Aside from the over used statements such as “One Plus One Equals Three” and “To Better Serve Our Customers,” it is important to clearly understand why both parties are interested in pursing a partnership. In most cases, neither the goals nor the resources and capabilities will be the same for both partners. Ideally, partners will complement each other by leveraging each other’s strengths to overcome each other’s shortcomings. In this arrangement, goals can be very different, as long as they are not in conflict. Understanding each other is the first step in establishing trust, and trust must be present in every partnership for it to be successful.
With the focus of the articles in this collection on startups and smaller private companies, the remainder of this article will assume that the company is a “David” and the potential partner is a “Goliath.” “Davids” are small, scrappy, companies without a large amount of experience or resources. “Goliaths” are large, mature companies with abundant resources and experience. In each case, the actual motives and goals for forming a partnership will vary. Below are some examples that may apply.
Why you (a David) may be interested in partnering with a Goliath
- You want to leverage their name and reputation to lower the apparent risk to customers
- You want access to their “Rolodex” of prospects and customers
- You want to leverage their expertise and capabilities in areas that you need but do not have
- You want to leverage their economies of scale in areas such as advertising, marketing, purchasing, manufacturing, order processing or fulfillment, installation, and customer services
- You want access to their larger, dispersed sales organization to rapidly increase sales volumes
- You want to rely on their cash reserves to minimize cash flow issues, for example, by them paying in advance or purchasing inventory
- You want them to provide technical guidance based on their deeper and broader resources
- You want access to their patent portfolio
Why a Goliath partner may be interested in partnering with you (a David)
- You fill a void in their product portfolio that their customers are interested in, but they do not have the time or expertise to develop similar capabilities on their own
- Your product or service will broaden their portfolio to provide a competitive differentiator while not requiring the expenditure of internal resources
- You can help fill voids in underutilized, internal capacity
- Your products or services can provide them with an opportunity to sell more to their existing customers or expand their presence in adjacent markets
- You have customers that they would like to access through your relationships
- You have expertise in areas that they have voids
- Your small size and ability to quickly respond will allow them to try new products or operations through you without upsetting their internal organizations
- You have patents that they would like to utilize
It is important to conduct open and frank dialogue and discuss each other’s goals for the partnership. Knowing this information up front will help to set the proper expectations for each party or, perhaps not. If, for example, your primary goal is to have access the partner’s existing customer base, and the partner has no intention of providing that access, it is better to know this disconnect before entering into a relationship.
Another advantage of sharing goals is the fact that, although partnerships are important, companies simply do not make major changes in their personalities or approaches based upon partner requests. If a partner expects the other party to begin operating differently, frank discussions need to be held to determine if those changes are desirable or even possible. For example, if both partners have strong feelings about “owning” the customer, channel conflicts will occur. Formulating plans to accommodate these differences, or finding alternatives to address the overlap or voids needs to be addressed early in the discussions.
A useful method to jointly discuss the underlying goals and objectives of each party is to expand the document described in the article in this series “Partnerships: Start with a Story”. That article describes the creation of a narrative written from the end customer’s point of view about the partnership. From that narrative, both parties can then add how the method of satisfying the customer will help them meet their internal goals for the partnership.
Although it sounds self-serving, openly discussing “what’s in it for me” and asking the partner to do the same thing, “what’s in it for you” will allow both parties to clearly understand what will be required to make the partnership work and provide an acceptable return on investment for both parties.