by Mark Brigman
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Business Growth Opportunities
As I travel the country and speak with business leaders, I frequently ask the following question, “Would you like to grow your business?” Without exception, the answer is “Of course!” Then I ask, “How?” I usually get responses such as, “Well, we are looking to hire another salesperson,” or “We are planning to do more marketing.” Although both of these strategies can increase revenues, their impact will likely be incremental at best. While incremental growth is generally better than no growth, my passion is discovering exponential growth opportunities with business leaders.
When I speak of “growing your business,” I really mean, “growing profits.” If we think back to our Microeconomics 101 course, we remember that
Profit = Total Revenue – Total Cost
Achieveing exponential growth by leveraging strategic partnerships requires a long-term strategy. Strategic partnerships fall into one of two categories: 1) revenue creation or 2) cost reduction. You guessed it; strategic partnerships can either help us generate new revenues, or they can help us become more efficient by reducing our operating costs. When strategic partnerships help us generate new revenue, we call this “business development.” Contrary to what some believe, the craft of business development is not sales. As a matter of fact, it is very different than quota driven sales. When strategic partnerships help us reduce our operating costs, we call this “operational excellence.”
Another way to look at growth strategies is to use the “pie analogy.” Suppose that your market is a ten inch pie and your company has a 20% market share of that pie. The short-term approach asks, “How can we grow our share from 20% to 30%?” In the short-run, the size of the market pie is fixed at ten inches. But in the long-run, with the help of innovative strategies, the size of the pie is variable. When taking the long-term view we ask, “How can we expand the market pie from ten inches to fourteen inches?” The most dominate companies are able to think and execute on short-term as well as long-term strategies, simultaneously. They implement strategies that increase the size of their slice while they work to increase the size of the market pie.
Consider the long-term versus short-term illustration that follows. The bottom section of the schematic describes a generalized, short-term business operations model that nearly every company follows. The company has a procurement specialist who buys inputs from a vendor and those inputs are combined with the company’s internal expertise and resources to generate a product or service that is sold by the sales team to end customers.
There is no doubt that businesses need to have an effective short-term revenue generation strategy (increase sales, expand marketing share, and operate more efficiently). However, it is also important to not overlook a longer-term growth strategy. Our sales and marketing people are constrained to sell the products and services that we have today with the features and benefits that are offered today. Market leading companies, however, always look for the next move in the chess match that we call business competition. Market leaders, such as Apple, constantly ask what evolution within the customer value puzzle will generate the next competitive advantage.
A growth opportunity that is largly overlooked by companies is the long-term play—top portion of the illustration. When companies commit to leveraging strategic partnerships in order to grow their company, they open a whole new world of opportunities. In these strategic cases, the Partner Development Leader (PDL) is used in a range of capacities to uncover and execute strategies that unlock prospects for exponential growth. Partner Development Leaders, whether they are revenue generating or operations focused, share the same skillset. They are strategic-minded, competitive, opportunistic, and absolute ninjas at forging symbiotic relationships.
In the mid-2000s, Apple had dozens of global competitors offering MP3 music players. While the majority of these competitors were focused on sales strategies and creating simple feature changes to better manage playlists (short-term play), Apple focused on the integration of two major game-changers that were outside of the MP3 product itself: iTunes and broadband wireless data access (long-term plays).
Rather than solely focus on incremental functionality enhancements to grow their slice of the pie, Apple deployed a long-term strategy that created a pie that was too big to fit into the oven. First, Apple wanted to “own” the mobile music space, so they built the very easy to use iTunes music download and management application so people could cost effectively purchase and organize all of their favorite music. Next, Apple knew if it could allow users to download content beyond Wi-Fi network access, it would create a new market that they would dominate. With their strategic partnership with AT&T that was announced in 2007, their newest rocket had lauched.
I realize Apple and AT&T are two gigantic companies. I realize 99% of businesses cannot forge a partnership with either of these giants. But I give this example to share three points, 1) even the big boys need to partner, 2) companies that achieve exponential growth are companies that think and execute beyond the short-term, and 3) strategic partnerships can be a highly effective way to achieve a competitive advantage that enables exponential growth.
Companies, large and small, forge stragetic partnerships every day that lead to transformative growth. Companies generally achieve exponential growth by expanding into new markets or by introducing a product or service that significantly increases value for the end consumer. I am convinced that there are strategic partnership opportunities that can help every company perform at a higher level. You just have to proactively look for it.
It is good for us to be reminded of the definition of a strategic partnership. You may recall that strategic partnerships are contractual relationships between two or more companies where the mutual intent is to create joint benefit and a competitive advantage. Most business relationships are not strategic, they are transactional. Sales or procurement teams complete most business transactions for companies. This is how it has always been and how it will always be. The short-term side of the business is the core. These are the teams that pay the bills. To the contrary, the long-term side, which is led by Partner Development Leaders (PDLs), is where the homerun swings and the Hail Mary passes are made.
By being disciplined, opportunistic, and strategic, we can significantly increase our likelihood of success when we take the big swing or throw the 50-yard bomb. Instead of using an exponential growth strategy as a defense mechanism, we want to use it as an offensive weapon. The strategic partnering approach can quickly put points on the board and separate us from the competition.
Through strategic partnerships, PDLs seek new, innovative, game-changing ways to either 1) create new revenue opportunties or 2) implement business operation enhancements that signif
icantly improve your ability to compete, hence, giving your company a competitive advantage.
Generally speaking, 90-95% of the strategic partnership opportunities are focused on new revenue generation versus operational excellence. The Apple / AT&T partnership is an example of revenue generation. Now I would like to share an example of an operational excellence strategic partnership. It is important to note this distinction because strategic partnering opportunities that are operations focused do exist and their impacts can be profound. The “Network Advantage” partnership between Sprint and Ericsson is a great example of a strategic partnership that is operations focused.
In July of 2009, Sprint signed a 7-year, $5 billion dollar partnering agreement with Ericssion. In this relationship, Ericssion was responsible for managing the day-to-day responsibilities for Sprint’s national telecommunications network. This strategic partnership marked the largest of its kind worldwide. Because of my background managing large and complex strategic partnerships, I was selected to be on the core partner development team.
This colossal relationship was known as Network Advantage. It was definitely a trailblazer for the telecommunications industry as it forced technology executives worldwide to consider how strategic partnerships could be used, not only to grow new revenues, but also to become more operationally efficient. The Network Advantage partnership sought to reduce Sprint’s expected network expense by $2 billion over a 7-year period.
Rather than have a transaction focused procurement organization negotiate and manage the agreement, the leaderhship team knew success would require that seasoned partnership professionals lead the relationship. Our team was completely comfortable with ambiguity, uncertainty, and risk-taking. We knew that the partnership would evolve over time. Our small team spent the next three years navigating obstacles and further defining the partnership. The flow of contractual amendments seemed constant, which was by design.
Thinking Strategically
The term “strategy” is arguably the most overused word in business.
It sounds really cool and almost militaristic to say “strategy.” Using the word makes us sound like we know what we are doing. The best definition of strategy that I have found is “a plan, method, or series of maneuvers executed in order to achieve a specific goal or result.”
By building strategies, we intentionally plan a series of steps that we will execute in order to prepare our company for future success. Business growth is not a single chess move. It is a series of hundreds of decisions and actions from many people that are compiled over time to deliver specific results—sometimes good, sometimes bad. Our success is critically dependent upon our ability to create and execute plans that maximize our opportunities for success.
Strategic planning comes in two forms, short-term and long-term. Generally speaking, short-term is one-year or less and long-term is any initiative greater than one year. The most successful businesses deploy a series of short-term strategies (sales, marketing, procurement, product development, employee development, etc.) and a couple long-term strategies. Examples of long-term strategies might include evaluating acquisition opportunities, developing your industry’s version of a “killer app,” or your company may have a strategic partnering initiative.
The important thing to remember as you lead your company is to do it intentionally, do it strategically. Build plans, milestones, and lead your teams to execute against the goals. Keep in mind that short-term strategies and long-term strategies are different, and they must be treated differently.
Short-term strategies, such as sales, marketing, and procurement should contain specific goals or outcomes by month and quarter. These outcomes support the revenue plan, expense plan, and future product / service development goals. Your leadership team should set high-level annual goals that your team managers further refine into monthly objectives. We manage our teams to ensure that these targets are hit so we stay aligned across the company to achieve our quarterly milestones. If an element lags behind, it will likely affect other components and real-time adjustments will need to be made.
Long-term strategies, however, contain many unknowns. Oftentimes, long-term strategies include interactions with other companies or the market in general, so timing is mostly out of your company’s control. But by being proactive, methodical, and opportunistic, we can insert our company into the information stream to ensure we have some level of influence on the market. By keeping a close pulse on our ideal customers, major competitors and major solutions providers, we can constantly be thinking about value-add activities. These innovations will allow us to fast-track customer value and thereby position us to develop a competitive advantage.
As I admitted, I am biased to using a healthy dose of strategic partnerships as a way to execute a growth strategy. The opportunities for innovation that are created through strategic partnerships cannot be denied. If your company has a vision for your industry’s next “killer app,” and your company has the wherewithal to build, market, sell, implement, and maintain the solution, then knock it out. But for most companies and most “true” killer apps, the solution requires expertise from at least one other market leading company. This is one way that a strategic partnership can be born.
The Journey of Innovation
How can you determine what your company’s next growth engine is? This is the million-dollar question. Unless you are Apple, and then it is the multi-billion dollar question. Innovation is a mindset; it is an attitude and a culture. Companies that are able to continually create meaningful products and/or services do so because they have a company culture that fosters innovation. In my humble opinion, a company either has the culture for innovation or it does not—there is no middle ground.
Innovative companies are risk takers; they are forgiving and they understand that the most successful initiatives are only successful because of many failures along the way. Attempts at hitting homeruns result in more strikeouts than 450-foot bombs into the centerfield fountains. Innovation is a very messy, indirect, and unpredictable journey that many business executives and CFOs don’t have the stomach for because they are risk-averse. Innovation by its very nature is a long-term strategy that requires the discipline to know that every win comes as a result of several losses along the journey.
If your yearly company-wide goals include “increase innovation” coupled with “cost reduction” or “optimization,” then your leaders do not understand innovation. But if your company is well informed, competent, and methodical, the benefits of innovation can be significant. And, yes, a strategic partnership can be a wildcard to fill the gaps that you need.
If there are so many downsides to innovating, then why in the world would any company commit to innovation? Ask Apple, Google, Facebook, Amazon, Microsoft, Uber, or Lyft. If you know what customers are willing to use and it creates value, the return on investment can be huge. I know what you are thinking, innovation takes a brain surgeon who knows how to write code and combine a lot of information that creates an arbitrage opportunity, right? Nope! Innovation can be profound and simple.
In 2006, two brothers set out on an all-day fishing trip. It was a pretty frequent endeavor for the pair. Toward the end of their day, they struck up a conversation talking about their constant frustration at how coolers never seem to keep ice frozen for very long. Every time the brothers were out in the hot sun for a day of fishing, they had to stop midday to replenish the ice. Otherwise, their food and drinks would get hot and sometimes spoil by the late afternoon. Furthermore, they could not step on their cooler because it would break. When fishing in a boat, real estate is a premium. The brothers decided to set out to find a cooler that could both keep ice all day and allow a fisherman to use it as a platform.