By Doug and Caroline Somers - Friday, July 3rd, 2009

The right partner for your business can provide a host of operational and fiscal advantages, provided you clearly understand the core competencies that distinguish you in the market and the commitment of time and resources required to nurture and maintain a partner relationship.

When considering any kind of partnering arrangement, be it for sales, marketing, distribution, R&D or any of the functional areas involved in bringing a product from concept to the end user, you as the leader of the organization must carefully consider your strategy. What is it you are trying to achieve? What unique value do you bring to the market?

Look at all aspects of your business, the full range of skills and functions required to make it fire on all cylinders. Break these into two categories: what you will keep in-house and what you will outsource or seek to execute with an outside partner.

When, and when not, to keep it in the family

What you keep in house is known as your core competencies. This group should be characterized by only those skills that are specific to your organization, add significant value to the customer, and differentiate you from your competitors. These are the ingredients of the secret sauce that define your unique value proposition.

What’s left are you non-core competencies. These are skills that may still be critical to getting a product to market and encouraging a customer to buy, but they are not significant differentiators. They may in fact be quite commoditized and standard for your industry. The question that must be applied here is if it is more cost-effective to find an outside partner who can do the job for you.

For example, if you are a software developer, does it make financial sense to have internal resources on the payroll focused on manufacturing and distribution of shrink-wrapped product? If you’re in the hardware business, should you be stamping sheet metal enclosures and fabricating optic cable when there are suppliers who specialize in these components?

Once you have taken a hard look at your business and separated your core from your non-core competencies, what then? How do you go about establishing a relationship of mutual benefit?

The building blocks for lucrative partnerships

You have to let go. Sometimes this can be difficult. Key individuals within the organization may feel quite possessive about a specific skillset or function. This is particularly common in high-tech companies with product R&D. But again, it comes back to having a clearly defined focus for your business and understanding what does not have to be kept in-house. If it doesn’t differentiate you, don’t waste internal resources on it. The right partner can bring your product to market faster and allow you to better leverage limited resources against your core competencies.

Partners can add value in multiple ways. For example a partner with an established presence in a market you wish to pursue can validate your offering as a reference customer.

What’s in it for them? It’s easy to look at a partnership arrangement purely from the perspective of “what’s in it for me?” But to build a truly beneficial relationship, consider “What’s in it for them?” What is going to make the arrangement work for the person on the other side of the table?

Once the deal is done, the real work begins. The partnership requires ongoing care and feeding. Too often, organizations will close a deal and move on to the next one without putting the resources in place to ensure value flows both ways as intended. This is crucial to preventing the arrangement from going south and driving your partner to a competitor. For example, it can take 12 to 18 months of dedicated effort to see returns from a distribution deal.

Trust is critical. There must be a relationship of trust that goes beyond the fine print of a contract and the threat of legal action if there is a breach. If you are in the midst of negotiating an agreement and there is a persistent and obsessive focus on the granular details of legal rights and obligations, this should be a red flag that this prospective partner may not be the best choice for you. Once the deal is struck, continue to act in a way that engenders trust and goes beyond the terms of a contract. For example, in distribution arrangements, companies will often damage the relationship by doing an end run around their distribution partner and selling directly to the end client.  If you plan to go direct under certain circumstances, outline them at the outset – setting the right expectations in any relationship reaps huge rewards.

Have a mechanism for discussion. Prevent the relationship from jumping the tracks by assigning an individual who owns the relationship and having your partner do the same. The idea is that these representatives of the two organizations have a personal, eyeball-to-eyeball dialogue and a clear communication channel to put issues on the table.

Outsourcing. Invariably, a partnership arrangement is a form of outsourcing. The time, effort and resources required to effectively manage the arrangement may, in some cases, be more costly and distracting to the organization than simply keeping the competency in house. This can often by the case in situations such as outsourcing complex R&D outside the company.

To conclude, handing off a non-core competency to a partner is not an abdication of responsibility but rather an opportunity to focus on your strengths. There must be trust and a commitment to feed and nurture the relationship to ensure it is profitable for both parties. Finally, for a partnership to be successful, there must individuals on both sides of the table dedicated to maintaining a regular and open dialogue.

Category: Expert Advice.
Industry: Technology
Functional Area: Marketing
Tags: business development, channel partners, channel strategy, distribution, marketing, outsourcing, R&D, research and development, strategic partnerships