Five steps to successful strategic partnering

The ability to develop and nurture strategic partnerships can make the difference between success and failure in the high-tech industry. Just ask independent software vendors, a segment of the industry that earns more than 40 percent of its revenues through successful partnering. ISVs have created an entire ‘ecosystem’ of partners that open up new opportunities, and new revenue streams for them, says Frank Luksic

The pace of innovation today is too fast for any one IT company to be all things to all customers. For example, last year alone the US patent office awarded more than 16,000 patents to the top 10 global high-tech companies for their innovations. A quick look at the history of the industry reveals a graveyard of once successful companies that failed to adapt fast enough to industry changes. Despite its long record of success, IBM suffered a near-death experience in the early 90s. New leadership and a new strategies were instrumental in engineering IBM’s turnaround, and so was the power of its alliances with over 90,000 business partners.

Partnering explained

Partnering offers a company the power to win with a world-class team. In cricket, for example, winning teams know the value of fielding the best players at every position. A star player may win individual games, but it takes the power of the whole team to win a World Cup. The same is true for a company in the IT industry; it needs to compete every day. Working with your partners, you have the stamina and flexibility of an all-star team. You can offer a broader range of IT solutions, maximise the value of your customer’s investment, and help ensure market success.

Developing relationships

How can you develop relationships with partners to increase your competitiveness and win in the marketplace? What have companies like yours done to create strategic partnerships that work? Here are five factors that lead to successful alliances:

• Make the strategic decision to partner at the highest executive level, and secure buy-in from all levels of employees, especially the folks who interact directly with customers. It makes business sense for a small company to partner with a bigger player, as reach in the market would leapfrog substantially. One should regularly attend trade shows and follow up with monthly personal phone calls to develop the partnership, which helps a company accelerate revenue growth, generate industry awareness, and differentiate itself from competitors.
• To determine if a potential partnership is the right match, share your business strategy, understand each other’s core competencies and check synergy in goals, technology and target markets. The best litmus test for partnering is when one finds out that his company’s successful partnership creates benefits for customers that neither partner could have delivered alone. Together the partners reach new markets, and expand their revenue bases.
• Remember that an alliance is a formal business agreem ent, not just a handshake over lunch. Get a contract in writing to avoid misunderstandings; build in rigorous commitments on both sides, and have clear measurements for those commitments. Unfortunately some would-be partners may view an alliance as a way to get sales leads, rather than as a joint effort to drive new opportunities. Partners need to share both the risks and the rewards. So have specific requirements for resources, such as training, technical and marketing support. In addition, have clear revenue targets and regular meetings to monitor progress.
• Be clear that you may still compete with a partner in some areas, while you are collaborating in other areas. Today you may be competing with someone you could partner with tomorrow. Your business strategy will determine when you partner and when you compete.
• The most common reason why alliances fail is neglect. Both partners need to put in the time and resources needed to make the relationship work. The recommended regular meetings help track results. In addition, to keep an alliance healthy and profitable, make an individual executive responsible for results, put infrastructure in place to support joint business development and to deal with issues as they arise. Having a formal process in place to renew or exit a partnership is valuable. Partnerships need to evolve with market conditions, and have to be flexible enough to be transformed when necessary. But, if both partners decide it makes business sense to exit, then a well-executed plan can save time, capital and human resources. If you’re not seeing revenues within the first six months then you are not getting traction and it may be time for both parties to say goodbye.

These five steps can help put the power of partnering to work for you. With the right partners, you can offer customers more choices, best-in-class technology and world-class service to compete and win in the high-tech industry today.

The author is country executive, Software Group & Developer Relations at IBM India. He can be reached at fluksic@in.ibm.com