An Executive’s Guide to Not Screwing Up Partnerships
Everyone loves partnerships. These fancy sounding deals are also often called “strategic alliances,” “co-marketing agreements,” “channel sales,” or in Continental Europe, “a coöperation” (sounds quite nice and German, doesn’t it?). Partnerships are prestigious, and they whisper to you the sweet possibilities of easy revenue. In Silicon Valley, they are generally run with lots of fanfare by a gal or guy with shiny white teeth and a winning personality.
Here’s the problem, though: most of the time, these deals don’t do jack to advance the company’s interests. Often they’re net drain on the company’s resources and, in the worst cases, they nearly kill the company outright (just look at Ask.com and other search companies that have tried to “partner” with Google).
So how can executives approach the “real” partnerships, as opposed to the ones that serve as an excuse for a press release or two but otherwise get consigned to the void of failed company projects? Here are a few guiding principles to keep in mind:
Find the partners who share your values. Companies have values, and those values mean something. If you try to align yourself with a partner who views the world through an entirely different lens, it’ll fail miserably. One good (though not perfect) proxy for understanding this is to look at the pricing strategy of the partner (i.e., are they a low-cost leader or do they want to have the premium pricing in the category?). Ideally, the two companies share the same approach.
Partner infrequently, but commit deeply. Make the products and services really sing together. In order to afford the requisite integration time of a deep partnership, limit the number of deals you evaluate and the deals you agree to do. My own company, Grand Rounds, expects our immediate number of partnerships to be so low that you can count them on the fingers of one hand. But the ones we choose to pursue, we will pursue with 100 percent commitment and dedication.
Trust and respect your partner. Make sure the leaders of the brand are ones that speak to you in some way; you should be excited about about sharing a set of goals with them. Consider the early ‘90s partnership between Apple Computer and IBM: they were attempting to release a new operating system together, but ended up squandering $150 million. Why? Because while they were collaborating, they were also filing lawsuits against each other for patent and technology infringement. Let’s just say that the foundation of a strong relationship was never successfully built.
Figure out the right timeframe. Recognize that the relationship is likely to age, and that corresponding interests will converge (or diverge). Cisco used to have alliances with Motorola and Ericsson—but those relationships eventually imploded once the smaller companies had finished enough acquisitions to enter into the market as a competitor to Cisco.
The partnership is actually not about you. Or the other guy. It’s about the customer. What does the customer get out of this joining of mighty forces? How will the end user ultimately benefit from what’s happening? Think that over carefully; if there’s no tangible benefit for the customer, it will be hard for either side of the deal to achieve huge financial success.
License to partner. Consider licensing technologies from trusted, stable and non-competitive partners and then make heroes of each other in the marketplace.
Something to gain and something to lose. Partner only when there are clear revenue goals and there’s skin in the game for both sides. This is the one that I think most startups miss. Startup life is busy with priorities constantly shifting; if there’s no sting to missing the deal, then it’s not likely to get attention during strategy and prioritization sessions.
Patch up your weaknesses. Partner to make yourself strong where you are not already strong or for the things you don’t know how to do. For example, I love how SONOS has embraced the music services and digital download world while they master hardware and software. (I don’t have nearly as much admiration for how T-Mobile and AT&T did their network sharing… you can see how that’s working out for them).
If your proposed strategic partnership gets a passing grade in all of these areas, great—time to send out your white-teethed alliance guru to get the deal done. But if any of these areas makes you think twice—or worse, break out in a sweat—well, then I’m sure you can think of business priorities that are truly more pressing.