Many tech vendors hope they can disrupt the broader tech universe by expanding from one winnable niche – i.e. website building, listings, scheduling and email marketing. How? Via acquisition, tech development, or partnerships.
From the sales point of view, it makes total sense. Getting an SMB’s attention and winning their loyalty sits near the top of the value chain. If you can win their business in one area, why not provide that customer a “one stop” to other areas? The rise of AI/machine learning makes the connections more obvious.
But does the convenience factor really make it an “ecosystem?” Lorren Elkins, a longtime local leader (Camilyo, Granite Broadcasting, American Towns, PowerOne Media, and The New York Times), argues that there is a distinct difference between an “ecosystem” and “a universe of galaxies.”
The ecosystem paradigm just doesn’t hold up in most cases, he says. The vast majority of vendors serving SMBs are not compatible with other vendors. Sure, some vendors have extended their product line through acquisition or development. But this model has not been consistently successful. For those who try and force it, SMB owners may end up with substandard features they don’t need, they can’t pay for, that they don’t know how to use, and that may not integrate very well with each other.
Indeed, Elkins’ challenge of the ecosystem paradigm — the basis of such ideas as the “SMB OS” and the “integrated platform” — takes on local infographs previously developed by several analysts – among them, David Mihm, BIA/Kelsey and Elkins himself.
Putting everything together on one page, with overlapping categories, basically creates an undifferentiated (and hard to read) “logo city,” says Elkins. A more realistic approach divides the industry into the separate “galaxies” that they really represent. The most prominent companies, as determined by their social media followings, are shown -–tag cloud style — as proportionally larger.
Its true that some companies are doing very well as one stop, integrated platforms (i.e. Thryv, Go Daddy, Web.com). Elkins says such companies are the ones actually developing comprehensive, integrated offerings. They exist in his infograph in the “outer ring….the asteroid belt.”
Many features are also naturally connected across specific galaxies. For example, many CRM vendors are naturally piggybacking off MailChimp and have created integrations with them. The vast majority, however, are better off focusing on what they really do. “HubSpot, for instance, is really, really good at what they do,” says Elkins. “They don’t try to do everything.”
As sketched out by Elkins, local tech galaxies can be developed for a wide range of feature builders, including site builders, reputation, marketing automation, email, social management, ecommerce, CRM, schedulers, listings, loyalty, payments and phone management.
It’s not just local, adds Elkins. Vertical universe providers, from real estate to automotive, can use the same model.
Dividing feature sets into appropriate galaxies allows you to do a number of things to make decision making easier. For instance, Elkins has mapped out typical revenues associated with each galaxy (i.e. marketing automation brings in an average $413 a year). He’s also started tracking the growth of companies within each galaxy.
I don’t know that Elkins “galaxy” paradigm will necessarily take hold over the industry. I also don’t know that most SMBs actually care about our industry maps. But he makes a lot of salient points, and shows the way to applying more intelligence into our models.