"Bad deals don't last"

Trust has been a big topic in the news lately - Facebook's questionable privacy policies, UK Google Earth gathering personal information from people's computer's via their unprotected wifi networks. (As if me leaving my front door open gives you the right to enter my home and steal my television set! Not.)

It got me thinking about the importance of building and maintaining trust in alliance relationships. Too many organizations don't get it when it comes to the currency of trust.

I recall working for an internet startup where the CTO and founder would brag about "screwing the partner over", as if this was something to brag about! I'd commiserate with our VP of Sales, who was fond of saying "Bad deals, don't last". He was absolutely right. You may be able to get a partner in a tight spot where they feel compelled to accept a deal in the short term that is not in their long term interests. Ultimately, however, I don't care what kind of contract you put in place, if a deal is not good for one partner, they will find a way out. One way or the other. So you may win in the short run, but you will lose in the long run. Not only with this partner, but your reputation in the partner community will suffer - and then good luck finding ANY company that will partner with you!

For more on this topic, check out this white paper by Robert Porter Lynch (Chairman Emeritus of the Association of Strategic Alliance Professionals) and Paul Lawrence (Professor Emeritus of Organization Behavior, Harvard Business School) - Building a System of Trust for Strategic Alliances.

I'll share more thoughts on this topic in a future blog post.

AMFM - Always Maintain Forward Motion

I read an article in the Sunday Parade magazine a few months ago about an entrepreneur who's daily mantra was "AMFM" - Always Maintain Forward Motion. I loved that! That mantra was so applicable to our partner efforts that I adopted it as our divisional slogan for 2010..

We have been implementing formal processes for qualification, development and field execution of partner initiatives for the last 2 years and one thing we've learned is that momentum is your friend. When partner initiatives stagnate, particularly in the qualification phase, it's typically symptomatic of a project that has waning sponsorship or waning enthusiasm (either internally or within the partner organization).

Partner initiatives tend to be like produce, they go bad when they sit around for long periods of time.

So what we encourage the alliance managers to do now is carpe diem! If you've got sponsorship and a well qualified idea, execute quickly. The market moves quickly, and your sponsors and stakeholders might lose interest and get distracted by the next new "shiny thing" if things get stalled and bogged down.

Always Maintain Forward Motion - or as my nephew would say - "Keep it movin'"!

Breaking Up is Hard to Do - Part III

So what about when you've come to the point where you feel you need to invoke the exit clause and end the alliance?

It's certainly not a good feeling. I've been there. I was VP of Business Development for a startup. One of the co-founders had entered into an agreement with another company that seemed good on paper, but was just not making business sense for us. We were expending a lot of precious technical resources on the project with absolutely no hope of a return.

The CEO asked me to "fix it". Great. The first thing I did was read the contract and pray that there was a well written exit clause. Luckily, our corporate counsel, who I eventually developed a great partnership with for future alliance work, had written a very good contract with an exit clause that provided me with the right level of flexibility.

The second step for me was to organize my thoughts and think about the matter from the business partner's perspective. I knew he was not going to be happy. Were there any mitigating circumstances? Was there a way to leave the door open to working together down the road in a more mutually beneficial endeavor? Was I on solid ground in invoking the exit clause? How could I articulate our position in a dispassionate way and in so doing remove the sting?

The third step? After reviewing my thinking and game-plan with our corporate counsel , I wrote a succinct letter to our business partner's CEO, informing him of our desire and intent to terminate the agreement (required per the contract). I followed up with a phone call asking for a face to face meeting with him.

When I met him in the lobby and walked him into a conference room, I'm not going to lie, I was nervous. He was clearly not happy. But I have to say, at the end of the meeting, we shook hands and he said "I'm not happy with the outcome, but I understand your position and I respect how you've handled this". Whew! Thankfully, we were able to exit out of an unprofitable partnership while still preserving our relationship with the partner (and our reputation in the partner community!).

Next time you're negotiating a new partnership agreement, imagine the conversation you'd want to have with the partner in the event things don't work out and you found yourself in that conference room. Thinking about that conversation should help you plan for a positive exit

Find your "Avis" - They'll Try Harder!

When choosing a partner, the conventional wisdom holds that you should pick the #1 player, the proverbial 800 lb gorilla - the Hertz of the industry. But in my experience, sometimes the guy who is #2 (or even #3 or #4) is often hungrier and therefore more willing to take risks and put more on the table - in short - more like Avis and willing to try harder.

Have you ever tried courting the market leader? How long did it take to get them to return your phone call? Ugh. Since they're #1, they are getting a lot of phone calls. They are probably the media darling and getting lots of press as well, and that combined with years of success sometimes breeds a certain amount of arrogance. I know I always have to "gird my loins" when making those calls, and the pressure is really on to have an exceptionally strong partnering proposal and compelling case. And even then, you might not get their attention.

When there's a #1 player that I really do want to win over, sometimes what's worked better for me is to go after the #2 or #3 player in the market. They are typically much easier to approach and they're hungry (they want to be #1!). They are usually more willing to take risks and try new approaches to gain marketshare over the larger players. So, as a result, they sometimes are more fertile ground for exploratory partnership discussions. Additionally, if you win them over and the two of you can build some success together over a period of time, you will be in a stronger negotiating position once (or if) you approach the #1 player.

Food for thought..

Breaking Up is Hard to Do - Part II

So what should you think about including in the exit clause? You'll probably want to ask yourself a few questions...

• What circumstances should trigger either party invoking the exit clause? What would need to happen for your company to want out?
• What kind of notice should each party be required to give?
• What about Intellectual Property (IP) - what happens to any jointly developed assets?
• How will customer support be handled in the event of a breakup of the alliance? (typically covered in a "wind down" clause).
• Should there be any penalties for termination (or contract breaches)?

Think about the worse case scenario and what you would want to see happen, especially as it relates to any joint customers or prospects. Having this discussion during the initial contract negotiations is sure to save you potential headaches in the event that things don't work out the way everyone planned...

Breaking Up is Hard to Do

According to the 2009 State of Alliance Management Survey of 430 companies, alliances success rates are improving, but still less than optimal at a reported 57% . Our goal as alliance managers is to increase our success rates and make sure that our alliances are successful. However, sometimes no matter what you do, an alliance may come to an end - often for reasons completely out of your control - market forces, a company strategy change, pressures from a down economy, among other factors, can all conspire to precipitate a break up.

Breaking up is indeed hard to do, but it doesn't have to be excessively painful, and it can be done in a way that preserves the relationship and keeps the door open for future joint endeavors.

How?

Well, this might seem counter-intuitive, but the best time to plan for the break up is during the "coming together" process. Why? Because that is typically the time of the greatest goodwill. Both parties want things to work, both are operating in good faith. Both parties are relatively positive and happy. That's the perfect time to have the "exit clause" discussion. You are more likely to discuss sticky separation issues sans the emotion.

Next up - what should the exit clause contain?

The "Barney Hug" Alliance

Hi, there. For my family's spring break vacation this year, we went to Costa Rica! You will often hear Ticos (folks from Costa Rica) using the term "tuanis" (too-ahn-ees). It means "cool" or everything is wonderful. Which brings me to the topic for this week!

This week's topic is something that as Alliance Managers we have all encountered at one time or another - the dreaded "Barney Hug Alliance " or BHA. "Barney Hug Alliance" is my catchphrase for those vacuous "I love you, You love me" (queue the music) partnerships. You know the type - they start with a flowery joint press release extolling the virtues of the partnership and hyping all the great things the partners are "gonna" do together. A virtual lovefest of goodwill. Six months later, 1 year later, 2 years later - nothing... All you hear are crickets chirping. The partnership seems to have just evaporated into the ethers.

How and why does this happen? Here's how to tell if you might be headed for (or in) a BHA:

1. No real resources committed to business plan execution. You've issued the press release, now it's time to get down to brass tacks. If you are having difficulty getting the partner to the table to build out an execution plan, that's a sign that the partnership is not a priority. If you don't get this fixed, you might be headed for a BHA!
2. No sales sponsor. The field sales organization is where the rubber meets the road in partnerships. Sales executives should have a seat at the table in the partnership discussions. If you have been sitting in the exploratory joint meetings and you don't see any sales people in the room, be very afraid. If there are no sales executives clamoring for the partnership and willing to apply sales energy to promoting the joint solution, the partnership is going to go nowhere fast! Which brings me to the next sign...
3. No customer validation. There's nothing like a joint customer to validate the value proposition of the partnership. A partnership with no customer validation is a big red flag. What sounds nice on paper, doesn't always translate with customers. Until you have some customer validation (preferably a win!), step away from the press release..
4. Your partner is a start-up. Not all start-ups are guilty of this, but having worked as the Business Development exec for several start-ups, I can say that there is incredible pressure to announce a partnership with a major established player in the market. Such an announcement often has a material impact on the start-up's valuation. Additionally, many startups (and many established companies!) underestimate the time, effort and investment required to develop and execute a successful alliance. So they may enter into the relationship with the best of intentions, but simply not be able to execute effectively.

So there you have it. Watch for these signs and save yourself from a "dolor de jupa" (headache) down the road!