There are partnerships and there are Partnerships. Software companies routinely explore partnerships to gain edge in the marketplace. It makes sense too in some cases. But in majority of the cases partnerships can prove to be a big distraction and/or misdirection in terms of execution. The earlier stage you are, as a company, the lesser the chances of a partnership working.
Early stage companies routinely think of partnerships as a way to acquire new business. Being scrappy it is natural to think of being parasitic. “We cannot afford to have an army of sales people or we don’t have the mindshare or brand to make companies take a chance on us”. So “if only we can partner with Deloitte or KPMG we can sell into their entire existing customer base”. Before you propose that strategy to your leadership team or you happen to be a leader yourself – just take a minute and think about it. You are a company yet to establish a reputation or recognition. Think of how many other vendors like you must be contacting the “Deloittes and the KPMGs” to partner with them. Thinking of partnering with “Oracle and SAPs of the world” in the early days is an even more outrageous strategy. Just make peace with this – “You are not worth their time”. Unless you have a way to bring them more business you are not worth their time. Better yet, get them in a deal that you have already clinched and give them business, not once but a few times before you get them to bring you into their deals. The friend/ex-colleague you have in a Deloitte, KPMG, Oracle or SAP might not tell you this directly, but that is the truth. If you continue to nurse any aspirations of going ahead with your partnership plan before you established some marketplace resonance for what is it that you do – you are naïve. Here is some reality for you – for every success you have heard of a small, no-name company with their magical technology signing a partnership and then parlaying that into millions of dollars of business to become an overnight success, there are thousands (if not millions) who fall by the way side pursuing this strategy. But then again, companies love to tell their sorry failure story of how they almost got this partnership working and how they were on the threshold of greatness. Stop dreaming and don’t become another road kill.
With that morale boosting rant done, here are some things to keep in mind while venturing into a partnership (using a bakery and cake analogy)
- There is no shortcut to succeeding in technology business. You need to first get someone to taste your cake and buy it from you. Yes…Directly. You might not make great margins on those deals, but you get the taste (no pun intended) of what the customer expects.
- Repeat that exercise with an improved cake, factoring in the feedback from first customer, with a new customer. Do this until they tell you that you have really helped them. Think NPS (Net Promoter Score).
- If they don’t tell you that means they did not meet their needs. They are just being nice in not telling you that. Repeat the exercise of improve-sell-and-check? Your value proposition (think nutritional benefits listed on your cake) is not complete until you manage to sell the cake to multiple customers and they all like it and agree to would vouch for it. Once you accomplish that, is when they will tell you of any additional needs/help they need. That is when you can augment your offering with an appropriate partner offering.
- From a timing perspective, until you establish some repeatability of revenue – ideally 3-4 quarters (or 7-8 customers whichever comes first), don’t even think about partnering. . All you will accomplish are a lot of “great meetings”. That’s it. It is a huge distraction.
- Start partner discussions from a position of leverage. Conversely, partners will reach out to you if you are doing well and that way you have more leverage in the structure of the partnership. Remember these very partners that you are seeking are also in those companies you are selling into. If your solution is doing its trick in that company they would hear about it and start doing the math. Soon you will get a “we should grab a coffee” call from one of their leaders.
- Partnership is not a sales thing. Partnership is a strategy thing. It is not something two sales guys on either side can whip up. Just partnering with someone, in the hope that they will be motivated to bring you business is like “Linking to someone with a lofty title on LinkedIn thinking they will help you get a job”. Neither is going to happen as easily as you imagine. Partnership should include the clear goals for success for either side. Without that you will not get buy-in from the top management of your partner. Success is more than just sharing some leads/opportunities (that is just crumbs). If the partnership yields value (to both companies) that is beyond what either can accomplish independently or with other partners then the partnership will work. Think of all those alliance partners who put “Oracle Partner” logo on their site (and pay money for that privilege). Most of them don’t see the light of the day. They still end up working hard, on their own, to build business. Oracle is not working hard to get them new business. Remember, it is always the smaller of the two that will do all the work to bring home the bacon. The bigger one usually waits to takes it share.
- This one might sound a little contradictory to the previous but it is not. When you are ready for a partner and if you are young company, chose a partner that is more established in the market. Partnering with another wannabe upstart or earlier stage company (no matter what they offer) is akin to having two one-year-olds trying to hold hands and teach each other how to walk. They might eventually succeed in that, but there will be a lot of falls, lost-teeth and bruised elbows in the process. Really painful, just don’t do it.
- You don’t need to partner at the first opportunity with another provider/vendor. Don’t be in a rush. If a particular customer has a need that can be serviced by a fellow vendor that you have identified (and verified), then use them on an ad-hoc basis and get to know their functioning. Think dating. If it works out once, try them again in another project. Remember divorces are painful. If things did not work, you can terminate partnerships but you will then have to deal with the child (i.e. whatever you jointly delivered to the client). Only after you have established that there is alignment in the value system of both companies, do you go ahead and ink the partnership.
Having said all of that, I still believe partnerships have their merits. I have had some successful ones in my past life. They can lead to glorious outcomes. Just that there is a right time and right partner to do it with.