by Mark Brigman
According to our 12th Annual Global CEO Survey, over 75% of CEOs rated partnerships as ‘important’ or ‘critical’ to their business in the Telecom, Media, and Technology sectors.
KPMG’s U.S. CEO Outlook 2016 survey found that 67% of CEOs expect to grow their business through partnerships, but only 44% believe their companies have the necessary skillset to do so.
INTRODUCTION
PARTNERNOMICS is the culmination of my 20 years of corporate and organizational experience in forming and leading hundreds of multi-million dollar partnerships, interviews with more than 100 senior executives from companies such as Google, Microsoft, Nokia, HP, Sprint, Texas Instruments, and General Motors, as well as intensive industry research. This first-of-its-kind book is intended to be a “do it yourself” guide that offers real-world best practices and a logical framework to clearly and effectively manage and lead strategic partnerships so you can achieve competitive advantages within your market.
Throughout my career, I have witnessed the creation, management, and leadership of some of the most powerful strategic partnerships that our country has ever known. In the mid-2000s, I was traveling the world to build strategic partnerships that fostered components of the mobile revolution. Many of these partners helped create new industries that truly redefined how business and entertainment were to be done. On the contrary, I have also witnessed some dreadful partnerships that were absolutely doomed before they even hit the starting line. Millions of dollars and thousands of man-hours flushed, all because the most elementary of best practices were not considered or followed.
The term “strategic partnership” has many different meanings in the business world today. For example, some companies tout having strong strategic partnerships with customers, employees, and alliance partners. Others claim to have strategic partnerships with their vendors and community organizations. PARTNERNOMICS defines a strategic partnership as a contractual relationship between two or more companies where the intent is to create joint benefit and a competitive advantage.
I hope you enjoy reading PARTNERNOMICS as much as I enjoyed writing it. But most importantly, I hope the information and tools explained in this book help you and your organization construct strategic partnerships that give you a competitive advantage. Here’s to business growth, personal growth, and eternal prosperity! Cheers!
If you would like to ask questions or share comments, please feel free to contact us at: http://www.FidelisOne.com/contact-us
I invite you to visit www.FidelisOne.com to sign up for free emails and content as you look to grow your business and improve the success of your business partnerships.
CHAPTER 1
PARTNERNOMICS.com/C1
Getting Your Mind Right
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Defining a Strategic Partnership
Today’s business community uses a number of buzzwords in an attempt to make a concept seem new or revolutionary. This approach causes confusion as we end up with ten words that all mean the same thing. PARTNERNOMICS will bring some clarity to the confusing landscape of business partnerships and, most importantly, offer a framework that your organization can implement in order to achieve competitive advantages from your partnerships. The concepts and terms shared will not strike you as new or revolutionary; this is by design. The art and science of how to achieve significant results by leveraging strategic partnerships should be straightforward and logical.
As we start down this journey, I want to offer a definition of what a strategic partnership is to ensure we are aligned from the beginning. Although the content, model, and framework offered in this book can be generalized for many relational purposes, the primary intent is to explain its use in the business environment. At the end of the day, success is the act of aligning resources to accomplish an objective, whether you are building a business or a tree house.
A strategic partnership is a contractual relationship between two or more companies where the mutual intent is to create benefit for each party that results in a competitive advantage. Furthermore, the ideal strategic partnerships directly and substantially complement and support each organization’s purpose, values, and strategic goals. When companies achieve this significant level of alignment, relationships can last for decades and often result in a merger or acquisition.
Let’s consider two examples of strategic partnerships to paint mental pictures of what we are discussing. Remember, strategic partnerships are born when
companies collaborate and deliver innovative solutions within a market. When success is achieved, both organizations benefit from the newly created competitive advantage. The overall value that is extracted from the partnership depends on each partner’s ability to perform responsibilities while maintaining a symbiotic relationship.
Take the strategic partnership of Apple and AT&T. In 2007, “Project Vogue” was announced to the world. This strategic partnership was unlike anything the country had ever seen. Apple offered AT&T an exclusive sales and distribution agreement of its brand new iPhone in exchange for marketing and revenue share requirements. The two companies launched the five-year exclusive partnership that left every other cell phone carrier drooling with envy. It seemed every new release of the iPhone shattered the sales record set with the previous model.
During the Mobility Live Conference in Atlanta in 2015, AT&T Mobility CEO Glenn Lurie stated that AT&T did not even see the iPhone prior to signing the distribution agreement with Apple in 2006. Eddy Cue, the Apple executive credited with inventing iTunes and the Apple App Store, said it was imperative to earn AT&T’s trust. Apple was convinced the iPhone would be an absolute “game changer” and they needed to have a partnership that was strong enough to endure and capitalize on the opportunity at hand. Both companies were committed to making their strategic partnership become a mutually beneficial competitive advantage in a very crowded marketplace.
Granted, this is an example of two multi-billion dollar giants combining forces. I share this example first as it is one that every person in the US older than the age of four can relate because of the recent iPhone craze. The success of the iPhone is nothing short of phenomenal and is due in large part to the diligent management and leadership of Apple and AT&T bringing the product to life. Strategic partnerships are created every day with companies of all shapes and sizes, not just the big guys.
Take the case of a company I will call “Thermal Tech” as an example on the other end of the strategic partnership spectrum. In 2011, after having the doors shut on his employer, Gabe Smith decided to start a company that would leverage his expertise as an electrical engineer to offer innovative thermal optics solutions. Gabe wanted to target public safety as he felt this niche afforded the most upside for his young startup.
In the first year of operation, he learned of an opportunity where a leading transportation services company was looking for a new technology that could predict vehicle brake failures. This company, which we will refer to as “Transpo X,” was looking for a system that could capture and evaluate thermal readings from various components of a vehicle or trailer’s wheel assembly as the vessel flew at speeds greater than 80 miles per hour.
In a grueling series of tests, Gabe’s company found itself competing against companies with annual revenues as much as $1 billion dollars. Having full faith in his superior technology, Gabe pressed on and eventually won the contract. Because of his unique technology and the competitive advantage that Transpo X stood to achieve with the new innovation, Transpo X made a bid to purchase Gabe’s company. In the summer of 2016, the multi-million dollar acquisition was closed. Because of the strategic nature of the product, the purchasing company would not allow me to divulge either of the company names.
Types of Business Partnerships
Business partnerships come in many forms and sizes; not all offer an opportunity for exponential growth. Actually, most business partnerships, at best, offer only incremental growth opportunities. But these commodity partnerships can be critical for an organization. The most important thing to realize is that great partnerships allow both organizations to become better off as a result of the relationship, regardless of scope.
Below is a sample list of possible partnership types that a company may pursue. Although any partnership type can grow in significance to meet the criteria to be classified as a strategic partnership, most are not. The ability to classify a given partnership as “strategic” depends on the unique relationship that is structured between the partnering companies. By definition, if a partnership is deemed strategic, it must offer an opportunity to create a competitive advantage. When this occurs, it is then the business leader’s role to turn the competitive advantage into exponential profit growth.
General Partnership Types (doesn’t require contractual agreement):
Sales & Distribution
Marketing & Advertising
Research & Development
Technology (Software, Hardware)
Training / Education
Alliance, Co-op, Referral
Digital Content Providers
IT Development & Support
Raw Materials Suppliers
Finished Goods
Customer Care / Service
Billing & Financial Transactions
Professional Services (legal, consulting, finance, HR, etc.)
This list is in no way intended to be exhaustive but rather to offer different types of business partnerships that your organization may consider. Remember, the definition of a strategic partnership simply requires that we have an agreement and that we intend to create a mutual benefit and a competitive advantage within our market. If you let you imagination run for a minute, you will start to conceive ideas where these partnership types could result in a unique opportunity for different companies, perhaps even yours.
Business Growth Continuum
Let’s introduce on the topic of business growth strategies and consider some concepts. When you think about business growth, I would like for you to think of it in two distinct realms, short-term and long-term. Granted, the approaches are obviously interconnected, but try to draw separation between the two in your mind. Now, consider the illustration offered in the Business Growth Continuum. This visual aid is packed with a lot of underlying concepts. In this section, I will share the general approaches to business growth strategies. Later in Chapter 3, we will conduct a much deeper dive into this important topic and equip you with valuable tools to help you find your “growth engine.”
You will see that the left side is focused on transactional initiatives that the company needs in order to hit short-term (less than one year) objectives. As you can see, this is where sales teams and procurement managers operate. Business leaders are able to steer efforts by imposing quotas on this side of the continuum so that performance levels can clearly be matched with the company’s revenue objectives. Here, your company’s procurement teams buy commodities from vendors and products and/or services are sold by your sales teams. The ability to modify or enhance your product and/or service offering is limited in the short-run.
On the right side of the continuum, we have the long-term approach, which represents not only an increased number of unknown factors and risk levels, but opportunities to create a paradigm shift. Here, Partner Leaders and Business Development specialists are able to collaborate with other business partners in order to create solutions, processes, and opportunities that have potential for significant value-add to the market. When this occurs, the rewards are exponential profit growth.
3 Elements of the Business Growth Continuum:
Strategic, Functional, and Commodity
Strategic is the most collaborative side of the Business Growth Continuum. In strategic partnerships, each party seeks to create a mutually beneficial relationship that results in a high probability of creating a competitive advantage. These partnerships allow for much flexibility to create what is needed rather than be bound by present constraints and thinking. This is where “true” business development (BD) operates. BD specialists do not have monthly or quarterly quotas, and they do not sell products or services. BD specialists sell ideas and visions that turn into future revenues and improved profits. The strategic side is totally comfortable with ambiguity, risk, collaboration, and research. These specialists are opportunistic, methodical, and patient, yet cleverly tenacious to advance their vision of a better future. The strategic side of this continuum is where the “higher risk equals higher re
ward” saying was born. Where new products, new processes, new technologies, and new ways of thinking exist.
Functional is the second tier partnership that includes opportunities for differentiation and certain levels of strategic collaboration. Many strategic partnerships begin as functional partnerships that grow over time. Functional partnerships frequently include products, processes, and/or technical integrations into each party’s business operations. Although functional partnerships are critical to an organization, they do not result in a competitive advantage and they tend to be operationally managed. Expectations are clearly defined in these relationships and the best partners require little-to-no interaction—they just deliver. Salespeople and procurement specialists operate in the functional segment or the commodity segment of the Business Growth Continuum. Salespeople and procurement professionals have monthly and/or quarterly quotas that are needed to drive the short-term operations of the business. Quotas are not a part of the strategic side’s vocabulary because there are too many unknown factors to make them meaningful. Instead, targets are used to communicate the intent and direction that is being executed.
Commodity is the least integrated level of partnerships in which a company engages. Although all partnerships should be considered important, commodity relationships are generally the least costly to find and replace. Commodity partners have an abundance of suppliers who actively compete for business where price is the main differentiator. Because businesses have unique needs, a commodity partner for one company may be a functional or strategic partner for another. For most companies, commodity items may include office supplies, raw materials, transportation, building maintenance and real estate services, technology support, and some professional services, just to name a few.