To launch, a business needs time and capital; but to genuinely scale, partnerships become equally as important. This has become a forced reality in a day when competition is now global, not just local. For business leaders, it means mastering and leveraging the resources outside the company as well as within. To lead successfully, knowing what is available, how to ask and how to return value in partnerships is of utmost importance. Often, the most unlikely of partners and even competitors may become the best choice in the long run.
Relationships come in many flavors but are best leveraged when something of value is offered in return. Often, for leaders, crafting that equity proves to be the challenge. Stepping back and being able to bend or alter a traditional policy in return for more value can pay off. Take Jennifer, a CEO for a manufacturing facility that was breaking even for several years. Her expertise was the manufacturing side but not the client-facing or sales side of the business. After many failed attempts at hiring for those roles, a partnership was formed with a group that only builds sales and marketing channels in her space, which happened to be cosmetics. In exchange, this group doubled Jennifer’s sales numbers in the first year, making both companies a nice profit. This was a huge win for the CEO who had not been sure how to scale.
So what had the company coming in wanted in exchange? Its request was not about money but about differentiation in the manufacturing space — its leadership wanted smaller minimum quantity order runs. This gave them a competitive advantage to land new clients who may be starting out, and earn their business for life; it also got them the press and exposure to make these statements. It netted out that more than 70 percent of those small runs turned into large repeat orders, resulting in an all-around win. The key to this partnership was not about margins, but access to unique offerings and leveraging each other’s skillsets.
As leaders, we need to step back and look for those unique things we have to give, or other ways to structure a deal to not risk our revenue but, instead, to grow the possibilities.
Building the relationship takes a lot of transparency. Many leaders enter a relationship very guarded and hide data or access to key employees. To get the most out of the partnership, building trust early in the relationship helps get past the fear of sharing with key employees. Leaders who lack the ability to trust will fail in the partnerships they create before the actual deal is even fully inked. When Dale, CEO of a biologics company, looked at a partner for developing their new go-to-market strategy, he chose the path of sharing with his potential partner everything that had gone wrong, what was not working and where in the past years they had struggled. Through this openness, the partner was able to save a lot of time and energy and avoid some bad choices. They quickly turned around several key past barriers and were able to start order processing in less than six months, to a level that cash flowed into the company. Had Dale not executed a very binding NDA and gone into this full disclosure, his new market partner would have repeated many mistakes and Dale’s funding runway would have run out long before profitability.
Small businesses have always been quick to jump on strategic partnerships due to their limited resources. In larger and more established organizations looking to grow and potentially sell out, selecting the right partnership can lead to the ideal future owner as well. Working with a major player in the credit space, we built a unique structured relationship with a major security software. It started with simple joint advertising for leveraging each other’s client bases to expand the other’s reach. Over the course of two years, their products became uniquely intertwined and one easily upsold the other. Within a year of this, the major player in the software space did a full acquisition of the company and the owners took a very well-paid and well-timed exit. When looking to build partnerships, the advantage may not always be what is in it right away; a better yield may come from looking at it from a long-term approach of how the partnership can be evolved into something that wasn’t considered on Day One.
Involving a Team
Selecting the right partners will require a team approach in many cases, since we all have a specific viewpoint from within the company. Doing a whiteboard or brainstorming session can lead to outcomes not foreseen by the CEO or COO. Often, putting out a call for help to line-level employees and various departments can lead to surprising results. We ran a strategic session several years back that illustrates this point very well.
Working with a large collection of cement companies who each had its own brand and touted how its mix was the “best in the industry,” we had a huge revelation that led to a key strategic partnership. In a brainstorming session, each company focused on why it was better, but, finally, a customer service person spoke up and stated, “No one ever asks how we mix. They do ask, ‘Will the trucks be there on time?’” After following up on this, we came to the consensus that cement is actually the world’s most sensitive and costly delivery business. This not only turned into a new corporate direction but also a new way to capitalize on customers being a top initiative for the upcoming years. The goal: to assure customers we would be there on time with a truck for each job. This 360-degree shift in thinking led to seeking partnerships with the top GPS tracking and customer notification apps. In less than two years, this group was rated top sales based on this new partnership and a new focus on what is really important to its customers. That partnership and transformational evolution did not come from the top and, quite honestly, probably never would have occurred because they had been so entrenched in the way business had been done.
Leadership is a mindset of wanting the best for the employees and the company. Structuring partnerships is very similar to leading a team. One must think about what the win is for oneself and one’s employees. When looking to build, leaders should look outside their industry for ideas and models, and be open to possibilities that may seem easy to dismiss. A good leader will consider all possibilities, give them time to gestate, then decide if it makes sense to explore further. Patience and planning in the early stages will lead to leveraging these partner relationships for the long haul.
Ben Smith is a seasoned entrepreneur, executive and marketer with nearly three decades of experience serving across a variety of sectors; building corporate structure; creating global brands; overseeing complex mergers, acquisitions and integrations; and developing high performing teams. In his current role as CEO of Xcellerate Biomedical Technologies, he is fostering growth and helping bring products and services to market that have a positive impact on health and humanity.