In my digital monetization consulting, I have worked for two companies that are far too dependent on other businesses that own or control key assets on which my clients rely. One client is completely dependent on a publishing company that has a virtually monopoly on the niche publishing market of my client. The publishing company has far too much leverage, and as a result my clients are not the masters of their own destiny.
Another client is almost completely dependent on Facebook. This client has seen phenomenal success in building a Facebook application. However, when Facebook changed their design a couple months back, the prominence of third-party Facebook applications was diminished, and most of the leading Facebook apps have seen a huge dip in traffic. Because of this recent Facebook strategy, Facebook apps that were too dependent on the Facebook platform must now diversify away from Facebook by building their own websites, and using social media websites such as as Facebook as marketing channels for their own websites, over which they have control.
Being too dependent on a third party who owns or controls a critical element of our businesses, is a recipe for disaster. It’s like building a skyscraper on leased land. Sooner or later that lease will come due, and the land owner will have all of the leverage in negotiating the new lease. Businesses need to be the masters of their own destinies and own or control their key assets. They need to not put themselves in a position that gives too much leverage to an essential partner. Businesses in this position need to work quickly to diversify and regain that needed control.
What has been your experience with these type of business relationships that create too much dependence on a third party?
Posted on April 27th, 2009 by Nathan Gwilliam
Filed under: Business Management, Entrepreneurship, e-Business
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