Beneficial technology partnerships have become an essential element in the creation of a successful business. Going it alone may sound good, but the fact is there are not many businesses that can stick to a DIY strategy and survive.
Technology partnerships offer a great way to obtain access to markets, special skills, tribal knowledge, physical assets and operational scalability that would simply not be possible to the enterprise relying on its native capabilities.
Years ago, companies could take their time and develop the resources necessary to bring a new product line or service online. Today, not so much.
Technology changes too quickly. Missing the first wave of opportunity accompanying a new technology usually means greatly diminished market potential down the road.
Even if you have some skill or capability inhouse, partnering usually offers the quickest way to develop an impactful presence in a new functional area or market segment.
This is not to say that selecting a partner is easy or a guarantee of success.
The Case for Partnership
Business history is littered with poorly conceived partnerships, and the price for many of these failed ventures has been exceedingly high for the participants. Even marriages that appear to be a sure success will sometimes stumble or fail when the pressure is on.
Great partnerships require more than marketing symbiosis. Great partnerships are great because they work on multiple levels and for both parties to create something greater than the sum of the individual parts.
Before a company starts chatting up potential partners, a careful evaluation of any potential business mates must be completed.
Glen Llopis, a contributor to Forbes.com, offered up some great advice in his 2015 article Six Ways Effective Leaders Evaluate Business Relationships. You’ll want to read this piece, but for now, I’ll just list his six points:
- Do They Broaden Your Perspectives?
- Do They Keep You on Your Toes?
- Do They Make You More Courageous?
- Do They Help Leverage Existing Assets and Resources?
- Do They Have Your Best Interests at the Forefront?
- Do They Strengthen Your Significance to Sustain Your Success?
I would like to take the discussion a couple of steps beyond these six points and look at some more specific considerations.
Elements of a Great Technology Partnership
Great partnerships are built on three foundational elements:
- Mutual trust – Can the parties operate with a reasonable assumption trust that is free of ongoing suspicion? Partnership agreements must contain adequate contractual protections that allow the individual partners to thrive and, at the same time, enable the partnership to achieve joint success.
- Mutual need – Both parties should have identifiable needs that the other party can help fulfill to achieve the partnership goals. You need sales; they have feet on the street. You need access to federal government customers; they specialize in selling products to the government.
- Reciprocal need – Both parties need to have reciprocal needs, meaning both parties benefit from addressing each parties’ individual needs. You and your partner both need additional revenue; your partner needs access to new medical products; you are offering a new diagnostic tool to a medical market you are currently unknown in.
Finally, there is one more element, perhaps the most obvious element of all, which is alignment.
This means the two partners share the same technological environments and product flavors. You both operate within the same technological domain. This can be important in terms of back office systems as well as products built and sold.
A very important consideration is culture. If you are a start up with a freewheeling workforce of ten people that live their jobs 24×7 you are not likely to find happiness in an agreement with a more established company that is content working 40-hour weeks. There will be times when this may be the only choice and that is fine, but expectations should reflect that reality.
Perhaps the key element in this area has to do with goals. Can both parties share the same goal of success derived from the partnership? If one party is essentially enabling the success of the other at the possible expense of losing out on other opportunities, then the partnership will be fragile and at risk during stressful times.
Selecting a Technology Partner – Vetting Potential Partners
The initial task in selecting a partner is to establish a clear vision of what the successful partner relationship will look like. If you can’t identify your destination, then you should not start your trip.
The success vision is more than imagining happy people with smiling faces busily working. What are the metrics of your success vision?
Is there a specific revenue goal? Are you looking for an aggressive growth rate? Is the objective to establish so many new customers in a new market? Perhaps you are looking at the other side of the equation and trying to reduce costs in some radical fashion.
The more specific your definition of success is, the more likely you will be able to design a partnership that will help you attain those objectives.
Is there a long-term goal involved such as spinning off a business unit or moving into a whole new line of business?
Short, medium, and long-term goals must be identified and agreed upon by all stakeholders involved.
What Type of Partnership?
Are you looking for a reseller or alternate distribution channel? Are you simply wanting to import some technical expertise by partnering with a company with matching technical chops?
Knowledge transfer can be hastened with the right partnership if you are careful and upfront about your needs and goals. Companies are more inclined to share certain types of expertise if they don’t see any potential downstream competitive conflict.
Technology and knowledge are the precursors to attacking a whole new market so be prepared to discuss your plans in this regard if you are seeking these types of relationships.
Additional Partnership Factors
Big companies like to do business with other big companies and small companies are frequently more at home with other smaller footprint enterprises. If you enter into a relationship with another enterprise with a significant difference in size, be prepared for the consequences associated with those differences.
The same is true for partnering with companies that are content with a domestic scope. If your goals involve operations on six continents and your partner has their hands full with six states, you will likely have conflict downstream.
Another question is risk. Successful start-ups are many times more comfortable with risk. More established companies may be just more comfortable and not interested in rolling the dice quite as frequently. Be prepared to either insulate your partner from those risks or find someone who is more at ease taking some chances.
In a similar vein, how well will your workforce interact with the potential partner’s workforce? If your guys are in the office late Friday afternoon trying to close business and your potential partner is effectively shutting down on Friday afternoon, how is that going to play out over time?
Location may or may not be an issue, but it should be considered. Time zone differences can impede the daily operations of any company in larger domestic markets and certain international markets. If the relationship will involve shipping of product or supplies between operations, be sure to consider the fragility of any shipping modes or specific channels involved.
Finally, just ask yourself, do you like these guys? You will be doing business, sharing successes and crisis and depending upon each other to achieve success. It is always nice to at least like the other folks on your team.
Be Honest About Your Direction and Technology Partnerships
Partnership is a great strategy. Be open, honest and know where you want to go. The right partner can be the best way to get there quickly.