Recently, a client of mine mentioned how he successfully managed his alliance program.
Since I am always looking for ways to improve alliance activity, I asked him to describe what he did and how it was different.
He immediately began to list all the companies with whom he was in discussions. It was a Who's Who of his industry and he was talking with everybody. He shared how he evaluated his partner Ecosystem as a pipeline that was to be filled with eligible candidates that would pass through a qualifying funnel based on sales potential. The benefits of this approach is that it allows you to track a potential candidate through a defined process that places them neatly into a category for evaluation.
While a pipeline creates activity, it does not create a competitive advantage. A platform however, whether it is physical (think App Store), or conceptual (consider healthcare networks surrounding a hospital), creates an improved value proposition for the customer, while building a barrier to competitors. This concept was brought to light in the HBR Article; "Pipelines, Platforms and the New Rules of Strategy."
As relevant as platforms are for corporate strategy, they are equally important for your Ecosystem strategy. It forces you to think beyond quarterly sales quotas and to instead focus on competitive advantage. When developing an Ecosystem strategy, you will need to understand who can impact your industry, who needs to be monitored, what alliances or partnerships are required, and what initiatives need to be launched. This is an ongoing process that aligns with your company's business strategy and capabilities.
A strong Ecosystem platform has a number of characteristics in common:
- Governance - The most critical aspect is to build a governance structure that can not only balance the needs of the company and partners, but has the ability to move quickly when the right opportunity presents itself. Multiple sign-offs can slow the onboarding of candidates and often frustrate partners early in the process. Clearly defined internal sponsorship responsibilities help to educate individuals about their role in the decision framework. This is important in larger companies where a dense approval process can frustrate smaller more entrepreneurial firms.
- Sourcing - The ability to attract and engage ecosystem partners is a capability that should not be done alone. Does it fall on your shoulders to find candidates, or do you have a healthy pipeline where outside advisors recommend and bring potential candidates to you? Is your existing Ecosystem aware of your corporate strategy so that they can advocate for you and help ensure a steady stream of potential alliance candidates? Compare your inbound calls to outbound calls to evaluate the success of your sourcing strategy. A 2:1 inbound to outbound ratio is healthy.
- Structure - Not every alliance, partnership or investment will be handled in the same manner. It is helpful to set benchmarks for expected outcomes of each opportunity and ensure that you have briefed your advisors and support functions so that they can act appropriately when needed.
- Onboarding - Most firms are prepared for the integration associated with a merger or acquisition, but it is equally important to understand the level of integration required for an Ecosystem transaction. Clearly documented processes for bringing new partners onboard should be shared early in the negotiation discussions. This can help anticipate potential bottlenecks before they become a constraint to business. It will also accelerate the time to value by aligning the interest of all parties. The earlier you can uncover an issue, the easier it will be to resolve.
- Incentives – Alliances won’t work if you management or sales leadership has a “bring me deals” mindset. Often organizational incentives are counter to long term relationships and instead drive short term thinking around how much business a partner can bring this quarter. While sales drive success, long term value can only be gained by aligning partnership incentives with the needs of both organizations.
Alliance strategy is more than identifying a gap in your portfolio, finding a candidate and negotiating an agreement. To develop a strong Ecosystem, you need to go much deeper. Empower your Ecosystem program to create energy to drive sales, while building the walls and moats to block your competition.