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!

The Alliance Conversation - featuring yours truly

Simoons & Company, an alliance consulting organization based in the Netherlands, recently had me as a featured guest for the latest installment of their podcast series - The Alliance Conversation. You can check out the podcast at the link below!

Alliance Conversation with Donna Peek

Step 8: Create an Alliance Plan

Before you uncork the Champagne bottle, realize that after the alliance agreement has been signed your work has just begun. You now need to work with your new partner to develop an alliance plan that outlines partnership goals/objectives, action plans, rules of engagement, and checkpoints , and you will need to assign an alliance manager to manage the relationship and execute on the plan.

Step 7: Negotiate Partnership Agreement

The negotiation process effectively starts when you make your initial call to the partner prospect and you should be continually establishing your value in all your interactions, up through and including the negotiation process. Before you start drafting contracts, first sit down with your business sponsors and gain agreement on general business terms. Make sure that everyone is on the same page before you engage your respective attorneys.

Step 6: Conduct Due Diligence

In this step both you and the partner prospect will be evaluating the "fit."

Technical fit: This will typically involve technical product walthroughs by your respective product teams. In these sessions, you are both trying to find out if the product is "real and ready".

Marketing fit: What are the products' strengths and weaknesses relative to the market needs? How do we complement each other? What are the areas of potential competitive conflict? How will customers view the value this partnership?

Cultural fit: Don't give this process the short shrift. Talk to the prospect's current partners. Talk to analysts or experts that follow your market. You are trying to get a sense for what this company would be like to do business with.

Go back and look at your Partner Selection Criteria in Step 2. Validate any of the assumptions you may have made about this partner prospect.

Finally, you will need to layout the business case for the partnership. Based on what you find out during the due diligence process, what investments will be required to make the partnership work?

Step 5: Conduct Recruitment Calls

Once you've done your homework, you are now ready for that initial call. Depending on the size of the firm, your target will either be a VP of Business Development, VP of Marketing, or perhaps the company founder or president. Use your friends and family network to identify the right contact and perhaps get an introduction. Send them a copy of your completed partner proposition worksheet and step them through it. You will win points with them simply for being prepared and demonstrating knowledge of their business.

If all goes well, they'll request a follow-up call or visit and the due diligence process will begin.