Avoiding Partners From Becoming Competitors

Quick Summary: Constantly increasing your value to your partners will help to keep the relationship intact.


With the ever present demand to increase revenue to grow a business, business partners can, at times, decide to take over the role of their partners to increase their margins.  Sometimes there are valid business reasons, sometimes it is based on greed or other more sinister motives.  Companies, by consistently increasing their value, can, in most instances, stop the degradation in relationships from occurring.

It is unfortunate, but greed can become a highly motivating factor that can impact successful partner relationships.  Although it can occur in virtually any type of partnering arrangement, it is probably most common when a company is working with a much larger, well-established channel distribution partner.  In these cases, with their close customer control, they may sense an opportunity to take over part or your entire portion of the solution to improve their portion of the solution content and thereby increasing their overall margins.

In theory, contractual language, patents, and copyrights can provide protection against this occurrence in some cases.  Unfortunately, for these remedies to be useful, you may have to sue your partner, not a practical method of keeping a solid working relationship in place.  Additionally, with their closer ties to the customer, they are better positioned to re-define the relationship going so far as to say or imply that “the customer has requested…..”.  Finally, if they are much larger than you, they probably have an army of attorneys that could easily overwhelm you if you attempted to stop them even if you had a clear cut case.

In many cases, your partner may be significantly underestimating the know-how and efforts that go unseen in the development or your product or service.  Mistakenly, they may feel confident that with little effort they can subsume your portion of the overall solution.  Their false sense of confidence may be driven by their greed to increase their margins.  Unfortunately, they may have a more sinister objective that was always present.  They may have been partnering with you only to learn what you do, how you do it, and even to steal your trade secrets and know how.  Although most of us may view this behavior as underhanded and illegal, some other cultures consider this approach as a normal part of business.  Due to our common sense of fair play and ethical behavior that we assume exits with all of our business associates, the undermining of our positions can become apparent only after it is too late to stop.

There could, however, be another reason that a partner attempts to remove you from the overall product solution.  It could be their real or imagined view that you have become unresponsive to their customers’ needs.  With their close contacts with their customers, they may, indeed, be correct.  Product life cycles and alternative approaches to existing solutions along with constantly changing customer requirements can lead to product and service obsolescence quickly.  If you are completely relying on channel partners for customer feedback and determining market trends, you may be too insulated and isolated from adapting quickly enough to avoid channel partners sensing the need to find an alternative.

With the exception of a channel partner with a sinister motive of stealing your product or service, the best method to avoid partners from becoming competitors is to constantly increase your value to them and let them know it.  Updating your product or service, staying ahead of direct and indirect competitive alternatives, and providing your partner with tools and techniques that they can use to further enhance their relationships with their customers are effective methods for solidifying your relationship.  Strive to remain essential by actions and not by contract language or threats.  Also, make sure that your partners know how much you are doing behind the scenes to make them successful.  Be sure that they view you as a valued partner and not just as a supplier.


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