Recipe for Successful Partnerships

In the poem “Mending Wall” by Robert Frost he writes, “Good fences make good neighbors.”  While this may be true when it comes to neighbors, in the case of partnerships, good fences make bad alliances.  Strong partnerships are devoid of walls or barriers to success.

When I reflect upon the successful partnerships I have built or been a part of, I realize that each of them possessed several common ingredients that created a winning recipe.  A mutual eagerness and laser focus were indigenous to these relationships.

Let’s review seven key characteristics of productive partnerships.

#1.  Hunger.  The single most important ingredient to a successful partnership is hunger.  Both parties must be hungry, or highly motivated, by a driving force.  The force may be the need to increase revenue and grow the company to the next level, thus satisfying a directive from the board of directors or executive team.  The force may be a particular pain point or missing link that can only be resolved through a strategic technology partnership.  Or it may be the opportunity to launch into a new market or geography.

#2.  Complementary products and services.   Organizations looking to partner should provide complementary products and/or services that are strategic to each other’s businesses.  As an example, a software company partners with an IT consulting firm that provides services surrounding the software solution.  Conversely, an IT consulting firm may seek a software partner whose solution enhances the firm’s specializations and capabilities.

To further illustrate this point, Bill Kantor, angel investor, sales consultant and partner at Delta Capital Partners states, “When looking for alliances, you seek companies with complementary products and distribution.  Often these companies turn out to be competitors more than allies.  The ideal relationship is one in which the ally sees your product as complementary to or enabling an important part of their business; but not something that they have to own or control.”

#3.  Joint Offering.  As a follow-on to #2, partners with complementary products and services should consider designing a joint offering, that is consistent with their core business, to market to their existing customer base and new prospects.  As an example, an IT consulting firm builds practices within various technology domains.  If they develop a practice surrounding an existing product that complements and enhances their service offering, they will generate more interest in the offering and ultimately more revenue.  An IT outsourcer has Service Level Agreements (SLAs) to meet with their existing clients and the addition of a product may facilitate or expedite meeting these SLAs.  IT consulting firms and outsourcers can proactively reach out to existing clients and new prospects to sell the joint offering.

#4. Bi-directional.  A partnership should be mutually beneficial and bi-directional from both a technology and financial standpoint.  Most companies are searching for partners who will bring them revenue, however true partners understand that a strong alliance involves giving as much as receiving.  If a partnership is one-way, where one party receives the lion’s share of the benefits, then the alliance will fizzle.  There has to be something in it for both parties in order for the partnership to succeed and progress.

#5. Resources.  Companies must have available resources to build and maintain partnerships.  A technology partnership requires available R&D or technical staff  to build or integrate a joint solution.  A revenue-generating partnership requires sales and marketing staff to grow the partnership as well as Alliance or Partner Managers responsible for maintaining a productive relationship.  Partners should have salespeople available to train and then sell the solutions as well as marketing personnel to lead joint marketing activities.

#6.  Budget.  Partners need budget to pay for the staff that is managing and maintaining the partnership, and funds available for joint marketing activities such as webinars, seminars, email campaigns and industry events.

To elaborate on this point, Bill Kantor continues, “Alliances are often easy to start and difficult to make work.  It costs nothing to say ‘let's buddy up’ but it requires investment on both sides to generate revenue.”

#7.  Simpatico.  Organizations that are like-minded and congenial with each other will have a much greater opportunity for a successful partnership.  A willingness and desire to cooperate and work together as a team towards a common goal are critical elements of a productive alliance.

In summary, these seven qualities are pervasive in successful partnerships.  Both parties must be highly motivated to build something together to go-to-market and achieve great results.  

The Value of Networking

Formal business networking to increase our connections and find new opportunities is becoming an increasingly popular and accepted practice.  Many of us who are responsible for driving business for our employers or ourselves understand the value associated with every connection we make.  Others may take a more reserved approach, where they feel uncomfortable reaching out to people and asking for help.  But what is business networking really about?  It’s not about taking, but giving.

In Never Eat Alone the author Keith Ferrazzi writes that in his career, he learned that “real networking was about finding ways to make other people more successful.”  He learned this early in his youth, working as a caddie at a country club.  He came from a meager background and in his work as a caddie, he observed how the golfers constantly helped each other, from business to personal life to children.  Keith took the approach of helping the golfers he worked with to be highly successful on the course, and in turn, they helped him pave the way to private school and Ivy League college.  And this launched a highly successful career.

For those of you both comfortable as well as timid with networking, I would like to share some recent personal stories of business networking involving Facebook, an association event and a personal business relationship that had very positive outcomes.

The Facebook Story

A couple of years ago I thought Facebook was stupid.  We had an upcoming college reunion and I joined Facebook merely to reconnect with a long-lost college friend.  I found my friend, so spending the time on Facebook was worth it; however I was in a high-stress job receiving 100+ emails each day, so the last thing I wanted to do when I wasn’t working was spend more time at the computer on a social media tool.  When I left my job, I took the time to reconnect with people on Facebook and build my social network.  I began enjoying communicating with friends I hadn’t seen in many years.  During this time, I started my own business and reconnected with a friend from high school whom I hadn’t seen in 25 years who was now a Senior Vice President for a growing software company.  We decided to meet for lunch, he then introduced me to a business colleague who was the Vice President of Sales at another software company, and this firm became my first client in my new business.

 

Even though the original intention of Facebook was for social networking, it has now evolved into a dynamic business networking tool as well.  Many companies have Facebook pages and refer to them on their websites.

The Luncheon

This winter I was snow birding in South Florida and during this time, decided to try local networking to grow my business.  Knowing that Florida is not a high technology hub and that it would be very challenging to find new clients in this region, I gave it a go.  While in Florida, I was competing in tennis in my spare time and found myself needing regular deep tissue massages to stay on the court, so I scheduled massages at a chiropractic office.  I became friendly with one of the owners who was a board member of a Women’s Executive Club.  She invited me to a luncheon so that I could network.  I went into this with a defeatist attitude thinking, “I am not going to meet anyone in high tech here,” however, there was a member from IBM at the luncheon.  I told my chiropractor friend that I wanted to meet the IBMer and she introduced us.  We followed up with a phone call and the IBMer introduced me to a competitor that was in the same line of work – building sales channels.  However, this competitor was headquartered in London.  I met with the competitor a couple of times and we have recently formed a partnership which will help both our businesses expand our global reach.

Personal Business Relationship

A few years ago, I was working for a software company where I was responsible for building strategic partnerships with leading IT outsourcers.  I was trying to develop a partnership with one company and it wasn’t moving forward – this company had built a home-grown solution that was similar to ours, and there were large incumbent vendors in place that were serious competition for us.  My main contact, a director at the company, liked our product but was in a difficult position politically where he felt as though his hands were tied.  Then he was laid off.  He approached me asking for a job and introductions to business connections.  I willingly helped him and as he was leaving the company, he promoted our solution internally.  Eventually I found him a great job through my business network and the IT outsourcer entered into a multi-million dollar, multi-year global agreement with my company.  This was very rewarding experience because it was win-win and I always believed that the single turning point in the sales process was when the director promoted our solution internally just before he left the firm.

Let’s revisit the theme of focusing on giving more than receiving when it comes to networking.  In the story of the luncheon, I was a regular client of the chiropractor and she in turn helped me by inviting me as her guest to the luncheon and making an important introduction for me.  In the story of the personal business relationship, I helped the director find a new job and he in turn promoted us internally.  In the story of my Facebook connection, he has helped me but I haven’t yet found a business opportunity to return the favor.  But I will.

When to Build Sales Channels

Many technology companies are aware that they need to build sales channels or increase their number of active partnerships, however they prefer not to distract from their direct sales focus.  Early to mid-stage companies may be under pressure from their investors to increase revenue as quickly as possible and they may not have the internal expertise, resources or time to pursue developing sales channels.  When should these firms step off the treadmill to build channels, and how can they get it done?

Determine the strategy of the business.

The first step is to determine the exit strategy of the business.  If your company is developing a technology to sell to a well-established organization, then developing sales channels will not be as important.  However, if this is not the situation, then you may consider building partnerships for the following reasons:

·       Grow revenue

·       Increase sales reach because you can’t afford to grow sales force organically

·       Break into a new market

·       Go international

·       Look attractive to potential acquirers because you have existing, productive sales channels in place

Phil Odence, Vice President of Business Development for Black Duck Software, a technology company that helps development organizations manage their use of open source, believes that partner development is very important.  “Leveraging channels is almost essential to a small business, for a technology company to build business outside North America.  Another party can share some risk, where you don’t have to front the money for new employees, office expenses, legal fees, taxes, etc.  There is little involved and you pay as business is booked.”

Establish timing.

Once your company chooses to build sales channels, it will be important to keep in mind that it will take time to realize revenue from the new partners.  It may take 6 months or more because first you will need to get your partners on board from an education, sales and administrative perspective.  Then your partners will be ready to approach their customer base, follow-up on leads and go through the sales process.  Due to this time lag to realize revenue, it is critical to start the partner development process immediately so you can see the benefit more quickly.  Continue to focus on direct sales while you build channels to maintain a parallel effort.  It is risky to place all your eggs in one basket, either with solely a direct or partner sales approach.  Spread the wealth.

Find the best resources.

What if your company does not have the internal expertise, resources or time to develop sales channels?  If you have budget available, here are some options.

Tap a senior Alliances executive who can build channels.  Odence advises, “Put a fairly senior person in channels.  This is a big investment so it doesn’t have to be a full-time role at first as the person can do other things to add value to the company. Using someone internal may make sense for this reason.  The individual needs to be versatile enough to be able to put deals together as well as build relationships.” 

This senior employee can also work with the sales and marketing teams to help their efforts, or work on projects for other executives while building channels part-time.

Hire an outside consultant who can assist with strategy and partner development.   Odence suggests, “Another option is to go outside the company to get channels going by hiring an external consultant to help you understand how channels fit into the overall business strategy, and to jumpstart partnership development.  The consultant can do the legwork for you until you are in a position to hire a full-time Alliances person.”

Hiring a consultant relieves the cost burden of a full-time employee.  If your firm has a small budget to work with, you can hire the consultant on a project basis to get started with developing sales channels.

In summary, it is important to first determine your sales channel strategy and then pursue it immediately to realize the revenue benefit as quickly as possible.

Is Your Head in the Game, or in the Sand?

One of the greatest comebacks in professional tennis history occurred in the 1999 finals of the French Open.  Andre Agassi was striving for his first French Open victory, to complete a career Grand Slam and make history as only the 5^th male player to win on all four tennis court surfaces.  He was facing a formidable competitor, Andrei Medvedev, who had been on a roll since Agassi had given him advice several months before on how to improve his game.  Agassi really wanted this title as it had eluded him when he lost in previous finals in 1990 and 1991.

In the beginning of the match, Agassi was not executing his shots, played with fear and very quickly lost the first set 6-1.  Fortunately, early in the second set there was a rain delay and during the break, Agassi had the opportunity to listen to the advice of his coach Brad Gilbert.  Brad encouraged him to change his game plan, to hit his shots the way he knew how, to match each shot that his opponent gave him but to hit the same shot back better and harder.  He advised that if Agassi was going to lose the match, he should do it on his own terms, by playing his own game and really fighting.

After the rain delay, the match resumed and Agassi continued with his earlier style of play and lost the second set 6-2.  Finally, when Agassi was just 4 points from losing the match, something changed…Brad’s advice resounded in his head and Agassi began to go for his shots without fear and execute Brad’s game plan.  Agassi won the third set and went onto to win the match and his first French Open championship 1-6, 2-6, 6-4, 6-3, 6-4.  Television viewers who were rooting for Agassi had turned off their TVs towards the end of the third set, only to be completely surprised to learn later that Agassi had turned the match around to clinch the title.

Changing strategies midstream can be a necessity in sports, business and in life.  If a strategy is not yielding expected results, it is important to re-evaluate, analyze and make any necessary adjustments before it’s too late.

Let’s take an example of a software company that was trying to build strategic partnerships with systems integrators (SIs).  The software company provided a solution for managing hardware and software assets that enabled their customers to better track their IT assets, ensure they were in compliance with their vendors and not overpaying for software licenses and maintenance.  In partnering with the software company, these service providers would build consulting practices surrounding the use of the software solution and the partnership would become a win-win for both parties:  1) the software company would benefit from the SIs making multiple purchases of their software for use with their customer base and 2) the SIs would benefit from providing professional services surrounding the implementation of the software company’s solution.

In theory, this approach seemed solid and the software company chose one of the leading SIs in the high technology market as its primary target for a strategic partnership.  The software company transitioned quickly from a direct sales model to channel sales or selling through partners, and dedicated their entire North American sales force to building the partnership with the chosen SI.  After a year of relentless pursuit of the SI, the North American sales force had not closed any sales and it was becoming apparent that the SI may not be a good fit as their existing partners were much larger software companies that provided big ticket solutions where the SI could bill millions in revenue on the consulting services alone.  Conversely, the software company’s product was a lower-ticket and lower priority solution and the dollar value of professional services was not large enough to gain full attention of the SI.  However, the software company kept its head in the sand and was determined to succeed in its pursuit of the anointed SI.  After two years, although progress was being made, no sales had closed with the SI. Then the software company was acquired.  Had the software company changed channel strategies midstream and not wasted as much time pursuing the target SI, the sale of the company would have been much more profitable for the investors and stockholders.

Developing sales channels is not easy.  To begin, it is critical to evaluate the target market, research potential partners, establish types of partners, create sales messaging by partner type, establish a target list and pursue it.  However, if progress with a specific type of partner appears minimal, companies need to be flexible enough to change direction midstream, before there are painful consequences such as disapproval from the board of directors and investors, layoffs due to profit/loss not meeting expectations, employee morale and job dissatisfaction issues, etc.

Companies should approach building partnerships with an open mind.  They may enter into partnership discussions with one strategy in mind, however the target partner may have a different recommendation that could prove to be more financially beneficial to both parties.  It may also be an approach that the software company had never considered.  The new recommendation may lead to a complete shift in strategy that yields the anticipated results.

It is also important to network with the target companies even if they turn out to not be the right fit for a formal partnership.  Networking is a productive and fascinating exercise that can lead to great connections and business results.

Additionally, organizations should implement parallel efforts in pursuing alliances and not place all their eggs in one basket with a particular type of partner or target company.  For example, taking a balanced approach by pursuing various types of partners simultaneously will help ferret out the companies that will not be a fit, thus saving the time and expense of the business development organization.  With this methodology, the company will be able to focus more expeditiously on the types of partners that will yield expected results, both in terms of quality of the alliance and revenues.

If Andre Agassi had not changed his strategy in the middle of his match in the finals of the 1999 French Open, he would not have won the tournament and earned his rightful place in professional tennis history.  In fact, his June 2011 induction into the International Tennis Hall of Fame will be all the more satisfying having secured his career Grand Slam.

What's in it for them?

One of the most famous exit lines in film history comes from the 1942 movie “Casablanca.”  Humphrey Bogart, who plays Rick Blaine, a saloon owner and corrupt moralist, says to Claude Rains, who plays Captain Louis Renault, a local police officer and corrupt opportunist:

“Louis, I think this is the beginning of a beautiful friendship.”

Why does Rick say this?  Because the friendship is mutually beneficial.   Rick and Captain Renault had made a bet for 10,000 francs that Victor Laszlo, a fugitive Czech Resistance leader who had escaped from a Nazi concentration camp, would be prevented from leaving Casablanca.  If Victor escaped, Rick would win the bet.  As the story unfolds, Rick shoots and kills Nazi leader Major Strasser as he attempts to stop Victor Laszlo and his wife, played by Ingrid Bergman, from departing Casablanca.  Captain Renault rounds up the police but does not turn Rick in, asking the officers to “round up the usual suspects.”  Captain Renault realizes that Rick has saved him from the tyrannic control of Major Strasser.  Captain Renault and Rick decide to leave Casablanca and join the Free French at Brazzaville, and Captain Renault tells Rick he will use the 10,000 francs he lost in their bet to fund their trip.  Both Rick and Captain Renault have developed a mutual respect, realizing they can be of use to each other as they strive to fight the Germans in World War II.

Let’s turn the clocks forward to the high technology industry of 2011.  Many organizations are striving to build strategic partnerships that will drive revenue for their businesses.  Often times, they focus more on the quantity rather than quality of partnerships.  As an example, a company that highlights numerous partnerships on its website will appear more established and credible to potential customers, partners and acquirers.   There may be extreme pressure from board members and executive teams to build as many partnerships as possible within a short period of time.  In this situation, the compelling reason for developing the partnerships may get lost, and the effort is more akin to throwing darts against a wall to see which one sticks rather than a taking a methodical approach to securing productive partnerships.

When it comes to developing sales partnerships, most companies take a self-serving and myopic view.  They are mostly interested in receiving leads and haven’t spent enough time considering what’s in it for their partners.  Enthusiastically, they shake hands, execute a formal agreement, celebrate the partnership and wait for the leads to arrive…and nothing happens.  They had placed so much time and effort into building key executive relationships with their partner and educating the sales team on their product or solution, but the partnership soon becomes unproductive and stagnant.

One of the key ingredients for a successful partnership is to ensure there is a great benefit for all parties.  The existence of the partnership needs to solve a pain point or business problem or it will become extinct.  Let’s consider examples of an inactive contrasted with a productive partnership.

Example of Inactive Partnership

A software company developed a product to help organizations manage their software licenses to determine whether or not they were in compliance or overpaying their vendors.  The software company partnered with a Value Added Reseller (VAR) to resell their software product.  Both organizations felt very positive about the opportunity for revenue and lead exchange through the partnership.  The software company trained the VAR sales and technical teams on the product and how to sell it, and they developed joint marketing programs to promote the solution to the VAR’s existing customer base.  Despite the time and money involved in this partnership, no leads or sales ensued.  What happened?  In this particular situation,  1) the VAR was already selling products that somewhat competed or overlapped with the software company’s product and 2) there was no specific offering related to Software License Management so selling the solution was not in the front of the sales people’s minds.  Basically, the VAR had numerous software products in their bag of tricks and this was just another one on the list.  Finally, the software company was not providing leads of any kind but simply waiting for the VAR to make all the effort.

Example of Productive Partnership

This same software company approached a systems integrator (SI) as a potential strategic partner.  The SI had numerous customers that had outsourced IT functions to them.  In many of these IT outsourcing agreements, the SI had Service Level Agreements (SLAs) in place where they were contracted to manage all software licenses of their customers to ensure compliance with their vendors.  They had developed an internal solution to manage software licenses, however it was not meeting their requirements or the expectations of their customers.  The SI decided to identify a commercially-developed solution that would meet their requirements.  They partnered with the software company, designed a formal offering surrounding the solution to include product and services, and sold it to their customers.  This resulted in a highly beneficial partnership for both parties – it became an annuity business for the software company as the SI purchased software licenses for their outsourcing customers, and the SI was now spending a lot less to solve a business problem while simultaneously meeting the needs of their customers.

In summary, it is critical that the forming of a partnership solves a pain point or business problem and that there is something valuable to be gained by all parties.  Organizations must consider what’s in it for their partner to ensure a mutually productive and profitable alliance.

The Power of Partnerships

In every aspect of life, there have been numerous, successful partnerships -  from history to music, Hollywood to pop culture, business, sports, politics and human relations.  Let’s take a look at some examples.  In history, the Lewis and Clark Expedition of 1804-1806, led by Meriwether Lewis and William Clark, was an overland exploration which laid much of the groundwork for the westward expansion of the United States.  In Hollywood, the partnership of the Warner Brothers Sam, Jack, Albert and Harry became a leading television and movie industry giant that has brought entertainment to the world since the early 1900s.  In 20^th century pop culture comedians and musicians formed unforgettable partnerships such as Abbott & Costello, Lucy & Desi, Rodgers & Hammerstein, Sonny & Cher, and Simon & Garfunkel.  In today’s sports, the team of Rafael Nadal, the number one ranked tennis player in the world and winner of 3 Grand Slam tournaments in 2010, and his lifelong coach Tony Nadal (Uncle Tony) has been a hugely winning combination.  And Bill Belichick coaching the New England Patriots football team has been a fabulous partnership leading to 3 Super Bowl victories with this club. 

In the high technology industry, there have been many famous partnerships that have changed the way we work and communicate.  In 1976, Steve Jobs and Steve Wozniak founded Apple Computer, a world leader in technology innovation.  One year earlier in 1975, Bill Gates and Paul Allen formed Microsoft, now the largest software company in the world.  In terms of partnerships, Bill Gates has said the following:

 “Our success has really been based on partnerships from the very beginning.”

Microsoft has built one of the most active, world-wide partner networks in the high technology industry with 640,000 member companies.  Many organizations strive to become Microsoft Certified Partners because this gains them access to new technologies and customers, credibility and opportunities to drive revenue.

In high technology business today, strategic partnerships are at the forefront of propelling companies to new stratospheres in the marketplace.  Many of these partnerships take the form of technology, financial, legal or sales alliances that help drive up revenues.  To illustrate, let’s examine types of strategic sales partners a software company can establish.

A software company develops a product and establishes a direct sales force to sell the solution to its target market.  The sales force has limited time and resources to reach a broad audience in marketing their solution.  To expand their sales reach exponentially without hiring additional headcount, the software company will build strategic sales channels or partners. A channel partner markets and sells the product for the company that produces it.  Channel partners may be technology providers, systems integrators (SIs), value-added resellers (VARs), original equipment manufacturers (OEMs), or industry associations, as examples.

Technology Provider.   A software company may establish an alliance with another firm to share technology and innovation to add capabilities to their solutions.

Systems Integrator or IT Consultancy.  A software company may seek a partnership with a systems integrator (SI) where the SI builds a solution using the software company’s technology.  The SI will develop professional services, or a consulting practice surrounding the software technology and market it to existing or new customers.

Value-Added Reseller (VAR).   A software company may approach a VAR to resell its solution.  Typically VARs add features to an existing product and then resell it as an integrated product, such as in electronics, where the software has been embedded in the hardware or electronics solution.  Often times a VAR simply resells an existing product without making any changes to it.

Original Equipment Manufacturer (OEM). – A software company may partner with an OEM that would purchase its product, or a component of it, to be used in its own products.

Industry Association.   These associations provide current industry information and trends as well as sales opportunities to their member companies.  A software company may become a corporate member or sponsor for maximum benefit of the alliance.

Professional Association.   A software company that specializes in software license compliance, as an example, may partner with a law or auditor firm to provide services related to the compliance process.

By building partnerships, the software company expands its sales reach without the expense of hiring numerous full-time employees.   Naturally there is an expense associated with this effort in the form of time invested to develop the partnership, travel, legal expenses associated with finalizing a formal partnership agreement, joint marketing and any agreed-upon referral fees or commissions to be paid once sales are generated.  However, a productive partnership should result in revenue that far outweighs the time and expense to form and maintain the alliance.

Simply stated, some things work better together, like peanut butter and jelly or cake and ice cream.


No man is an island.  Grow your business through strategic partnerships.