David or Goliath Partners

Quick Summary: Partnering with either small companies or large companies has different advantages.

Abstract:

The size and capability of a potential business partner must be carefully considered.  There are certainly advantages and disadvantages to working with other new and smaller companies as well as with large, well-established organizations.  Carefully and realistically reviewing the pros and cons is crucial before considering entering into a long-term relationship.

The use of David and Goliath to differentiate partners refers to their size and strength as opposed to the outcome of the biblical story.  As the story goes, David was a young, small, inexperienced person with virtually no reputation.  Goliath was an older, large, experienced person with a proven reputation that was feared by all.  The companies that are the intended audience of this book are “Davids”.  Unlike the biblical story, the goal of partnering is to join forces, not to fight.  So, the two choices for joint forces are either “David and David” or “David and Goliath”.  Although most of the articles in this collection can apply to Goliaths, the primary audience are Davids so comments about “Goliath and Goliath” partnerships will not be made.

There are distinct advantages in teaming up with either a David or a Goliath.  There are also distinct disadvantages that are probably more important to consider when entering into a partnering relationship.  Smaller, newer “David” companies are more likely to be scrappy and flexible and willing to work with you in the development of a unique customer solution that meets both companies’ goals.  Probably like you, they have limited resources and may be easily distracted as they, naturally, will be focused on their survival and growth.  They probably do not have a large prospect “Rolodex” or customer base nor have a well-known reputation in the market place that can be of immediate benefit to you.  With Davids, you are more likely to be working directly with decision makers that can move faster and adapt as the relationship develops and actual partnering experience is gained.  As pointed out in numerous articles in this series, most small companies are not successful.  If success or failure is binary, then with two David companies involved, there are four possible outcomes (failure & failure through success & success).  Only one of those outcomes, success & success, will result in a meaningful, mutual long-term relationship while the other three outcomes will not.  Customers know this and may be reluctant to commit to two closely coupled startups or small private companies.

Goliath companies have grown to be Goliaths by determining how to be successful and implementing processes that work. They are not likely to make material changes in their core business to accommodate a new David company.  They have far greater resources and, therefore, stability and have a large customer base and a positive reputation.  Due to their size and most probably layered structure, a number of different groups within the organization may be involved.  All groups will certainly have opinions about the partnering relationship.  In almost all cases, managers in Goliaths will exhibit two seemingly universal traits that can stymie partnering .  First, they are risk adverse; they will focus on not losing, instead of winning with something new.  Second, there are far more managers empowered to say “no” to a new idea than empowered to say “yes”.  These factors could delay the finalization of an arrangement or could derail it at any moment.

By definition, Goliaths are large and have an incredible amount of momentum.  Even if highly motivated, it will take them time and significant effort to implement changes that will probably be required in a new partnering relationship.  As one example, consider the time and effort required to bring a Goliath’s large and dispersed national sales team up to speed on a new product provided by a partner.  Sales training, pricing, proposal preparation, sales and customer support, order processing and fulfillment, and on-going customer support must be thoroughly developed, implemented, and explained before the beginning of order flow can occur.

Goliaths will have well defined processes and standard methods that have served them well and allowed them to manage their growth.  Those processes may be optimized for their large, steady rate businesses but may not be applicable for you. Asking them to change their processes or requiring you to conform to their processes may not be practical, desirable or possible.  Examples of Goliath processes that are undeniably valuable to their company but could be overly burdensome are rigid adherence to quality standards that may or may not be applicable, rigid purchasing, documentation, testing, and compliance activities.  Also, adherence to government mandated or self-imposed employee related requirements that are “passed through” to all suppliers and partners may be an unmanageable burden.  Rigid use of standard ordering, fulfillment, and payment systems in line with their other lines of business could also be required.  The use of highly complex standard vendor/partner contracts administered by insulated Purchasing or Legal Departments that are not directly associated with the operational, P/L partnering business unit could result in considerable expenses and extend the relationship finalization time.

It is not uncommon for you, the entrepreneur, and, perhaps one colleague, to attend a potential Goliath partner meeting with eight, ten, or twelve individuals with vertical responsibilities in the Goliath’s organization.  Commonly, not all of the “right people” will be at the meeting, so multiple meetings over some extended period of time will probably be required.  On the other hand, many Goliaths have realized that the potential burden they could place on a David partner may be overwhelming and have made provisions to accommodate Davids.  Determining if a potential Goliath has a “small partner process” can avoid a considerable amount of wasted effort and allow you to develop more realistic expectations.

There may be naysayers in Goliaths and, to a more limited extent, in David potential partners that do not embrace the use of partners.  Instead, they may feel that their company would be better off either not entering into any relationship or their company should duplicate the partner’s capabilities.  They may be vocal or they may act behind the scenes to scuttle the partnership.  There is not much that you can do to avoid or rectify this situation except to insure that there is total senior management commitment to the success of the partnership.

There is no question that working with Goliaths has many advantages but those advantages come with a cost.  As with any partner, a Goliath will be making an investment in you and will want an acceptable return on that investment.  Keep in mind, you too will be making an investment in working with them.  Think long and hard about your investment and make sure you can afford it.  The revenue expectations that both partners have and the revenue impacts on each business will probably be very different.  The revenue received through the partnership may be a significant amount to you, a David, while it may only be “rounding error” to your partner, a Goliath.  The attention and urgency that each of you give for a potential order may vary proportionally.

Working with Davids may be initially far easier but their commitment and the overall market acceptance of the combination may not be as effective.  Partner Davids can easily become distracted and are more likely to refocus their attention to meet their immediate goals.  There may be David divisions or business units that work autonomously within Goliath organizations.  They may be the ideal partners that can leverage the best characteristics of both their David and Goliath organizations. 

There is no simple correct answer.  Rarely will a company have a choice among potential partners.  Partnering opportunities seem to appear randomly.  When a partnering opportunity appears, it is important to carefully and objectively size up the partner: Are they a David or a Goliath, and will their innate characteristics help you meet your goals, and will the combination meet their goals as well?

Article Number : 5.050201   

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