Commoditization Increases the Importance of Distribution

As products and services become commoditized, distribution and companies that help distribution become more important. Marketing and branding is one way to grow, but finding channel partners that already have a relationship with the target market is more effective.

I suspect that’s why sources of revenue for mature companies shifts to channel partnerships over time and why platforms like Shopify (platform close relationships with businesses) and Stripe (platform that helps others distribute a capability) are growing so quickly.

See also:

  • In 7 Powers parlance, platforms for distribution are a combination of economies of scale (they can reach more per dollar than marketing directly) and process power (a product or service that builds ongoing relationships)
  • Distributed Content Discovery

    One of the biggest challenge with distributed content networks and the fediverse is discovery. Platforms like Google, YouTube, Facebook, Reddit, Medium, have a distribution network built in that help users find your content. Commoditization increases the importance of distribution.

  • Turning Cost Centers into Profit Centers

    A successful business playbook I keep coming across is turning cost centers into profit centers. That is, taking a problem that takes money to solve for one business, the solving it and offering it to other businesses that need it.

  • A Direct Business Is More Valuable Than a Channel Business

    Having a direct business with a good product and deep relationships with the customer is, on balance, more valuable than an API/channel-driven business. One does not preclude the other—if you build a good product, partnership opportunities will naturally come to you, but there are very few examples of companies starting as an API and building a direct platform (namely Stripe and Twilio).