The Launch Doctor - Email Newsletter

Hello fellow launchers, and welcome to this month’s edition of The Launch Pad Newsletter.

Okay, it’s summer, and vacation time, and who has time to read? You’re in luck. July’s newsletter is mercifully short. It’s about the dos and don’ts of partnering.
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Feedback and questions are welcome. Send to: ckitcho@launchdoctor.com (note: This Opt-In email newsletter is sent monthly. If at any time you wish to Opt-Out from the distribution list, reply to this email requesting removal. Your name will be removed immediately.)
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The Launch Pad
July 2003
HOWDY PARTNER !

Whether you are an entrepreneur or in a large company, somewhere along the way in your business career you will need to partner with another company. Every company has strengths, but may also have gaps: in skills, resources, technology, or geographic presence. Another company can bring strengths to the areas where you have gaps, which benefits both of you. However, a partnership can’t be one-sided. There has to be something in it for both parties in order for the partnership to succeed.

There are lots of reasons why entrepreneurs or companies should consider partnering; the two most important are time and money. (Maybe curiosity, too. Ever wonder what other companies are really like on the inside? Do they have newer copying machines? Do they have Starbucks coffee? But, seriously…) A business partner with the right market presence can help you enter a market faster, and you might help them with a new technological edge that will benefit their customers. A partner may have global presence for support operations that will help serve your own customers. Maybe your company provides a service that will complement a partner’s product, enabling both of you to capture a new market. Companies can leverage their own resources with other companies in order to save the time and money that’s necessary to acquire or train other resources. Think of it as a resource-sharing program!

Companies partner with each for the purposes of marketing, development, distribution, manufacturing, investment, services, global reach, or just plain fun. Partnerships may last months or years. There may be detailed partnership agreements in place, with options for renewing the arrangement. Anything goes.

Single Entrepreneur Seeks Attractive Development Partner
Yes, you must go through the search phase of finding a partner, kind of like the ugliness of dating. Initially, you should think about what kind of partner you need. Just like dating, will they be big or small? What skills, technology or presence do you need from them? At this stage, you also need to think about what’s in it for them. What do they get from partnering with you? When you have a list of candidates, then you can start with the biggest or the smallest or the first on the list. Then it’s time to call them up and ask them for a date.

Date Before You Commit
It’s not a great idea to sign a multi-year partnering agreement during the first meeting with a candidate partner. What if you find that the two companies are not compatible in terms of philosophy, operating procedure, values, strategic goals, work style? When that happens, lawyers get involved and it creates bad feelings. Mainly because lawyers are present, but also because you must now terminate the agreement. It’s better to try working together on some small project for a few months, a phase during which you get to know each other. Yup, it’s dating all right. Instead of discovering annoying little personal habits, you may find objectionable processes, attitudes, or misplaced priorities.

Avoiding Divorce
The objective is to avoid lawyers at all costs. Don’t get me wrong; I do like lawyers. Really I do. I have friends who are lawyers. However, they can get very expensive, so it’s advisable to put an exit strategy in place, before you even start. Figure out how you will make decisions as a partnership and how you will resolve conflicts. Build in regular status check meetings and reviews to assess how the partnership is progressing relative to its initial goals. If it’s not working according to plan, fix it before it gets worse. Just like a marriage, it takes time and effort and attention and a lot of work to keep the relationship going. If you get to the point where it just is not going anywhere, then exercise the termination clause in your agreement and move on, but do that without burning bridges. Have frank discussions as to what worked and what didn’t, which will help both parties relative to any future partnerships.

Renewing the Vows
Sometimes a partnership is going so well, both parties want to not only continue the relationship, but also expand the partnership in new directions. It’s great when that happens, but make sure that the initial agreement and its structure remain intact. Don’t abandon the basics just because things are going well. When it comes to relationships, you just never know what can happen.

Quick and Quirky Example
Suppose you are a small startup company and your product is a wireless modem product and service that will be made available to hotels, who can in turn make the service available for a fee to their hotel guests. (And for anyone who actually goes out and invents this business, I will personally nominate you for sainthood). You’ve tested the device (which has a universal connector that fits any laptop) and the speed is a minimum of 56K in any major metropolitan area. Now you need a partner who can help you enter the market.

Your target customer is any major hotel chain, so you begin by figuring out what types of companies already sell products and services to hotels. You narrow it down to telecommunications providers (who supply phones and service) and companies who manufacture and distribute set-top boxes for in-room TVs along with pay-per-view movies. You decide that the telecom companies would see your service as competition, even though their pitifully slow connections, at the mercy of the hotel switching capacity, will hardly compete on a technology basis. So, you decide that the set-top box people would be more amenable. Maybe you could even market together: “Watch Matrix Reloaded and zap your spam all for one low price!”

You select the smallest of the top three set-top suppliers, Lodger Entertainment Technology Services (LETS) and conduct an initial meeting with their Alliances Director and their Business Development VP. They are intrigued, and agree to another meeting to find out more about each other’s technology and marketing plans (all under nondisclosure, of course). At the second meeting, you meet their marketing people who are less than thrilled because it would mean completely re-doing their marketing plan that they just spent the last two months rewriting at the insistence of the bean counters. You suggest a test project first, just to investigate the feasibility of the market. They reluctantly agree, and the Alliances Director wants to get started right away. You suggest a short agreement that captures what each party will do, how long the test period will last, and what the measures of success are.

During the initial test project, the field sales people get a lot of positive feedback from several customers, and find that the hotels are interested in being able to capture more revenue, especially since vacancy rates have been down due to the dip in the economy. When the marketing people analyze the feedback, they dismiss it as irrelevant because it was too small a sample, and recommend that the alliance not go forward. The Director of Marketing supports her team’s recommendation of “no go”. The Alliances Director overrules her and is ready to make a deal with you, but you decide it’s probably not going to work in the long run. Why? A cultural issue. Without the enthusiastic support of the marketing team from LETS, the partnership is doomed to fail. If a director within their own company is going to constantly overrule their recommendation, it creates organizational tension there, which will be directed at you in turn. Partnerships only work if both partner’s teams are working together toward a common goal that everyone believes in. LET’S start searching for a different partner, shall we?

(NOTE: More information on partnering can be found in Chapter 12 of my book, “From Idea to Launch at Internet Speed”. That is, when summer is over and you have more time.)

Go forth and multiply…your success rate with the right business partner!

Catherine Kitcho
The Launch Doctor