Large enterprise clients can push smaller B2B product firms into exclusivity contracts to prevent the enterprise's competitors from striking a deal with the smaller product company.
This severely limits the addressable market for that product company and leads to the enterprise making more and more demands. The end result of this is ultimately a forced acquisition.
Most B2B product companies get 80% of their revenue from a single client. This client is often demanding of custom features, integrations, and enhancements designed specifically for the benefit of that one client.
The client knows they have all the leverage in that relationship, so the product company is stuck developing client-specific features instead of targeting their feature roadmap towards the greater market to gain new clients.
Adding new features to an existing product is extremely difficult, especially in the IoT space where hardware is often involved. Investing time and money into the wrong features could limit the potential sales of that product.
In addition, the demands of the market tend to move more rapidly than companies in this space can keep up. You need to have the foresight to know what the market demands will be in the next two to three years for any feature you build now.
In the age of connected everything, nothing is a stand alone product. The only way to compete in a market like this is to turn your product into a platform. Extending your device into a platform is the key to success in the IoT B2B market.
It is inevitable that your product will be used as a piece in a larger system. Why make it hard?
Building public APIs, SDKs, integrations, wrappers, connectors, and standard interoperability features will allow you to sell your product not as a stand alone device, but instead a component that can be used for various purposes beyond the original intended design.
Once your product has an extensibility layer that allows it to serve as a component to a larger system, it becomes much easier to customize it for your largest clients.
You can focus on building the out of the box product to capture more market share, while you leverage third party partners to customize your product for specific clients.
Do you know how Salesforce makes most of its money? Or why SAP has a monopoly in the commercial B2B space?
Their product is designed for extensibility by third party vendors. This leads to their enterprise clients building intricate customizations specifically for them either internally or through a trusted partner.
The client can't ever move away from that platform because of how perfectly integrated that solution is to their business.