The Art of Partnering

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.

Comments

[Rick Dobbs]

Picking the proper partners will save your company. The companies that did well after the .com bust relied on their partners to make their quarters, and not the ones that they just press released on. They relied on regional integrators, tight-knit VAR's, and others of that kind to keep revenue going when their own sales force couldn't. Take care of your partners and they will not only take care of you, they'll make you look great.

[Anshul Jain]

I dont know whether you have been to Singapore or not but here you will see a lot more of Apple stickers on IBM, Dell laptops. Even I have one. I think its a nice way to say that I LOVE APPLE BUT JUST DONT HAVE THE MONEY TO BUY IT.

[Kendall]

Being a middle myself I couldn't agree more. I have been involved in implementing hair-brained ideas from top brass that, to me, don't make a whole lot of sense. And I also see opportunities to partner with organizations that sometimes the higher ups don't see or agree with. I suppose I'll just keep on pushing towards what I see as best and let the chips fall where they may.

[Patrick Klatt]

This is a pre-apology for the email you will recieve shortly. Hopefully you'll be the victim of some long plane flight (soon) and take the time to entertain yourself reading too-lengthy emails and mine will fall onto the Read&Replied list. I was going to post here but I gave up after the two paragraph mark.
And I'm not kidding about the apology.

[Luc Vaillancourt]

To ad on point 4, when the numbers at stake justify it, I suggest both parties to send an "ambassador" working full time with the other's team to make sure that the "culture" and knowledge is available at all time and can monitor the progress...

[Ric]

And I've got one of the Apple stickers I got with the iPod on my IBM T42 laptop - just don't tell the boss!

[Audiolathe]

Hmm.. asking women? Are you being nice now Guy..? Maybe we are just more sceptical.

See the thing is we want to find a man we don't want to change to partner with in the first place so I suppose it is this mindset that stops us from jumping on the first ship that sails by. And as you doubtless know, women can be quite good at thinking up things that should be changed, so finding a company/man/etc you don't want to change takes longer but is ultimately more worthwhile.

And caution in business has never costed as many jobs as recklessness..

[Javier]

I have quoted your point about asking women in my blog, duly quoting you. I find that point especially relevant to my blog for other reasons...:)
Best regards,

http://niquel757.blogspot.com
Javier

[MJ]

I've been in this situation.

I always want to know WHY someone wants to partner with us. Things are always painted in a win for us - but there has to be a reason, otherwise why do it. Sometimes it's them re-using our services in order to win a contract. Sometimes they're effectively subcontracting us to their clients. Sometimes they just want access to our customer list. Sometimes it's just kudos - they just want to be hip and happening with the cool cats.

I've never signed any of these partnerships. I always want to see how things play out. In almost every case, I've not seen things play out during the trial period and that for me is evidence enough that what they're offering is not much more than smoke and mirrors.

[John C. Randolph]

Your comment about lawyers reminded me of another lesson I got from my first teacher in Entrepeneur's Disease. The guy absolutely *loved* to spend money on lawyers. He spent so much time and money arranging the deck chairs for our "can't miss, billion-dollar business" that our Titanic didn't have to hit the iceberg... It never even got sent down the ways.

I now consider it a major warning sign if someone who's asking me to participate in a new venture starts by spending his $100K in friends and family money on legal fees.

-jcr

[Charles]

Ferchrissake, quit whining about battery life and go buy a second battery. You can afford the $90 and the extra few ounces of weight.

[Viswanathan]

I think your 8th reason is more playing to the gallery than anything else.

But truth to be told all the other reasons are valid, in the sense we should all give it a good thought.

[Smittie]

I love explaining why I have a Mac. It's even more fun dropping the other shoe and telling them that I left Microsoft to go to work for Apple.

Aloha

[Graham English]

You always have unique hooks: “spreadsheet” reasons.

:)

I won't forget that one!