Technology partnerships rarely fail due to lack of technical or project management skills. Having spend most of my career in business development (partnership development) roles, I noticed certain patterns beyond the textbook answers on success of strategic partnerships. I hope noone needs to be reminded any more for the need of an executive sponsor or a governance process as advisors still often do. I want to highlight the nuances in leadership and execution that I believe make technology partnerships work. The scope of partnerships range widely from co-marketing and unspecific alliances through co-development or joint ventures to acquisitions and mergers. Regardless of these vehicles certain success elements are common to all.
Business development should create long term value through non-core relationships. Having a partner to deliver the same product or service to the same customer segments you are already engaged with is not really a partnership but outsourcing. True partnerships open avenues to operate outside the current swimlanes, customer influences, segments and product categories of one (or both) of the businesses.
The fundamental truth is that business development cannot be managed or measured the same way as sales is. But it should be managed and measured with similar rigor and business outcome orientation.
So here is the executive summary of what I have learned in my years in business development:
- Make sure business partners have common objectives – Most partnerships have several unrealistic or unstated expectations on either side. Unless both parties are aware of those critical expectations it is impossible to attain success that meets both side’s goals. These discussions have to be explicit and needless to say, both sides have to win given the same business outcomes. Ideally key program executives on both sides should have some of these outcomes in their compensation plans. It cannot be overstated enough that both sides must win and must win often for partnerships to survive.
- Select the right partnership format for any given goal – The financial and resource needs of a longer term co-marketing effort vs a product co-development are very different and clearly produce different business results (mind-share and sales leads vs tangible viable products that may or may not succeed). In my experience and probably rightfully so, most early partnerships are under-resourced for the stated objective. There is nothing wrong with starting small if the expected results are small as well. On the other hand, some partnerships start with lofty goals, due diligence and joint venture, which is fine as long the the expected failure rate is baked in the calculus (be a venture capitalist vs a cash flow oriented investor).
- Balance technical, commercial and program management skills in your partnership team – Most partnership teams are biased towards certain skills, either too technical and end up with technically viable but commercially poor results or too commercial and expect bankable revenues in pilot stages of a partnership. Balancing the roles in different stages of the partnership from concept (technical) through commercial due diligence through execution stacks the odds of success. By the way, never expect the core business to divert resources to step in to augment shortcomings in BD skills.
- Adopt a startup mentality: Fail early and Pivot often – I believe every business development team should think like a Lean Startup. Leaders should remember that noone knows what the ultimate business model will evolve into so experimentation will be key. Once the team understands the goals they should know it is OK to fail and course correct.
- Partnerships should be structured by executives – It is fine to have executive sponsors, but not enough. Most partnerships are structured and operated at a level in the organization that cannot divert the necessary resources, make commercial or technical roadmap changes or tradeoffs. Making all issues an executive escalation is a sure way to slow down or kill the partnership. The radical point here is that partnerships must be formulated by key executive teams and once they are up and running can be handed off to operational and sales managers for proper execution. The criteria for the right executive level is that the person can make the technical or commercial trade-offs necessary and have the backing of the board.
- Partnerships should have clear metrics and accountability from day one – However, leadership style, metrics and accountability should match the stage of the program. Early stage (Pilot Phase) the key metrics are there to encourage fail-early type pivoting or getting sufficient market feedback. Once key pilot projects are completed (Standardization Phase) the KPIs may become adherence to process metrics or adoption of best practices. Once the partnership is operational across the full scope (Scale Phase) the metrics should start looking like core business metrics (pipeline, revenue, NPS, delivery time etc) with the understanding that partnerships are typically outperforming the core in growth metrics and underperforming in efficiency (lower sales productivity or profitability initially).
- Process first, ideas second – It is easy to fall in love with a business idea. Before partnerships are formed, each party should be clear on what success looks like in each of the above stages and when course corrections are needed and yes, when the plug needs to be pulled to redirect resources.
- Contracts should include dedicating the necessary resources – Most contracts deal with IP issues and ownership of the commercial benefits of the partnerships and tend to neglect what each party has to keep doing in the early days of the program. It is very hard to start the project when results are unclear, it is easy to share the spoils once it is up and running, Contracts that specify expectations of people, executive time and even internal and external PR visibility of the effort will increase likelihood that the core business will support the partnership and not detail it.
- The core business will not understand or support the partnership in the early days and that’s OK – BD efforts are a distraction to the core business because they divert attention or resources from daily execution and do not enhance core metrics short term. The great book “The Other Side of Innovation” summarizes a wealth of research on this and I observed them all. Suffice to say, any support from the core should be pre-negotiated and appreciated when it happens.
- Brands do not partner, people do – In my experience it is a very critical realization. Having people in the BD team who like collaborating with others will be critical. It starts with the CEOs but true at all levels. Leadership teams should ensure the team fit and encourage collaboration.
I believe business development is the best growth engine in any company to bring ideas to market. All new innovation will need partners and all partnerships are different. The alternatives to successful business development are very costly whether it is decling revenues, lost marketshare or the excess cost of acquiring innovation we could develop ourselves through effective partnerships.