Securing partnerships is the fastest way to accelerate your business.
It allows businesses to work cooperatively to further their self-interested goals, and in the process, share their risks and rewards.
Companies can’t always rely on their own internal capability to create value. Sometimes, it makes more sense to find a partner. Other times, it is perhaps the only way to achieve a specific end goal.
For resource-strapped and next mile focused startups, corporate partnerships signal a silver bullet for growth. A possibility of leveraging a plethora of resources, riding on an established brand and accessing a latent customer base.
That possibility, though elusive, can create an enamoured feeling. A feeling, if not kept in check, can lead to a slippery slope.
This essay attempts to clear up some blindspots for startups entering partnerships with corporates.
The best things in life happen in clusters. That’s why the success of any business is pegged on its ability to create cooperative networks. These networks consist of customers, distributors, suppliers, investors and the government. But what makes one a partner?
A partnership is a sharing relationship that is not purely transactional. It is built on the combinations of value from businesses, which don’t depend on paying each other for a service. Often the key drivers of a true partnership include:
- Acquisition of resources.
- Optimization & economy of scale.
- Reduction of risk & uncertainty.
While these benefits would be welcome in any business, not all partnerships achieve this end goal. Certainly, not the wrong partnerships. So, just how do we gauge the right ones?
Defining intent should be the starting point for determining whether you’re best suited to execute alone or through a partner. This can be achieved by running your business model through a partnership intent puzzle.
If your genuine answer is ‘no’ to one of these questions, that could be an early sign for the need to explore a partnership.
A partnership is a parallel of two or more business models. The sooner you understand your intended partners’ model and how it aligns with yours, the easier it will be to come up with a winning pitch.
The partnership canvas, a prototyping tool for modeling key business partnerships, will help you judge the potential from the onset.
It consists of the following building blocks:
- Created Value: What output will be created for your business?
- Desired Value: What are you looking for in a partner?
- Transfer Activity: How will you bring together these values?
- Value Offer: What is your matching offer?
The crux of a partnership design is value creation and transferability. Your value offer is your contribution to the partnership. The desired value encapsulates your expectations for your partner(s). The transfer activity represents the barter trade zone between the parties. Lastly, the created value is the litmus test of the newborn value.
It is relatively easy to spot constraints, identify opportunities across the supply chain and generate subsequent partnership focused solutions. The main drawback of a partnership design process often lies in the transfer activity block.
Just like in bartering, there must be a coincidence of wants. The flipside is that people have different valuations for the same offering. And to add to the complexity, no one party puts in an equal measure of value on the table.
Ensure the end goal is worth navigating this complexity. More importantly, ensure the intent is customer centric.
No partnership is created equal. Especially one that is between a startup and a corporate.
The principle dynamic to be aware of is who has more to gain relative to the scale of their company¹
Brand, capital, distribution, and labour leverage are owned by the corporate. Startups have the leverage of ideas and innovative products with no scale [yet].
As long as you stand to gain more than the corporate, they have the leverage.
To mitigate a raw deal
- Be so good that they can’t ignore you. This means avoiding corporate partnerships in idea or pre-chasm stage when potential is all you got. Potential is a high-risk return ratio for the corporate and high-risk of replicability for you. Give yourself a chance. Convert the potential to an incentive. An incentive would make them more motivated to seal the deal and sustain it. Additionally, it would also dampen their chances of going out SOLO. And in the case, things go sideways, you want to give yourself a head start to the market. You also want to build that innovation identity clout in the ecosystem- assign a face to your product for everyone to see.
- Show them their competitive advantage. Partnerships will always be a driver for corporates to further their self-interested goals. That said, corporates’ main focus is on their competitors- other large companies. Nothing speaks louder than showing them how to increase their competitive advantage.
- Use FOMO. Fear-of-Missing-Out is a high stake game. If corporates don’t act on new technologies, business models and technologies, they’ll miss out on valuable growth opportunities. Being left out of the innovation table is one of their deep-lying fears for the future. The line chart would be along the lines of “this is how much money you stand to make and this is how much money you stand to lose” if you don’t capitalize on the opportunity. Plain simple.
- Exploit the inflection point. All companies experience a decline in their business lifecycle. This stage can only be pushed further away through innovation. The R&D department might save the day on a couple of occasions, but they won’t always turn up with all the answers. Shockingly, it takes some companies’ an awfully long time to figure out that they can’t always rely on their internal team. Luckily, their bottom line will always give them that wake-up call. And this is where you come in. Your innovative products and understanding of their target audiences will be a high yield opportunity that they can’t dare pass out on.
Truth is, partnerships between corporates and startups rarely work. And the few that have passed through the seal of a pen, haven’t quite lived up to expectations.
Sometimes you just have to wait for the industry to mature. For corporates, to start feeling the pinch of technological evolution. For the bottom line to veer a bit off course for their liking. Holding the line is sometimes the solution. Chartering your own path is another.
Sometimes it is just unrequited love. A relationship founded on onerous terms. To charter a successful partnership, you need to put up measures to avoid failure. Legal traps. Irreversible traps.
History is your friend. There have been others before. Use their experience to your advantage. Always assume that
- They could be a competitor waiting to happen.
- They might use you as a guinea pig for their next product.
- You could just be part of their optics or PR budget spend.
- Long term partnership is not guaranteed. They change with the tide.
- They will not have the same urgency as you.
This will help you determine information you can share, situations you can negate and opportunities you can capitalize on.
Pitching to Signing
Cold pitching almost never works. A warm referral is your best chance of getting into the room. If you can’t get a referral, work your way up, network and find people who know people that get you inside that door.
Joan Kelly famously said, “Before going into a partnership with someone, spend time with them in three different kinds of situations: a relaxing one, a competitive one, and an intellectually stimulating one.”
When done right, partnerships can be a boon to both startups and corporates. They provide linkages to resources, close knowledge gaps and allow cross-functional value creation. These sweet spots can only be achieved if there is a mirrored connection between the parties. A connection that needs to be probed through a partnership design process.
In the end, it is the human relationships and working camaraderie that make partnerships last.