Partnernomics

by Mark Brigman

  As you continue to evaluate feedback from your customers, consider the “jobs-to-be-done” theory. I normally steer away from academic theories, but this one is too good to pass up. Harvard business professor Clayton Christensen authored a book in 2003 titled The Innovator’s Solution. Christensen introduced the theory of jobs-to-be-done by recommending innovators focus on solutions to the jobs that customers need completed rather than on evolving current products that are available.

  Do you remember the famous Henry Ford quote about innovation? “If I would have listened to customers, I would have built a faster horse.” Instead, Ford realized that people wanted a job to be completed. That is, people wanted to be transported in a faster, safer, cleaner way. Rather than breed a faster horse, he invented mass production of automobiles and made them affordable for the average American.

  Professor Christensen is also known for creating the term, “disruptive innovation.” He recommends that entrepreneurs, business owners, and innovators explore and exploit innovative opportunities to add exponential benefits to current solutions. By focusing on the best way to deliver what customers want, regardless of existing methods, better systems can be deployed. Take Netflix versus Blockbuster. Netflix’s streaming video service allows customers to download movies directly to their phone or television for a flat-rate monthly subscription fee without ever driving to a physical store or being told the movies are out-of-stock. Great companies help their customers get their jobs done.

  Complements

  Look for complements in the market; look for companies, technologies, capabilities, leaders, and associations that complement your company and its product line. As you think about your current product or service, what is another product, company, or market that could benefit from or become an input to your product? In the early 2000s, Apple and other MP3 players did not envision major wireless carriers, such as AT&T and Verizon, as a complementary company. Yet by the mid-2000s, Apple was on the hunt for a wireless carrier partnership. Apple knew that the customers of their impending iPhone would need to have wireless broadband access to their phone. In this case, broadband wireless data and the Apple iPhone became the modern-day peanut butter and jelly—perfect complements.

  As you research various opportunities to grow your business, consider an ecosystem approach. Does your current product(s) or solution(s) fit into a larger ecosystem? What else can you do to better support the ecosystem and thereby best position your company for value-add? Are there complementary companies or solutions that can make your solution better? Does your company offer unique functionality that can make another market solution more compelling to customers? If so, you may have a strategic partnership in the making.

  Capabilities

  As you assess your growth strategy, look for capabilities that you have within your organization and your existing partners. It is likely that some level of expertise already exists that could become a competitive advantage to you or to a partnering company. As you evaluate capabilities, also understand your limits, where your company has deficiencies, and where partnerships could add value.

  TRUEcar has become the premier car buying service in the country over the past ten years. However, when they were first beginning, they knew their strengths were in software development, information sharing, and partnership building. TRUEcar leveraged each of these attractive qualities to partner with massive brands such as USAA and AAA to bring huge potential sales volumes. These big partner brands have millions of customers who could be a good fit for the TRUEcar offering. They offer TRUEcar a tremendous capability with which they would otherwise not be able to access.

  Concepts

  This is where new, potentially “disruptive” ideas fall into place, where we never stop asking “What if…?” Where capabilities force us to ask how we could use what we currently have and what we presently know; the concepts realm has us asking about future possibilities, where no limits exist. In the concepts realm, we constantly ask ourselves, what is the next product, service, feature, enhancement or big idea that could unlock our market for us? What could we create or co-invent with a partner that would add significant value to the customers in a market? What disruptive innovation could we offer to customers that would grow our market pie from ten to fourteen inches?

  The ideation and innovation processes are definitely at the core of the concepts realm. If your company is interested in digging deep into this element, you can find many books and professional consultants who will methodically walk your organization through this process. One thing to keep in mind is that innovation does not necessarily mean a new product or a new technology. Being innovative or developing an innovation could simply mean refining your business processes, brand positioning, or partnering with a complementary firm that has a missing link to your business growth puzzle.

  We must also realize that true innovation starts by asking “what if” and evolves into executing an innovation plan that adds value to your company by enhancing the lives of your customers. Although it can be fun and entertaining to sit behind a whiteboard and ponder great ideas, ideas only have meaning if we are able to implement the innovative idea and if the innovation generates revenue that outweighs the research, development, and implementation costs. Most innovations turn out to be a dud. This is part of the process. But you need only a small amount of wins in the innovation game in order to make large strides forward.

  Since the innovation process can be time consuming, costly, and frustrating, the option to select a strategic partner for research and development can be quite attractive. By partnering with an innovative company, you will be able to leverage their expertise, provide your own know-how, and share in the trial and error costs. If you are working on a new product with another firm, I encourage you to think about the intellectual property (IP) rights before you start the project.

  There are a number of ways to address developed property rights, so don’t let this topic keep you from joining an opportunity to co-develop a new product or service. But do know that it’s always easier to have an agreement on the front-end versus waiting until the big idea works and then trying to stake your claim. IP consulting is a specialized area of business and I recommend you speak to an IP attorney or patent agent before you get too serious with a partnering company where a new product or service is being created. More will be shared on the subject of IP rights in the next chapter.

  Capacities

  The last “C” that we need to consider is capacities. As previously stated, exponential business growth requires an increased use of resources. These resources may prove to be financial, man-hours, real estate, and/or intellectual capital, just to name a few. As you consider what your next growth engine is and how you will acquire it, be mindful of capacity constraints facing your company. Many times the use of strategic partnerships becomes the clear choice when considering your company’s capacities.

  If your company does not have the know-how, the manpower, or the financial resources to develop your growth engine in-house, then a strategic partnership may be your only option to execute an exponential growth strategy. Strategic partnerships can be an efficient way to extend your resource pool by leveraging the expertise and strengths of other market leaders for which your company is aligned.

  As you evaluate your company’s best path for growth by using these three tools, you will likely find yourself spending multiple iterations within each tool. The use of multiple tools will frequently cause you to take a unique look at your business, your market, and your opportunities for improvement. After carefully completing your internal company analysis, you should have discovered multiple opportunities for growth—potential growth engines.

  Business Growth Options

  If you are interested in growing your business (increasing profitability), you have three avenues from which to choose. As you can imagine, there are positives and negatives with each. The three avenues for business growth are the

  1) Organic approach

 
; 2) Acquisition approach

  3) Partnering approach

  Organic Approach

  The organic approach is the default path. This avenue is what all business leaders follow naturally. We run our businesses, lead our people, and form strategies to increase sales while being fiscally responsible. If the organic approach is your only approach, you are limiting your company’s upside potential—big time.

  The organic business growth approach does offer the most control. By definition, organic growth solely comes from within the company walls. The business leaders have full discretion to deploy resources as they see fit. Your team is hired, trained, and deployed to “go win the business.” The revenues you are able to garner are trophies of mini victories.

  However, this approach for growth can be slow, relatively speaking. Again, organic growth means that all business growth activities come from within the company. Short of doubling your marketing and sales staff overnight and waiving a wand so they are fully trained, generating a significant upswing in sales is very difficult. With this approach, any revenue growth is due to great efforts made by your sales team(s).

  The organic approach can also be quite costly. Again, all of the expertise and resources are members of your own company, which means that your company has to foot the bill to hire, train, and manage each resource. This approach can also be high risk as any failure weighs squarely on your company’s budget. Yes, the opposite is also true. All wins put 100% of the revenue into your pocket. The organic growth strategy is a winner-take-all or loser lose-all approach to business growth.

  Companies that have strong financial backing may have all of the resources to “go it alone,” to take a pure organic approach. They may be looking for full control and ownership and simply think they are smarter than their competition. Maybe they think they have some revolutionary intellectual property and they do not want to risk losing any of it, so they go the organic route and build their company walls thick and high. Can this approach work? Well, it depends on your definition of “work.” Can the company stay in business for a very long time? Sure, that is possible. But will the company reach its maximum potential of customers, revenue, market impact, and social good? Never!

  I venture to say there are millions of people who own or work within business consulting companies who provide specialized services in order to help companies organically grow. Specialized services such as marketing, sales, operations, distribution, training, and executive coaching are all forms of consulting services that are designed to give business leaders tools to help them organically grow. The vast majority of business self-help books are geared toward the organic approach because it is the default requirement. The question is, will the organic approach be your only approach for business growth?

  Acquisition Approach

  Growth through acquisition is a valid business growth option to consider. If you recall, Barry-Wehmiller acquired more than 80 companies to amass its 9,000 employees. Obviously they see tremendous value in growth through acquisition.

  As you consider acquisition as a viable growth strategy, I encourage you to weigh the costs and benefits. Acquiring another company can be quite costly. If your company has the financial means to make an acquisition, keep an open mind. Purchasing and ingesting another company can be an effective means to quickly grow. And by making a full purchase, you now have full control over the new company. All of the positive results that come from your new asset will be yours to enjoy.

  Although acquisitions can quickly add revenue to your company and offer full control, be cautious. First and foremost, many acquisitions fail to give the purchasing company the full benefit that they seek. Oftentimes after an acquisition is made, the purchasing company learns that the company cultures are not well aligned and the acquired company does not have all of the grand capabilities that were advertised. If you head down the acquisition road, spend as much time as you need conducting due diligence. After you sign the purchase agreement, the new baby is yours, no matter how ugly it might be.

  The strategy to grow via acquisition is frequently out of reach for most small business owners, at least in the short-run. The process of purchasing a company not only includes the cost of the company, but you also have attorneys, accountants, and several other professionals who are involved in the process that must be paid. If acquiring a company is in your future, be sure to account for these additional expenses and do not take shortcuts, or you will likely regret them. Remember, most companies are sold because the prior owner “wanted out.” It will be your job to fully understand why the owner wanted to offload the business and to decide how you can manage the company’s assets better. You do not want to end up with a perpetual headache.

  The niche industry of mergers and acquisitions (M&A) is the place to look for these resources. M&A is a very specialized discipline that has brokers, agents, attorneys, accountants, process consultants, and appraisers who stand ready to assist if you have a need. Acquisition can be an effective way to grow, but “buyer beware.” The stakes are high and you cannot “un-ring the bell” after it has been sounded.

  Strategic Partnerships

  The final pathway to business growth is strategic partnerships. I openly admit I am biased toward strategic partnerships but with good reason. After executing and leading hundreds of strategic partnerships over the past two decades, I have seen several of my product lines grow by 10x in a very short amount of time. The power that strategic partnerships can have is nothing short of incredible. But the power cuts both ways, good and bad. Just like a keg of gunpowder, these relationships can be very powerful. They can blast a huge hole to uncover diamonds in the Earth, or they can cause serious harm if not managed properly. Strategic partnerships are, without a doubt, the “wildcard” in business.

  Bernie Brenner, Co-Founder of TRUEcar and author of The Sumo Advantage, calls strategic partnerships the “turbocharger effect.” His company uses partnerships with big brand companies such as USAA and Consumer Reports to achieve revenue growth levels well over $100 million per year and did so in a short amount of time. Strategic partnerships are leveraged by startups, such as TRUEcar and mature giants, such as Apple and AT&T. Why? Because strategic partnerships can deliver extraordinary results. But they must be handled with caution, just like dynamite.

  Should your organization have strategic partnerships? In one word, absolutely! It does not matter if you are a “one-man band” or you lead a $100 billion dollar international firm, your business should be leveraging the strengths of others as a means to grow. Yes, your company should have strategic partnerships in order to achieve its maximum potential. As the world becomes increasingly integrated, the need and use of strategic partners continues to grow.

  Businesses are constantly on the prowl to create differentiation in order to achieve a competitive advantage, from start-ups to multi-national firms. Successful start-up entrepreneurs are absolute masters at forging strategic partnerships—they have to be. The start-up entrepreneur’s very existence requires that he/she be innovative, resourceful, budget-conscious, and tenacious. But most importantly, startups quickly learn that they must be good partners. Large organizations are also partnering to leverage new capabilities and technologies. General Motors recently announced its partnership with Lyft, an Uber competitor, to help position its assets for the next generation of transportation.

  Strategic partnerships can be a great accelerator. They can make the world speed up, and if you are not ready, they make the crash happen faster and cause more damage. These partnerships allow for shared risk, shared cost, and shared expertise between multiple firms in order to create a competitive advantage. The newly created capability can bring great value to participants of a partnership. This ability to pool resources is incredibly powerful as it can speed up the process to build and launch a revolutionary solution that can be a “game-changer.” Knowing what opportunities exist and which companies can serve as great partners is the key; this is a part of the art and scienc
e that Partner Development Leaders can offer.

  It is true, strategic partnerships can offer shared risk, shared cost, and shared resources. This ability to limit risks while leveraging another firm’s expertise is attractive to most business leaders. But identifying, negotiating, managing, and leading a strategic partnership is not simple or easy. It requires a highly specialized skillset. As with any highly specialized professional, having an experienced veteran with a strong track record of success is absolutely critical. I describe the imperatives for great Partner Development Leaders (PDLs) in Chapter 6.

  Planning for a Strategic Partnership

  Step 1: Understand that strategic partnerships can facilitate exponential growth

  Step 2: Complete SWOT Analysis, Constraints exercise, and the 6-Cs framework

  Step 3: Identify and rank our top 3 growth engines

  Step 4: Determine if organic, acquire, or partner is the best course of action for each growth engine

  If you have determined that a strategic partnership is the best course of action for one or more of your growth engines, you are now ready to identify, engage, and evaluate partner candidates. After great candidates are discovered, your team will negotiate a partnering agreement and begin to lead your new strategic partnership. Chapter 4 provides an end-to-end framework for performing these important steps in the partnering process.