As featured in Forbes.com –
I have been building partnering programs since the ’80s. What surprises me over my career as a partnering professional, and now as a consultant, is that I still have to explain why partners are crucial to business growth and viability. In fact, I can recount times I was grilled by C-level executives to justify resources and the very existence of the partner program. This is despite the fact that the largest and highest capitalized companies on Wall Street and in Silicon Valley have vast ecosystems of partners, such as Apple. Not that it is essential that every company have a massive platform play of partners, but even an early-stage startup can benefit from a carefully curated community of strategic partners.
There has been tremendous growth in new software startups in the past few years. Forrester estimated there were 10,000 independent software companies in 2008. Today the estimate is 175,000 and growing, with each having a CEO who needs to understand how partners fit into their growth strategy and how to enable effective partnering to achieve their goals.
So what does your CEO need to know about partners and ecosystems?
Here are some key concepts that are not specific to any industry or to software startups, but given the number of new software startups and hence new CEOs, there is a lot of explaining to do.
- Winners collaborate.
No one can go it alone in today’s business climate. Customers demand a “complete” product, which is often a cluster of related products and services. In this age of digital transformation, these solutions are often composed of an entire ecosystem of collaborating partners. Partners provide valuable sources of innovation. They provide wrap-around services to your products. If you are running a services company, partners can bring specialized expertise that complements your practices and provide access to new clients and opportunities.
2. The best ecosystem wins.
As much as we would love to believe that the best product or best technology wins, that is not always the case. Often success is based on the best ecosystem. Your partners create a footprint in the market that is much larger than just you. They create market awareness that is as large as the ecosystem; they provide additional value to customers who are buying the whole enchilada, not just your stand-alone product. They are interdependent upon your success, and so when they promote their own products and services, they also promote yours.
Microsoft has been known for its powerful ecosystem of resellers, managed services providers and ISVs. Because of the stickiness of their ecosystem, many customers have stuck with them over the years. On the flip side, Microsoft and Nokia were unable to engage that powerful ecosystem in a way to compete with iPhone and Android platforms, losing that ecosystem war.
3. Partnerships are not a deal.
There is space for opportunistic partner relationships, but you will get the most value from partnerships that are built for the long haul. These arrangements are not just for the deal of the day, but are based on a value proposition that extends repeatably to many customers over the long haul.
4. Win-win doesn’t mean you win twice.
Working with partners requires an understanding of what they get out of the partnership. There has to be a win for your partner, or why would you expect them to work with you? On that note, the purpose of partnership ultimately creates greater value or a win for customers too. So win-win becomes win-win-win!
5. Success is not an accident.
I’ve found that companies that approach partnering in an ad hoc fashion have an abysmal failure rate. Various studies peg the failure rate around 50%. Yet, organizations that approach partnering like a management discipline can achieve higher success rates. In my experience, the difference is adopting a partnering strategy, implementing proven processes and executive sponsorship.
6. Different times require different partners.
Your partnering strategy depends upon the maturity of your products and the markets you compete in. The needs of an early-stage startup in an emerging market are very different from a mature organization in a mature market.
In the early stage, companies look for partners that help them get to market. It might be OEMing technology or perhaps a big-brand name partner that lends credibility. As products and markets mature, companies may look for partners that extend the value of their products through complementary features. Think smartphone apps or after-market products that strengthen the appeal of your basic product or service. Once customer value has been established, companies look to scale and achieve volume. Here they seek partners that can extend internal capabilities such as services or sales.
7. A strong ecosystem can help with your IPO.
More and more frequently, I have clients coming to me as they have landed late-stage venture funding, and their investors are advising these startups to up their game in their partner ecosystem. Market evaluations are much higher for companies poised to scale, and that means a strong ecosystem of partners.
8. Success begins at the top.
The role of the executive sponsor cannot be underestimated. The executive sponsor ensures that the partner ecosystem is a priority for the organization and that it’s supported in a way that drives value, scale, and innovation, paving the way to success. I’ve seen all too often partners and ecosystems fail when they did not benefit from executive air cover.
Some CEOs and senior leadership understand the power of partnering and ecosystems. Many have an idea it’s important, but they are not sure why. Communicate these eight points to inform your leadership team on the importance of partners and how they can be crucial to growing and scaling the business. The most important thing is that the CEO and senior leaders know their roles in supporting the partnering business model. Executive leadership is often the critical success factor in setting the strategy, the culture, and the resources to ensure you are building a winning ecosystem.