Strategic-Planning

Beware of Partnering Promises: Validate Why and Who To Engage With Before Forming Business Alliances

Before you engage in any partnering effort, be sure your expectations are valid. Do you have good reasons to partner with other businesses? You should. Do you know enough about your partner? You should. Beware of the wrong deal or the wrong partner. But don't let that scare you off. Partnering may be your company?s most lucrative path for revenue growth and innovation development.

Don?t be swayed by promises your partner may not be able to keep. Don?t be sucked into deals offering revenue you may never see. First, you must define your own partnering goals. Second, find a compatible ally. Before you start negotiating with anyone, conduct the appropriate due diligence to be sure they are actually capable of delivering up their end of the bargain.

The First Step in A Thousand Partnerships

Whether your business generates profits directly or indirectly, markets or makes products or services, sells via the Web or a sales force, offers parts or end-to-end solutions, operates locally or globally, you cannot afford to ignore the partnering opportunities available to you right now for growing revenue, innovation and brand equity.

But before you begin to engage potential partners, think about how far you want this journey to take you. Chinese philosopher Lao-tzu is quoted as saying, ?A journey of a thousand miles begins with the first step.? On its surface the statement seems to say the obvious. After all, even if the journey is only two steps long, it begins with a first step. So what did he really mean? Your level of commitment and resolution to reach your destination is encapsulated in how you begin. Very little determination is required in taking two steps. But one who embarks on a thousand mile walk must summon a whole lot of tenacity and purpose into that first step.

Starting down the path of partnership is similar. Don?t take it lightly. View your first partnering initiative as the first of many ? the first step in a thousand partnerships. Fail to start out right and nothing of consequence can follow. Start with the right reason and a good understanding of the path before you and you're on your way to reaching your goal.

Before You Begin: Choose A Powerful Reason To Start With

Before you engage in the partnering process, be sure to have a clear plan. First, decide on the best reasons to pursue alliances.

Your first alliance should be a strong one. Have a reason powerful enough to launch your enterprise on its way to future partnerships -- able to take you as far as you can foresee.

Here are ten solid reasons for engaging in partnerships:

1. Customer Access ? Two marketers exchanging access to compatible customers.
2. Sales Initiatives ? Producer or marketer working in tandem with a sales force organization, retailer or Web store to increase sales.
3. Market Expansion ? Partnership aimed at penetrating new or niche markets.
4. Unique Value Alliance ? Marketer with strong customer base partners with innovative supplier adding unique value to the marketer?s offering and increased sales for the supplier.
5. Building Scale - Partnership formed to achieve economies of scale.
6. Innovation and Specialization ? Public, education or private enterprises combine financial and knowledge resources to research and develop innovative or specialty products, services or solutions.
7. Supply Chain Stability ? Marketers trade exclusivity with suppliers in exchange for investment in quality, cost reduction, and priority speed to market; The supplier is able to make long-term commitments at stable levels and pass on the benefits to the marketer.
8. Distributor Partnering ? An alliance between manufacturers and distributors to provide access to new markets, domestic or foreign, or strengthen a position in existing markets.
9. Parts Manufacturing Partnership - Two or more manufacturers of component parts pool their resources to produce a better product.
10. Licensing Agreements ? Alliances providing license to proprietary products, support services or technology.

Before You Engage: Learn About the Road You Will Be Taking

You may be motivated to go the thousand miles until you discover it?s all uphill. So before you start on your way, be sure you know what?s in front of you. Six of ten alliances collapse at some point down the road, because one or more of the partners failed to do their due diligence. Before you engage a partner, learn the following:

1. Management Strength and Integrity ? Who runs the company - senior officers and board of directors? Are these people dealing from strength or weakness? Do they deal with integrity or are they the kind to cut corners or look the other way? Do they have a litigation history?
2. Short-term Objectives and Long-term Goals ? What is their corporate strategy? What is their partnering strategy? What will they gain by partnering with you?
3. Performance Rating ? Is their organization efficient? Is it flexible? Is it focused? Do they have other partners? How well have these alliances performed? How well have they performed in the past? Regarding: quality of goods or services, speed of delivery, pricing and management response to solving problems.
4. Capabilities and Innovations ? What are their capabilities: past, present and future? How committed are they to investing in capabilities that would benefit your business? How creative are they? Are they unique and innovative?
5. Financial Considerations ? What is their credit standing? Are they profitable - as measured by EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)? Are they growing? At what rate ? as measured by CAGR (Compound Annual Growth Rate)?
6. Resources and Employees ? Do they have the resources to deliver on their end of the partnership at the scale required? Do they have the staff or outsourcing to fulfill your orders? Are there unresolved issues with labor or former employees?
7. Risks and Compatibilities ? Are your trade secrets safe with them? Is their company a fit with your company in regards to markets and cultures? Are they looking for an exit strategy? How would a change in management or ownership affect your alliance? Will they be sold in the near future or right after they close the deal with your company? Is your partner planning on bringing in new investors? How can you get out of a failing alliance? Who will own new intellectual property rights and patents produced by your partnering?

Before you make contact with the prospect partner conduct as much research as is available to you. A second, more comprehensive and mutual due diligence phase must be undertaken once both parties have agreed to embark on negotiations. You will want to personally visit your prospect partner?s offices or production facilities.

Harvey Kraft is Managing Director of Partner | M -- partnershipsmedia.com -- the leading California-based marketing consultancy specializing in executive support for strategic alliances and partnering initiatives. Mr. Kraft is a skilled partnerships executive, author and speaker and creative marketing director with two decades of senior level experience in the media, finance, publishing and wellness sectors. Are you interested in building a successful partnering strategy, a revenue producing alliance network, a value creating co-branding campaign? For serious executive support with your partnership efforts from marketing initiatives through innovation facilitation, please contact Harvey Kraft at Partner | M.

Harvey Kraft

Tags: partnering, alliances, partner, customer access, sales, marketing, distribution, supply, goals, risks, EBITDA

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Strategic-Planning

Beware of Partnering Promises: Validate Why and Who To Engage With Before Forming Business Alliances

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