Companies understand well that they operate in challenging business times. Few companies can exert pricing power amid fierce global competition. Stakeholders and other investors are placing increasing pressure to show consistent growth in profits. And keeping customers loyal generally requires significant investment in new, innovative technologies or methods.
To combat this pressure, companies are seeking innovative business strategies that may provide some relief. Strategic collaboration is one such strategy. Companies increasingly are discovering that working with other organizations can be a cost-effective way to expand offerings, improve customer service, increase variety and choice, and, in some industries such as information technology, help ensure the standardization and interoperability of products.
To maximize business returns, collaboration among companies should not be approached in an ad hoc way, marked by some general pledge to try to work together. Instead, collaboration should be formalized, following best practices throughout the entire collaborative engagement—from the initial consideration of potential partners to the measurement of results. The best partners, in fact, turn collaboration into a core competency within their companies.
The six-step process described below can be instrumental in creating successful collaborative partnerships. These partnerships can, in turn, allow companies to enter new markets and deliver a greater array of innovative products and services tailored to their customers’ needs.
A Shared Strategy
Many organizations might already have ideas about which types of companies would make good partners. Successful networking technology companies, for example, tend to work with major systems integrators, professional services companies, telecommunications firms and certain solution developers that can complement and enhance their offerings in the computer networking industry.
You should be able to quickly identify those organizations that would make good partner candidates for your company, based upon industry, market size, product offerings, geography or other criteria.
In a way, that’s the easy part. The process becomes much more complex after two companies agree that a partnership is a possibility, when they begin to seriously explore a potential alliance. This step is called “Shared Strategic Map,” the first formal stage in creating a collaborative relationship.
The Shared Strategic Map details the potential partnership. The process is designed to examine, in explicit detail, what the potential partnership will entail, so that the parties can discern whether the creation of such a relationship would be mutually beneficial, and if so, how it will operate. The Shared Strategic Map should answer questions such as:
- What factors are drawing these companies together? What are the opportunities for collaboration, and what are the potential liabilities?
- Are the two companies’ goals aligned? Can their organizations work together effectively?
- What is a possible joint solution? How could it be deployed to the customer?
- Have the companies targeted a specific customer base? Do they have a joint value proposition to bring to the customer?
- What is the delivery, service and support strategy for the joint offering?
- What will constitute success, and how will it be measured? What are the milestones in the relationship?
The creation of the Shared Strategic Map should uncover the strengths and the weaknesses of the potential partnership. It should make very clear whether two organizations should move forward. If the answer is “no,” the parties can walk away before any substantial investment or commitment is made. On the other hand, if the answer is “yes,” it will solidify and even quantify the case for the collaboration. Moreover, the map will provide a strong starting point and serve as an essential guide as the alliance moves off the page and springs into action.
The Shared Strategic Map sets the foundation for getting the partnership on the road to profitability. The second stage helps ensure that the collaboration stays on course to deliver the joint offerings and drive expected revenue targets. This step involves the creation of an “Alliance Governance Framework.”
The Alliance Governance Framework outlines how the two companies will work together and communicate. In essence, it ties the companies together institutionally, providing multiple points of contact between them. It is vital to have several layers of the corporate hierarchy involved in the alliance so that commitment is threaded throughout the two organizations.
For instance, in a successful partnership, there are typically several touch points at the highest, executive levels of both companies. As a result, senior executives are usually highly involved with an alliance, with part of their job performance measured by its success. They meet several times a year to review the relationship, set common goals and resolve challenges. At the executive level, a global steering committee is usually created for the alliance, which helps run the relationship within prescribed geographic areas.
The alliance management team is responsible for ensuring the alliance runs smoothly on a day-to-day basis. A global alliance director or manager heads the team and is responsible for tracking initiatives, measuring goals, resolving complex issues and setting strategic activities. Other team members possess the expertise, skills and commitment to create, market and sell the joint offerings. The team usually includes people from central marketing and other corporate business units that play critical roles in supporting the alliance.
To succeed, alliance team members should have deep relationships with their counterparts at the partner company. To this end, a “Relationship Vigilance Map” is created. This map provides a quarterly review of the peering relationship, and an analysis of the successes and challenges. How well did the alliance perform this quarter? Were targets met? Which areas can be improved? How is the communication between the partners? Are there enough touch points between them? Specific relationship parameters are judged and assigned a status of “green,” “yellow” and “red.” Yellow or red status indicates that issues in the relationship need to be addressed.
The Relationship Vigilance Map helps partners closely track their accomplishments and plan next steps. It provides the opportunity to set goals for the following quarter and realign resources as needed. Moreover, it serves as an early warning for potential problems, before they can damage the relationship. Challenges can be resolved in a timely way or escalated up the chain of command as necessary.
Out of the Gate
The third step guides intercompany cooperation in the formulation and implementation of the joint solution or service. This complex, time-consuming step must be followed both for new partnerships, as well as for existing partnerships when the partners wish to embark on a new endeavor. It consists of three phases that must occur in succession: the “Concept Commit,” the “Execute Commit” and the “Launch Commit.”
During the Concept Commit phase, a specific opportunity is defined and evaluated with the partner. It first involves extensive discovery. For instance, what is the solution overview? What is its value to the customer? What is the market environment? What are the risks or the barriers to entry? Is there sponsorship within the companies to move this opportunity forward?
If the discovery is deemed successful, an evaluation stage—the second part of the Concept Commit phase—follows. The evaluation should answer such questions as:
- Is there a strategic fit between the companies for this offering?
- Is it technologically feasible?
- What type of financial benefit or return on investment should the companies expect?
- Is there stakeholder commitment within the companies?
If the Concept Commit phase yields positive results, the partners move on to the Execute Commit phase. In this phase, the basic planning takes place, such as the formulation of a governance plan, a go-to-market plan, an engineering plan, a test plan, and plans for support, training and field engagement are also created. A full program plan must be in place prior to execution.
Finally, in the Launch Commit phase, marketing plans, legal agreements and the organizational model are finalized. The joint business plan is reviewed to help ensure that it is solid, as well as to ensure that the teams at both companies are fully staffed and committed. After the exhaustive Launch Commit phase is complete, partners can confidently begin to market and sell the new joint solution.
Making the Sale
Joint sales can be one of the most challenging aspects of a business alliance. For this reason, a lot of time is devoted to the sales process, which represents both the fourth and fifth steps on the road to a successful partnership.
Following the creation of Shared Strategic Map, partners should feel reasonably confident that joint sales are possible. For many companies, collaboration in sales isn’t possible, because of culture conflicts, incompatible sales approaches or other factors.
To help ensure success in the sales arena, early field engagement—the fourth step—is strongly recommended. Representatives from the field should be brought into the process as early as possible, and the sales force itself should be kept fully informed. The sales teams of both companies also should be prepared to collaborate and, if necessary, to change.
Begin by examining the sales models of the companies. Does each company usually rely on short-term or longer-term sales cycles? What is the typical compensation model? Sales overlay teams can be formed to facilitate collaboration between the sales forces of the two partners. The overlay teams play an essential role in smoothing out differences in sales structures and philosophies. In the end, sales and compensation models that work to the satisfaction of all parties, including consultants and resellers, must be created.
After a product is launched, a few early sales can quickly transform two disparate organizations into one coherent team. Thus, it makes sense to identify likely early adopters and vigorously pursue them. Early successful sales help solidify the relationship between the two companies, deepen commitments and validate the long hours and intense efforts that lead up to the launch. Early sales also prove the value of the new product or service in the marketplace. Just as importantly, they motivate team members for the more difficult sales that lie ahead.
Measures of Success
The sixth, and final, step is to create metrics to measure the effectiveness of the partnership honestly and openly.
For the majority of partnerships, the most important metric will be the amount of bookings and revenue the joint product or service produces. This data will be compared with projections drawn up before the launch. In addition, there are other significant metrics for the alliance, which may include:
- How many sales engagements have resulted from the partnership?
- How has the relationship proceeded at the executive and alliance levels? Has communication been clear? Have meetings been productive? Have important issues been resolved satisfactorily? Where can improvements be made?
- Are both companies continuing to add value to the solution? Are they increasing their resource allocation, investment, expertise or training in the joint solution? Have they met past benchmarks?
- What joint solutions are in the planned for the future? How many? What type? And what is their status?
These metrics should be documented and publicized to both companies prior to the launch, which allows both parties to share their measurements and use them as a basis to improve the partnership and its performance. Ultimately, the data is intended to guarantee accountability. The partners can judge based on solid information what is working, what is not working and where resource adjustments need to occur. The information also will help ensure continued stakeholder support and alignment across business goals.
Greg Fox is director of strategic alliances marketing, at Cisco Systems, and was instrumental in the development at Cisco of the six-step alliance procedure described in this article, which has been successfully used to create partnerships that account for some $2.7 billion in annual revenue, or about 12 percent of the company’s total business. He can be reached at firstname.lastname@example.org.Filed under: Measurement, Technology