The 7 Best-Fit Criteria for Strategic and Corporate Partnering (and Gut Instinct)
See two past blog posts on “Why Good Strategic Partner Fit is Imperative – Part 1″ and “Why Good Strategic Partner Fit is Imperative – Part 2″.
Far too many companies accept the partners that come to them, because “we have nothing to lose, we’re not represented in that market, so if they sell we’re better off”. But with a small bit of planning and effort you can proactively approach the market, region or sector, to meet your business objectives and not simply respond to someone else’s possible once-off sales opportunities.
In gaining an understanding of whether a partner will deliver on your joint objectives, there is much you can tell in reviewing what they say about themselves, by reviewing their websites and various promotional materials. If you want to spend time working with the right partners you need to spend time finding the right partners.
In evaluating Prospective Partner companies you can review their websites and public materials to understand whether you want to speak to them to further qualify the prospect and thus decide who you can possibly work with. All 7 criteria don’t need to be perfect, they merely need to be considered in making your decision and how strategically and operationally challenges can be addressed. The 7 criteria are inter-related, like many things in a business. It is worth looking at the company from different points of view including who else they’re partnering with. Consider the adage, “if you want to know me, meet my friends”.
The 7 Criteria for Best-Fit Partner Analysis is linked to the alignment of the following (and Gut Instinct):
1) Business Model
I wrote a previous post on the challenges in partnering a SaaS business. If your company has a SaaS model and your prospective partner typically sells perpetual licences then this presents an immediate clash in charge models and sales incentives. If sales persons in the partner company get their commission when the customer pays, how long will they be waiting for the money in a SaaS model as opposed to a big initial licence fee sale. Businesses have found some solutions to this challenge and SaaS businesses are changing their approach to address.
2) Sales Models & Marketing Approach
How do you prospective partners sell their sales? What is their marketing and sales process and how can you fit into this? Do they focus heavy on marketing and lead generation and the sales follow ups OR do they know exactly who they want to speak to and focus more on the sales process? Neither is wrong, but if your company has a similar approach it makes it easier to work together and build relevant relations all along the customer journey. Other things to consider, are your prospective partners:
- Cost or Efficiency Driven Sale or Revenue Growth Driven Sale or Risk Protection Driven Sale
- Consulting Led Sales or Product Led Sales
- Thought Leadership or Direct Contact Sales
- High Profile or Under-the-Radar
- Pioneering Market (Missionary Selling) or Existing Established Market
3) Pricing Strategies
Do they adopt a premium market or higher volume lower cost approach? Where do you fit into this? I’ve seen companies increase the rates by partnering up market a little, thus increasing the ‘batting level’, credibility and thus move them up the value chain. You need to decide what your company wants.
4) Implementation & Solution Deployment
For example, System Integrators revenues are service days, licences and annual support & maintenance. If you have a minimum deployment cost, whether on-premise or Web deployed, it is less attractive to a System Integrator. In fact you may be competing directly with them. Understand what other software partners your prospective partners have and what type of deployments they have. Is the solution type Enterprise Solutions/SME deployed and is it Server Side Solution / Client Side Solution?
5) Growth Strategies
Review the prospective partners’ growth plans. This can be easier if they’re publicly quoted companies, as long as the division you want to partner with features separately in their shareholder communications. Are they in a Narrow Global Market that fits your business or are they very broad in Wide Regional Markets? How might this reflect your business approach? Do they have a large direct sales force or do they sell through partner channels? If they have a direct sales focus you are obviously closer to the customer than them operating through sales channels, thus faster potential revenues. Although if they have effective partner channels and your products fit well, their longer term upside could be significant.
6) Organisational Culture
Cultural differences are often cited as the reason 50% of failures in company mergers and the greatest difficulty in acquisitions and joint ventures. Some examples are, are they?
- Team Driven and Shared Leadership / Command and Control
- Aggressive Growth and High Performance / Cautious Growth
- Strongly Sales Driven / Strongly Delivery Driven / Strongly Product Driven
7) Business Objectives
Do their stated business objectives align with your objectives for the partnership? If you’re in a hurry, as most growing businesses are, do they show or state:
- Fast Revenue Growth / Cautious Cost-Effective Growth
- High-Profile Building Potential / Purely Revenue Driven
- Seeking 5 year Exit / Seeking Profitability
THEN Gut Instinct. If you know about technology businesses you can read between the lines to gain an understanding of their business reasonably quickly and make assumptions to be later verified. Keep in mind where their market is going and try to read into their reactions to possible market changes.
The 7 Best-Fit criteria don’t have to fit perfectly, but keep them in mind and use them as a framework. An effective partner relationship is all about people and how well the parties commit to overcoming the challenges as the gains greatly outweigh the pains.
