Forging Partnerships
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All product managers need to build relationships with internal and in many cases external partners. When engaging with business units like sales or finance or when you engage with partners who are building your products, or (gasp!) who are buying/distributing them - you need to keep everyone on your side. What are some of the key parts of making these relationships work. How do you form the partnerships? How do you build off of relationships handed over to you? What do you do to maintain, build on, and leverage relationships in the product arena when you need them the most? How do you know when the hammer doesn't fit the nail. We'll dissect the ideal and not-so-ideal partners, and engage the group in some real dialogue on the type of partner-smithing necessary to build the next generation of products well.
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Forging Partnerships
- 1. Hammers, Anvils and Hot Iron -Forging Partnerships A product manager’s look at alliances and partnerships A. Chakravarty 5/2013 © 2013 Ananda Chakravarty. All Rights Reserved. 1
- 2. What company is this? 29 marquis global partnerships across 6 years, almost 5 major partners/year Industries: Smartphones Software Telecom Tech Services Entertainment Consumer Product Goods Building Supplies Education Electronics Social Networking Storage Electronic Goods Merchandising Focused on: Technology Distribution Branding/Marketing Sales Channels 2
- 3. Introduction Average of 5000 major partnership deals each year. Healthcare has over 550 major deals annually Business partnerships have high success rates: Examples: Keiretsu Franchises Mega Supplier Networks (e.g. Walmart) 1. Business Alliances Guide: The Competitive Weapon. Robert Porter Lynch Note: Alliance and Partnership is used interchangeably. However, a Partnership may represent a distinct legal entity with different criteria and responsibilities than two independent firms working together. From a Product Mgr perspective, we are using the term to be a variation on partnering or cooperating with another firm instead of the formal legal definition. 3
- 4. Agenda Partnering, The Forge, Examples Partnering & Alliances for Product Mgrs So What? Why Should I Care? Partner Operations – Build, Sell, Manage Types of Alliances/Partnering Business Growth – Build, Buy, Partner Partner Life Cycle 5 Success Factors for an Alliance/Partnership Legacy Partnerships – Inheritance Q&A 4
- 5. Partnering Alliances and partnerships are developed to enhance your product offering and create a collaborative advantage Partnering is the least structured of the three key growth strategies for business: Build, Buy, or Partner Partnering also supplements your Build or Buy strategy Product Functionality Product Factors at Launch Logistics, Fulfillment Supplier Access Customer Support Time to Market Customer Access Marketing, Branding Finance/Cost Structure Distribution Channels Operational Financing Competitive Advantage Innovation, Technology Partnerships exist to fill gaps such as 5
- 6. The Forge analogy Organization Partners Ideas/Concept Finished Product 6
- 7. Examples of Partnering Examples of key partnerships Sales Teams (Internal) PR/Marketing (Internal/External) Outsourcing/Offshoring (External) Supply Channel (External) Other Examples? Sales TeamSales TeamSales Team Liaison Agency Marketing Dev Team PMO/PM Partner SitePartner SitePartner Site 7
- 8. Product Mgrs and Partnerships Why should I care? Product growth New market entry Competitive advantages Reduce cost structure Mitigate risk Access Innovation/Technology Establish market credibility Recruit top talent Financing Build economies of scale (and scope) … Few organizations are large enough and broad enough to tackle all markets – even within their own specialization and code competencies 8
- 9. Partnership Operations for Products Example Case: Online SaaS Procurement Tool with a key partner who owns and manages all access to Customer and Customer Facing engagement. SellBuild Manage Develop Test Sell Position Fulfillment Customer Service & Support DistributeMarketDesign 9 Partner Product Org. Partner Product Org. Decisions Accountability Sharing Learning Partner Product Org. Decisions Accountability Sharing Learning Partner Product Org. Decisions Accountability Sharing Learning Partner Product Org. Decisions Accountability Sharing Learning Partner Product Org. Decisions Accountability Sharing Learning Partner Product Org. Decisions Accountability Sharing Learning Partner Product Org. Decisions Accountability Sharing Learning Partner Product Org. Decisions Accountability Sharing Learning Decisions Accountability Sharing Learning Product Build, Sell, ManageTemplate
- 10. Types of partnering Visibility • Internal • External • Stealth Control • Junior/Senior • 50/50 • Consortium • Subsidiary Formality • Discreet, Non-collusive • Handshake/Verbal • Informal Agreement/ MOU/MOI • Formal Contract • SLAs, Addenda, multi-unit Engagement • Collaborative, frequent status communications • Dedicated Liaison • Multi-level ownership • Cross-functional dependencies • Dedicated funding/resources • Shared data, resources • Shared customer status Strategy • Resources • Technology • Customer base • Industry leverage • Logistics/Process Stage • Brainstorming, startup, NPD • Mature product • Declining value product – revitalization/termination 1. Figure 2.4 Business Alliances Guide: The Competitive Weapon. Robert Porter Lynch Product Managers typically operate here, but sometimes extend to JVs, M&A, and new business units. 10
- 11. Product Growth- Build, Buy, or Partner Build Buy Partner + Product Design & Control + IP + Higher Margins (depending on product) + Cutting Edge Tech + Time to Market + IP + Stable platform + Negotiable arrangement + Time to Market + Low Switching Costs + Stable Platform + Development Costs + Negotiable arrangement - Time to Market - Development Costs - Market Forecasting Risks - Unstable platform - Acquisition Costs - Integration Costs - Legacy Platform Risks - Sunk Costs - Product Control - Integration Costs - Typically Lower Margins - Typically Shared Revenue - IP - Non-compete Note: In certain cases, not all these criteria apply. For instance, partnering may not necessarily result in shared revenue if the contractual arrangement is designed appropriately. Partnering provides a unique path that is often overlooked for most product initiatives. Despite control issues, the rewards, higher capacity for your resources and time to market makes up for this and can usually be managed. 11
- 12. Alliance/Partnership Life Cycle Form High ambiguity Objectives and operations outlined Negotiations for revenue share Expectations set and due diligence Partner format established Sustain Optimization of operations Hidden conflicts arise Alignment with strategic goals are tested Realignment efforts and re- negotiation New contracts, Addenda, unforeseen conditions addressed Terminate Performance data shows change in strategic or profitability value to one or both partners Termination trigger criteria established Contract modifications, addenda introduced to enable equitable exit strategy Typical Junior-Senior Partner Alliance Life Cycle Growth Time Growth: Increased revenue, operational efficiency, reporting and data sharing increased, co-marketing/branding, and technology IP shared. Trust typically increases as well. Time: Partnerships have varying time and length of execution, averaging 3-5 yrs. Dependencies on technology typically result is shorter term partnerships in the US 12
- 13. Leveraging Partnerships Achieve Strategic Goals1 Filling in the gaps in the overall product solution to develop a strategic fit with corporate and product objectives Mitigate Risks Reducing the impact of risks such as financial, competitive, or technology factors that can diminish the product or market potential – many large companies have perfected defensive strategies to a science, e.g. MSFT Increase Rewards Expected increase in returns through revenue, profitability or cost containment – however this may also impact non-financial metrics such as brand recognition or customer satisfaction. Leverage Scarce Resources Effectively increase the value of limited financial and other resources (e.g. human) to commit to core competencies, and specialization. This leverages the alliance to enable more impact in the obligations of the firm 1. Paraphrased - Business Alliances Guide: The Competitive Weapon. Robert Porter Lynch, p.21 13
- 14. The Ideal Partner High integrity Fast response time Strategic fit Experts at what they do Strong, transparent communication Vested interest in mutual success Dedicated liaison and commitment Engaged in operational planning Flexible to change Strong managerial chemistry 14
- 15. The Nightmare Partner Limited vested interest in product organization Develops internal agenda in the name of the partnership Defames product organization’s brand name with poor quality customer engagement Focused on a transactional relationship only Limited or poor communication structure Does not commit to spirit or letter of the contractual arrangement Limited integrity, does not honor contract terms 15
- 16. Alliance Success – Five factors Trust Vested interest in your partner Mutual Gain Transparency Communication Frequent Informative Transparent Flexibility Ability to change Adjust to market changes Adjust to internal corporate changes Fit Chemistry Strategic Fit Motivational Fit – (usually financial) Capability Excellence Expertise Specialization Dedication 16
- 17. Legacy Partnerships Assessment of the inherited partnership Principal Chemistry Ongoing Strategic Value Assessment State of Affairs – New constraints, obstacles, or restrictions Action Steps - Initial Review of history to understand past efforts at building and avoid repeating mistakes Re-establish goals, objectives, metrics, and target deliverables Review contractual material and confirm with partner to ensure interpretations are synchronized Re-establish Routines Revise and re-establish partner operations plan Share new information from relationship in shared venue Communicate and ask for feedback 17
- 18. More Information Business Alliances Guide: The Hidden Competitive Weapon – Robert Porter Lynch http://hbr.org/1994/07/collaborative-advantage-the-art- of-alliances/ar/1 Leveraging Strategic Partnerships – Angela S. Calzone, Change & Response Strategies, LLC. http://seangallaghersite.com/yahoo_site_admin/assets/d ocs/Business_Alliances_early_stage_problems.601305 6.pdf Strategic Alliances: Three Ways to Make Them Work (Memo to the CEO) – Steven Steinhilber 18
- 19. Forging Partnerships Thank You! Ananda Chakravarty Product Director @achakravarty http://www.linkedin.com/in/AnandaChakravarty 19
Notas del editor
- All product managers need to build relationships with internal and in many cases external partners. When engaging with business units like sales or finance or when you engage with partners who are building your products, or (gasp!) who are buying/distributing them - you need to keep everyone on your side. What are some of the key parts of making these relationships work. How do you form the partnerships? How do you build off of relationships handed over to you? What do you do to maintain, build on, and leverage relationships in the product arena when you need them the most? How do you know when the hammer doesn't fit the nail. We'll dissect the ideal and not-so-ideal partners, and engage the group in some real dialogue on the type of partner-smithing necessary to build the next generation of products well. Real-life audience experiences welcome!
- Statistics on partnerships – interesting factsKeiretsu – Vertical supply chains – lifelong, deep partnershipsFranchises – Complete support structure and built in trust for scalability – McD’s, H&R Block to 7-11, and Enterprise, highly successful modelsWalmart achieved success in large part due to the 5000+ supply partnerships it formed to bring all consumer products to their superstores.
- Agenda page
- The value of alliancesAll firms engage in some level of partneringProduct managers also partner on usually a smaller scale, but in many cases significant level
- The value of alliancesDefinition of a partnership – describe the hammer (partner resources), anvil (product manager resources) and hot iron (product)
- Sales Teams - When I worked at Monster, we developed strong internal partnering channels with dedicated liaisons to ensure that we could bring the sales teams up to speed on innovations in our product line.PR/Marketing – Working with 3rd party agencies for creative, while simultaneously building marketing campaigns and trade events such as webinars and trade show participation, we succeeded in leveraging partners both internal and externally to build word of mouth awareness of the productOutsourcing/Offshoring – Development work was executed through multi-level partnering with contractors and subcontractors to build and execute the technical aspects of our new innovationsSupply Channel – Our customers purchased advertising through us, but we distributed these to highly specific vertical sites to build customer reach and generate sales value.
- Reasons for partnerships and alliancesOrganizations work together to build economies of scale for their product lines.
- Partnership Objectives for PMsBuild, Sell, and Manage the product are the key reasons to engage a partner.Case study – Online Procurement Tool – driving value for Typically falls into one of these categories – within each, the product mgr has an objective for the partner to provide a specific service or function. These may tie into a broader set of functions related to the gaps outlined prior.We examine how this impacts the product organization and partner – final decision maker, who will be held accountable, who will be responsible for sharing information, and who will learn from the arrangement
- Types of partnering
- Build, Buy, PartnerPartnering enables fast turnaround, and if designed right can be highly profitable.
- Partnership life cycleBuildSustainTerminate
- How PMs can leverage partnerships/alliances
- Ideal Partnership example
- Nightmare partnership example
- Key factors for alliance success – Trust – Most Critical of all – the ability to establish and show a vested interest in the success of the partner as well as your organization. The ability to maintain the highest standards ofProfessionalism and integrity. Optimistic attitude and full confidence that partner is working on your behalf.Communication – Regular communication across both parties to keep each other abreast of status, challenges, including transparencyFlexibility – Ability to change, adjust to new circumstances within the relationshipFit – Appropriate contact chemistry, strategic fit, and motivational (financial) fitCapability – Excellence in motion
- How to manage partnerships that have been handed to youPrincipal Chemistry – Does the new hammer and anvil function togetherStrategic Value – Do you still need to forge ahead, or are pliers sufficientState of Affairs -