Tuesday, March 01, 2005

Picking Perfect Partners

Finding the right partner is a central human dilemma. Some of us get it right, usually after a couple of tries. Finding the right marketing partner can mean the difference between success and failure.

Alliances and partnerships are key components in the search for efficiency and innovation, but few marketers choose their allies in a systematic way. Too many firms are still doing the equivalent of "eenie-meanie-miney-mo" when it comes to sorting out who can best help you succeed.

Gartner predicts that more than 40 percent of technology companies will commit significant corporate assets to partnerships over the coming year. If you look yourself honestly in the mirror, you realize that there is nothing philanthropic about partnerships. Partners are chosen and deals are designed to extract benefits, sometimes mutually, for the parties.

Generally the benefits come in one of three flavors ...
1. To establish or borrow credibility and access. You are nobody. They are somebody. By hooking up you gain credibility, reputation by association and access to their client base.
2. To pre-empt investment of time, people, money or power. You pick an ally to gain access to a partner’s learning curve, technology, workforce or competitive advantage. In theory, your savings and the acceleration of your business that results nets benefits to your partner. Using the skills, people, insights, connections, technology or tactics of a partner can be a springboard to success.
3. To road test a potential merger. Some partnerships are preludes to acquisitions, mergers or takeovers. During the partnership period the successor firm gets to understand the key assets, the critical players and the not-so-obvious nuances of a business, which positions them to gobble up the partner efficiently.

Given the significance of partnership as a business tool its logical tothink that the selection process has to be a matter of strategy. Consider a two-step process to screen potential allies. Step one, the business equivalent of a chemistry check, will eliminate obvious mismatches and level the playing field for negotiation.

As a firststep, ask the following:

Is there a brand fit?
Does the prospective partner align with your brand and your customers?
Do they have a reputation on a par with yours?
Will an association with their brand raise the perception of yours?
Do they offer a product or service that your customers know or care about?
Could a customer easily or intuitively figure out the link between your brand and theirs?
Is there a common approach? Does the partner think like you do?
Do they approach customers with the same perspective on product quality, urgency or service? Are they driven by similar financial concerns?
Do they use similar metrics to measure performance or to steer their boat?
Does a family, a despot, a committee or an unseen investor run them?
Who will be your liaison person?
Are they the same size?
Will you eat the bear or will the bear eat you?
Who needs whom and by how much?
Will the level of need change over time or as a result of market activity?

While a win-win is the best entry posture, understand and articulate clearly what you expect to gain andwhy. Then have a “plan B” in case things don’t work out.Too many businesses have signed up all kinds of partners and build all kinds of channels in a mad rush to seem real and to issue press releases implying “forward momentum.” Many of these partnerships aren’t worth the paper they are touted on.

Undoubtedly this sounds like the advice you’d give a seventh grader with a crush. But many marketers haven’t remembered their junior high mating rituals or overcome the embarrassment of being the last one picked in a schoolyard game when aligning their businesses with others.

Once a prospective partner meets these initial criteria, it’s time toget granular and dig for data or surrogate information. Due diligence is more than picking up a dinner tab. So get out a yellow pad and write down the answers to these questions:

A. What is the partner’s annual sales revenue and rank in their category?This establishes who has the leverage and gives you a baseline for reckoning likely expenditures for non-public companies. Also understanding transaction averages, frequency and cycles will give you an understanding of how and when the partner needs help, thereby defining some of your value and most of the inflection points for negotiating.

B. What is their geographic profile and how does it overlap or compliment yours? This asks you to look at distribution, employment and tax patterns. It inventories the boundaries of any deal.

C. Who are their customers, their best customers and how do they overlap or compliment yours? This tells you how high is up and gives you a perspective on how much poaching is likely. It is also useful to know the distribution and concentration of customers or product orders to see whom has who by the tail and to understand the operative dynamics of the business.

D. What stage of growth is your partner in? This is a surrogate measure for understanding how aggressive a partner might be and how much they might need or value the deal.

E. What legal or regulatory issues will come to bear? This gives you a feel for how hard it will be to get a deal done and what parameters might pre-exist in the negotiation.

F. Who will eat your partner’s lunch? Diplomats operate on the principal that the enemy of my enemy is my friend. Understanding how a partner aligns himself and who is gunning for him, is critical in weighing any decision on your part.

G. How will you measure performance? It’s not enough to glance longingly at the eye-candy attached to your arm. A partnership needs to have definitive goals which can be measured and counted by both sides.Without a goal and a way to measure, you’ll never know if its worth it.

If this sounds a bit Machiavellian for you, consider the consequences ofa partnership gone sour; loss of prestige, litigation, significant income loss, employee attrition, etc. Alliances are about bargaining power.And alliances are more like relationships between nations than a marriage. Finding the right balance of power and striking the right tone of diplomacy are the critical success variables.


Blogger Dan said...

Good blog but without advertising technique you have little chance of selling anything.

7:29 AM  
Blogger Brian said...

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11:14 AM  

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