LEVERAGE ALLIANCE WITH BETTER PLAYERS - WILLIAM EASTMAN

Element 5: Thriving on Deals, Partnerships, and Alliances
Zero to a Dominant Business Strategy is this months Report and the third element is Thriving on Deals - 6 of 7.

Thriving on Deals, Partnerships, and Alliances is a concept usually associated with large enterprises. That has been true in the past but when we were conducting our original research into Fast and Sustainable Growth, we found a number of very small firms – under $10m in revenue also used this approach to accelerate their ramp-up time.

One thought to consider before evaluating this approach is the concept of open source. If you are at all familiar, I would recommend you do a little light reading on the subject and think about it's business implications - how open source software is built. An originator writes the source code or kernel and then other developers work on building it into something more robust or on support applications. What does than mean for my business?

​Make this leap – what if you mapped all of your core processes to identify BFL (Better Fast for Less) opportunities and realized the company was deficit in a few areas. Given your limited resources, the cost of closing these gaps is beyond what you can afford. What if you looked for a partner who had quality “code” for your missing processes and you integrated it? Would not both organizations benefit and quickly expand capacity without spending any money?...

Think about this concept of an Open Source Corporation as the context to Deals, Partnerships, and Alliances. There are 3 main opportunities that make this element crucial to a market dominating strategy: the further development of your business model, a quick (and cheap) way of multiplying capacity, and to multiply revenue generation.

1. Business Model Development – one of the most neglected aspects of building a market dominating company is making a conscious decision on the right business model. The core question is - “how do we make a profit” and that answer drives which model(s) fit our purpose, systems, and processes. We will not address the entire topic here, our focus is on creating profitable deals, finding compatible partners, or building alliances as part of how you do business. The quickest way to fail is to cobble an ill conceived, reactive approach to this critical element of market dominance.

• Supply Chain – can we obtain a more secure, higher quality source of materials with better pricing and payment terms?
• Products/Services – can we add their products and services to enhance our offer? Can they add our products and services to enhance their offer?
• Market Channels - can we use their client base to distribute our products and services; can we use their client base to test new products and services? 

2. Quick Capacity – how quickly will all parties see an increase in capacity – the ability to do more business? An increase in productivity? An decrease in costs? The smart move for company's under $50m in revenue is to look for other organizations where quick wins are possible. This doesn't mean quick judgments. Taking the time to pick the right deals, partners, alliances is essential. However, once you have found the opportunity, the results need to come forth quickly. Find a client, an opportunity and take action. You will only know if the choice was right once action is taken. Remember in all things “fail fast”!

• Open Source Organization – can we achieve any economies of scale by integrating processes between the company's? Are their strengths our weaknesses – are our strengths their weaknesses? Is there a multiplier from the relationship for all organizations involved?
• Shared Vision, Mission, Values – are we compatible on purpose and operating principles? Do we are similar belief's about right and wrong? If you don't share these core issues, the relationship will sour quickly.
• Compatible Business Models and Customers – are we building a Frankenstein or something attractive to customers, employees, investors?

3. Generating Revenue - how quickly can we build something that will achieve results? Larger organizations have the luxury of time, small business do not. Patience is a fine quality and most relationships require time to nurture – BUT – this is business. Set an aggressive target for results and ensure your side of the deal is focused on tangible results. If it doesn't happen by the first deadline, evaluate why and make corrections. If you miss a second deadline – rethink the relationship. Here 2 strikes and your out apply.

• a product/service alliance to Gain a Foothold - boost the launch of a new product or service, measure it against prior launches to evaluate progress and success.
• Increase Mind Share – use the brand association to can greater exposure for your products and services, ensure you have a mechanism in place to evaluate the impact, do not rely solely on feelings or comments.
• Stable of Marquee Customers – use this approach to put the company on the map, nothing works better than having corporate brands with high visibility in your portfolio.

4. Rules of the Road – quick rules to apply to your search for deals, partnerships, and alliances:

• Choose the Right Agreement – all the company's involved have compatible brands. Strengths in one company match the weaknesses in others – avoid duplication. Good contracts make good alliances – discuss all aspects of the relationship: account ownership, costs, profit, accounts payable, accounts receivable, legal liability, etc. Discuss and agree in the beginning, and PUT IT ALL IN WRITING.
• Avoid Exclusivity - but always push for it. Only accept exclusive relationships if the other party is willing to guarantee performance. You cannot put the future of your business at the mercy of another company. If the relationship doesn't work you must be free to pursue similar deals without help from lawyers.
• use Equity to Level the Playing Field - using the Japanese model of keiretsu, members of successful long term alliances have small positions in the other companies. Nothing supports your success like having your partners invested in it.

• Develop Executive Champions – these deals must be supported without hesitation by the owner/executive level if you expect seamless relationships at the front. The operational side of the relationship will generate conflict that can only be solved at the top.
• Know Thy Exit Strategy – you need a methodology for untangling processes, customers, costs, revenue streams, personnel, etc.. All of this is easy to decide at the beginning, impossible if the relationship is failing. Clarity and agreement early will prevent problems in the end.

One of the most powerful methods of creating Low Cost - High Margin Opportunities, and Changing the Odds of Monumental Risks is to "partner' with companies with helpful reputations, infrastructure, and customers. Obviously there must be an upside for all players, building plug & play processes must make all the players more competitive with larger competitors while maintaining the agility of being small.

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