initially solved different problems (Myspace introduced users to new people, Facebook connected users to people they already knew), Myspace tried retaliating to Facebook’s arrival by building features targeting Facebook’s users. Myspace’s new features overrode their original value proposition. Profiles grew more cluttered, and users were bombarded with unusual requests. After a certain point, Myspace became almost impossible to use. In contrast, Facebook provided a crisp, clean, UI (despite fewer choices for users) and a clear set of core features which, to their credit, have remained front and center.

The more buttons a product has, the more likely prospective customers are to reach for another solution. App stores and partner marketplaces have an amazing ability to externalize features without complicating the user experience. When users need a new feature, they can go to the marketplace and install the plugin that suits their needs. It’s the only way that a product can provide 3,000 features without frustrating users.

In fact, even if a product is already bloated, it’s never too late to make things right. If a feature is used by less than 20% of your customers, pull it out of the product and made into an plugin.

3. Users will pay for things they need

Apps, plugins and extensions let companies upsell and cross sell individual features as opposed to selling features in bulk (known as plans or packages). When partners are brought on board, external developers and designers — all experts in their fields — are incentivized to contribute to the product by giving them autonomy and a scalable way of generating revenue. Ultimately, this means more revenue and less cost for both companies and partners.

For example, consider Shopify’s theme store, and one of their more prominent partners Pixel Union. Before Shopify was a billion dollar company, it was a startup with a small team that needed beautiful themes for its stores. Their value proposition is, “Shopify is everything you need to sell everywhere,” not “Shopify provides beautiful themes for your stores.” It would’ve been challenging for Shopify’s relatively smaller team to improve on its core proposition, while investing time and energy into a theme design team that would rival the quality of Pixel Union.

Pixel Union took care of another key component of a versatile product: support and support can be more of a burden than you might think. At the end of the day, Pixel Union creating a plugin on Shopify’s marketplace = Pixel Union taking on the responsibility of supporting their app and all its features.

What this all means…

Partner communities have provided some of the most valuable contributions to innovation and companies in every industry are beginning to see the value they provide. Even though needs evolve over time, companies don’t need to roll-out new, feature-heavy, versions of products to stay ahead. Keep focused on your core product and unique value proposition, and leave the rest up to the community.

Many companies out there feel that they are too small to attract developers and partners but this is simply not true. In fact, 90% of developers in small communities are hobbyists that are focused on building apps to solve their own problems and not to make money.

Partner marketplaces are simple, but they’re not easy. OpenChannel takes care of the technology supporting your partner marketplace so that you’re free to manage partner relationships and bring more partners to your platform.

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