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February 06, 2006

The Art of Partnering

Img 3385
When I went through the security line at San Francisco International Airport this morning, I noticed this laptop with an Apple sticker pasted over its Dell logo (click to enlarge the photo if you don't believe me). I thought this was very funny, so I asked its owner why he did this. He explained that he was tired of explaining why he had a Dell. I told him that I'd never heard of an Apple owner pasting a Dell sticker over the Apple logo, and he agreed that this was unlikely to happen. (At that point, he noticed my PowerBook's Tony Hawk autograph, but I digress...)

This got me to thinking about how companies form partnerships--pasting each other's logos on products and services and ending up with crap. The fallacy of partnerships--and how “partner” became a verb--is rooted in the dot.com days of 1998-2000. During these years, most startups didn't have a business model, so they blew smoke about having “partnered” with big firms. Surely if a company partnered with Microsoft or IBM, it would be successful.

To this day, whenever an entrepreneur uses “partner” used as a verb, it bothers me because I hear, “Bull-shitake relationship that isn't going to increase revenue.” However, I am not an angry little man, so in the spirit of improving what has become a flawed process, I offer The Art of Partnering.

  1. Partner for “spreadsheet” reasons. Most companies form partnerships for the wrong reason: To make the press and analysts happy. This is stupid. The right reason to form a partnership is to increase sales or decrease costs. Here's a quick test: Will you recalculate the spreadsheet model of your financial projections if the partnership happens? If not, then the partnership is doomed. You can wave your hands all you like about “visibility,” “credibility,” and “acceptability,” but if you can't quantify the partnership, then you don't have one.
  2. Define deliverables and objectives. If the primary goal of a partnership is to deliver “spreadsheet reasons,” then execution is dependent on setting deliverables and objectives such as additional revenues, lower costs, penetration of new markets, and new products and services. The only way to determine whether a partnership is working is to answer quantifiable questions such as, “How many more more downloads of software occurred because our two web sites are now linked?”
  3. Ensure that the middles and bottoms like the deal. Most partnerships form when two CEOs meet at an industry boondoggle. The next thing you know they've concocted a partnership that “the press and analysts will love,” and the next step is to get the PR people to draft an announcement. Is it any wonder partnerships seldom work? Some people believe that the key to successful partnerships is that top-management thought of it. They're wrong. The key is that the middles and bottoms of both organizations like the partnership--after all, they will be implementing it. Indeed, the best partnerships occur when the middles and bottoms work together and wake up one day with a de-facto partnership that didn't involve top management until it was done.
  4. Designate internal champions. Long after the press conference and announcement, one person inside each organization must remain the champion of the partnership. “A bunch of people contributing to the partnership when they can” doesn't cut it. For example, during the desktop publishing days of Apple, John Scull (not Sculley) was “Mr. Desktop Publishing” at Apple. His counterpart at Aldus was Paul Brainerd. So the responsibility for the success of desktop publishing came down to John and Paul--not John, Paul, George, Ringo, and a host of other part-time contributors.
  5. Accentuate strengths, don't hide weaknesses. Companies form most partnerships to hide their respective weaknesses. For example, Apple and DEC formed such a partnership in the 1980s. Apple's weakness was a lack of data communications strategy. DEC's weakness was a lack of a personal computer strategy. So the two companies tried to put two and two together. In the end two and two didn't even add up to four because DEC's data communications strategy couldn't help Apple, and Apple's personal computer strategy couldn't help DEC. The deal between Apple and Intel has better prospects because it is based on the companies respective strengths: Apple's ability to design great consumer devices, and Intel's ability to build fast chips with low power requirements.*(see footnote) And this partnership certainly has “spreadsheet” reasons for both parties.
  6. Cut win-win deals. A partnership seldom takes place between equals. As a result, the more powerful side is tempted to squeeze the other party. The weaker side, for its part, will begrudgingly accept such deals and try to get what it can. Bad idea. Bad karma. Bad practicality. If the partnership is a win-lose deal, it will blow up because concrete walls and barbed wire cannot hold a partnership together. Only mutually beneficial results can. In the long, the bitter seed of resentment planted at the start of a partnership will grow into a giant, destructive weed.
  7. Put in an “out” clause. No matter how great the deal looks, put in an “out” clause so that both parties may terminate the partnership relatively easily. This may seem counter intuitive, but if companies know that they can get out of something, they'll work harder to make it successful. This is because easy out clauses can increase motivation: “We'd better keep up our end of the bargain because we need these guys, and they can walk.” Frankly, if all that's holding the partnership together is a legal document, then it's probably not going to work anyway. It's hard to imagine that indentured servitude is a motivating model of employment.
  8. Ask women. Men have a fundamental genetic flaw. Actually, they have many fundamental genetic flaws, but I am only concerned with one here: The desire to partner (verb!) with anything that moves. They don't care about practicalities and long-term implications. If something is moving, men want to partner with it. Women, by contrast, do not have this genetic flaw. When you come up with an idea for a partnership, don't bother asking men what they think about it because they will almost always think it's a good idea. Instead, ask women and gain some real insight as to whether the partnership makes sense.
  9. Wait to legislate. Remember in the Art of Recruiting entry when I said that an offer letter is the last step in the process? An offer letter is not properly used as a “strawman” to get negotiation going. The same thing applies to a partnership. After you've reached closure on the deal terms--the result of many meetings, phone calls, and emails--then you draft an agreement. This happens at the end of the process because you want the people to have psychologically committed themselves to the partnership. If you start the drafting process too early, you're asking for nit-picking delays and blowups. Incidentally, if you ask for legal advice too early, you'll kill the process. The best way to deal with lawyers is to simply say to them: “This is what I want to do. Now keep us out of jail as we do it.”

Written at: Marriott Hotel, Park Ridge, New Jersey

* Please God, take these two strengths and give us a laptop that has the Macintosh interface and a six-hour battery life. But then, God, why didn't Steve talk about battery life in his keynote address?

Thanks, Tom Kang, for your outstanding contributions to this entry.

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Comments

Will work for equity (or food)! The URL links to my partner want ad. In addition to finding someone in the Pennsylvania / New Jersey area, I hope this ad provides some comic relief to our entrepreneurial brothers on the west coast. "Art of the Start, Philadelphia Style" is a work in progress.
:-)

Dear webmaster,

My name is David. I found your website from google. And deeply impressed by your site.We have two websites about oil paintings. hope to exchange link with your site. Do you think it is OK? If you are interested in exchanging. Our websites are as follows,

Title:Buy Oil Painting online-Oil Painting Reproductions-Portrait from photo
Website: http://www.2artgallery.com
Description:2ArtGallery.com offers beautiful oil paintings artwork. Flattest price and museum quality. 100% hand made and 100% satisfaction guarantee.

Title: Wholesale Painting From China.
Website: http://www.jandm.cn
Description:Wholesale fine art from China.Oil Painting,Watercolor painting,calligraphy,frame,stretcher bar,printed painting and so on.

Thanks very much & Best regards,

David

Guy,

It's unfortunate that you write with such a profound anti-male bias. Point #8 is not only incredibly offensive, it isn't even true. As a young man in the SF/Bay Area, I must point out that women partner much more readily than men, both romantically and otherwise. If there is a difference, it's that women tend to partner "up", in terms of wealth and power, while men are relatively ambivalent, considering more local and tactical issues.

Respectfully,
-Paul.

You made the sexual metaphor in #8, but I thought #3 cried out for one: "If the middles and the bottoms aren't going to be a good fit, it doesn't matter what the heads think" :-)

Interesting read. I reached the article through a comment on my article about 'stickers on gadgets' on my blog.
http://shreerams.blogspot.com/

-Shree

Partnering with other business has a great deal to do with the position of you and your partner in the supply chain and the relationship that's already in place. Some interesting books about industry wide partnerships are:

The Extended Enterprise: http://snipurl.com/extent

Value Nets: http://snipurl.com/valuenet

You might also google for: "E-procurement" and "Extended Enterprise"

Have fun reading!

Sand Hill Slave,

I read your web site. You are very, very funny. You do prove that there is nothing funnier than the truth.

You could be the next Denise Caruso--you might not know who she is. Back in the 80s and 90s she had the best rumor column in the valley.

My fond regards because of your efforts to show that the feces have no clothes.

Guy

Su-Ho,

You can go ahead and keep every entry at five stars. :-)

Guy

Sorry Guy, it is a design fraud in that the ratings of the links that have no note are not accurate. I was planning to add notes/rating to each link as I go through them.

Anyway, just changed them to all 5 stars, but that will change as soon as someone add a note.

One of the worst examples of "partnering" during the boom time = Excite@Home. Remember THAT one, people??

Guy, you beat me to the punch on my next post - it was in reference to a rag fest I had with a girlfriend -since when did the term "partner" turn into a verb?

You do realize that all this advice translates into relationship advice, right? Perhaps you can write an entry on that. God knows, I could use the advice. :-)

Slave Girl
http://www.sandhillslave.com

Su Ho,

Thanks for doing this! I love it.

Why do I only get three stars?

Guy

I'm loving this blog Guy (you just made a sale off the back of it), and especially all the ask-a-woman tips that appear all the time! P.S. Do you think Apple are subsidizing the new, cheaper Nanos?

I find your blogs offer a lot of insights, and I wish there is a table of content so the past entries do not get buried. Decided to create one over here:

http://www.suckingfish.com/view.do?crumb_id=csid_1149

Maybe this will be helpful to others as well.

Of course I am biased about the 8th Reason - there is no doubt that both men and woman contribute different perspectives to partnering.

So, real world example, what are the spreadsheet benefits of the partnership between FilmLoop and PhotoBucket?

Aloha

I agree with most of your points Guy. There are a few cases where partnerships have worked but in probably 90% of all cases they fail for at least one party. The probably most successful ones I know of are:

IBM. Get their partner directory (Yellow Page like book) and you will understand why this has worked for them!

eBay. In Germany e.g. alone they have 170k or so people making some sort of living by being an eBay sales rep.

Google. Just take a look at Guy's blog site further down on the right and you understand.


Interestingly, all of the above celebrity companies made partnerships work for them. I think the question is why did it work for them and for so many others not?

That's What everyone is asking, why no mention of battery life, with a 30% brighter screen there has to be batter issues even if the chip does use alot less power!!

Anyways again another great post!!! Keep it up!!

Greg!!

Number nine highlights the mistake entrepreneurs and business owners make when it comes to retaining counsel. If you are not comfortable having an attorney at every stage of discussions, change your attorney.

Attorneys are vital during negotiations and leaving them out until the end is a grave mistake.

Apple v. Windows power comparision:http://snipurl.com/macpower

In general, Apple's profit margins come from its "cool" factor, as opposed to a quantifiable power rating. Jobs plays to the "Wow!," not the solid performance.

Haha. I bought an iPod a while back and it came with some Apple stickers. I put one of them over my Dell logo on my laptop. Everyone always asks me about it. It's nice to know that I'm not alone.

Your post about partnerships is just as applicable to consultants like me as it is to larger business. I've met many people that wanted to be my partner because they wanted access to what I had not because they wanted to share what they had. I did however recently partner with another consultant to offer a teleseminar on a subject of interest to his clients. I have had direct and immediate "spreadsheet" impact from this partnership.

I've recommended your blog to a number of entrepreneur clients of mine and the feedback has been rewarding. Most are finding something of value in your blog. Keep up the great blog!

Gk,how's Kyle and prescott doing? are they still inspire to make film loop a successful company. Is Film Loop still in beta mode because I haven't seen Kyle or Prescott promoting their company.

Hey Guy... btw... ur blog DONT suck... i keep it in my safari bookmarks folder (for u dummines using IE... keep on guessing)!

I placed my apple sticker (from G3 iBook) a couple of years ago on my dell.. all my colleagues wondered why... i said Duh!!! Where you from??

Rock on Guy!!!

:spreadsheet: indeed! Never had looked at it that way. But now I will.

FK

I gave one of my partners an Apple sticker I received when I got my Mac Mini last year. He promtly placed it over the Dell logo on his laptop! Trend setter.

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