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Some Thoughts About Strategic Alliances

In the last few weeks we have been announcing a series of strategic alliances around our KidoZen platform. While watching the press releases I was reflecting upon the great job our team is doing finding, structuring and nurturing the right types of partnerships. This process has been a learning experience for us given that, as any new startup, we had to go through the process of figuring out which models of strategic alliances were effective for us and our partners.

Establishing effective strategic alliances is one of the hardest things on the early days of any startup. Identifying the right partners, make your technology visible to them, building and getting in motion the right partnership dynamics are some of the fundamental elements that need to be master as part of your early business development effort.

Based on our experience, there are a few lessons learned that I think might be helpful when structuring strategic alliances in startups.

Don’t Focus on the Big Guys

When thinking about strategic alliances, a lot of startups make the classic mistake to focus on the biggest players on a specific category. As tempting as partnering with a big company might be, you need to be aware of the level of effort and resources that might be required to establish those types of agreements and get the right level of attention from your potential big partner.

Instead of focusing on the big guys, we have found very effective to find the medium, boutique players on a specific category that are truly innovating in the space and devote the right resources and focus to the strategic alliance.

Have a plan to execute after the agreement is signed

A lot of business development folks think about strategic alliances mostly from the marketing perspective. Big announcements, solid press release but no real plan of how to execute after the agreement is signed. As a startup, you should spend the right time focusing on putting the dynamics in place to make the partnership effective and deliver real value to your company and your partner.

Honor the Partnership

Partnerships are only effective is both parties can benefit from it. As a startup, it’s natural to focus most of your attention on driving value to your organization but you should also put the right level of effort to honor your partnership agreement and make your partner successful even if it require sacrifices on your side.

You are Always Looking for Partners

Signing solid strategic alliance is a constant marathon, not a sprint. If you are a CEO or head of business development of a startup, you are always looking and reaching out to potential partners even if you are not equipped to get any agreements in place at the time. Building strong relationships, keeping partners up to date about your progress and vision will do wonders for your company when comes time to build solid strategic alliances.

 
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Posted by on September 27, 2013 in Uncategorized

 

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Enterprise Software Lessons: The Challenges of Acquiring International Customers

Last night, I was having dinner with some executives from one of our partners discussing their recent successes on acquiring customers and developing enterprise mobile solutions powered by our KidoZen platform in Eastern Europe and Asia. During our conversation, I couldn’t stop thinking that one of the main reason behind our partner’ success is their deep understanding of those markets and the dynamics to effectively execute on them.

Establishing a solid international customer presence is one of the hardest endeavors for any company but it’s exponentially more difficult in the enterprise software space. The main reason that makes international expansion so difficult for enterprise software companies is that customer acquisition, pricing and even negotiation dynamics are really influenced by the cultural and socioeconomic aspects of a specific region. These challenges are not as apparent in areas like North America and Western Europe that share a lot of economic, social and cultural commonalities but it’s very obvious on almost every other case. Underestimating socioeconomic, cultural and historic differences is one of the main mistakes made by enterprise software startups attempting to acquire international customers.

In order to mitigate those challenges, I typically advice startups to focus on establishing the correct strategic alliances with other enterprise software vendors with the right market and business-culture understanding and the professional reputation to be successful in a specific country or region. Even though establishing mutually beneficial and effective strategic alliances is an incredible hard effort, it can be extremely rewarding in the long run. Particularly in the enterprise software space, strategic partners can complement your product or service with the right connections, customer acquisition and delivery processes that will help you to organically grow znc be successful on that market. Attempting to acquire customers internationally all by yourself, can result in an exhausting exercise that will distract you from your main missing or creating great enterprise software technologies or services.

 
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Posted by on February 8, 2013 in Uncategorized

 

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Does Co-Opetition Work for a Startup?

Last week, Microsoft made making the Surface tablets generally available in several countries. This release, marks a turning point on the relationship model between Microsoft took and long term OEM partners such as Dell or HP. With Microsoft venturing into the manufacturing of their own tablet, it will start competing directly with the OEMs while, at the same time, expanding their relationship to grow the Windows 8 ecosystem. This is a classic Competition + Collaboration model known in the industry as Co-opetition.

While Co-opetition is very common in different segments of the software industry such as venture capital or private equity investment, it’s certainly not very popular in the enterprise software space. For years, we have seen enterprise software through the lenses of companies like Oracle that foment fierce, “take no prisoners” type of competition. Traditionally, the enterprise software ecosystem has drawn a very clear line between partners and competitors and combining the two was very unusual at best.

However, in recent years, the expansion and diversification of the enterprise software landscape has also changed the collaboration and competition models used by a lot of enterprise software vendors. When thinking about Co-opetition models, it’s important to notice that they can be fundamentally different from the perspective of large enterprise software company than from a startup. While well-established enterprise software vendors can implement Co-opetition mechanisms with other vendors without disrupting its fundamental business model, a startup can be banking its entire future in these type of partnerships.

While conceptually Co-opetition models might appear very compelling, there are a few elements I would recommend any startup to evaluate carefully before establishing a partnership with a competitor. Here are some of the most important ones:

What sides pull the most: Collaboration or Competition?

When entering in a partnership agreement with a competitor, you should very honestly determine which aspect of the relationship is more important to your company: collaboration or competition and if you are going to be able to separate the two. If beating your competitor carries more weight in the strategic plans of your startup then chances are that the partnership won’t be very effective.

Can you be a true partner to a competitor?

Partnerships are only effective if both sides can benefit from it. As a startup, you need to honestly determine if your company can be an effective partner to your competitor or if the relationship is only going to be conditioned to the competitive nature of both businesses.

How important is the partnership?

This might sound like a trivial question but it’s one that results difficult to answer honestly. While any partnership might result appealing as a startup, establishing a Co-opetition relationship with a competitor can result in more trouble that is worth. Is you have doubts if the partnership with a competitor is strategic to your startup, my advice would be avoid it and focus on discovering and building your core business model.

 
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Posted by on October 31, 2012 in Uncategorized

 

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Give Thanks to your Competitors: What I Learned from the Starbucks-Square Partnership

Yesterday, mobile payment processing startup Square dropped a bomb on its competitors by announcing a partnership with Starbucks  http://news.cnet.com/8301-1023_3-57488803-93/square-starbucks-aim-to-give-mobile-payments-a-jolt/. The initial phase of this partnership will enable Square to process credit and debit payments in 7000 Starbucks stores. Additionally Starbucks will be adding $25M to Square’s new monster funding round.

Pretty sweet deal for Square huh?

Well, while learning about the details of the partnership, I was surprised to learn that it was Starbucks who approached Square and not the other way around (http://pandodaily.com/2012/08/08/starbucks-approached-square-after-rejecting-every-other-mobile-payment-player/). Apparently, Starbucks had been approached by every other payment provider in the last few months and, not being completely satisfied with those technologies, they decided to evaluate Square which started the conversations towards the partnership.

For Square’s competitors, this has to feel like a punch in the stomach. Square literally benefitted from their efforts trying to land a strategic alliance with Starbucks. This is a classic example of how a failed attempt to establish a partnership can open the door to your competitors.

In the software world, establishing a successful partnership is always a combination of having a solid business model and a compelling technical solution that benefits both parties. Missing any of these two elements can have very different outcomes.

Approaching a potential partner with a great technology solution but a poor business model can completely shut the doors for all your competitors as your partner could assume that there are no viable business models in the space. However, if your partnership model is really compelling but the technology is not as good as your competitors the partnership attempt might backfire and create new opportunities for your competitors with a better technical value proposition.

As a startup CEO, when working on strategic alliances try to evaluate all possible outcomes of including the possibility that you might create new opportunities for your competitors. Similarly, stay aware of the partnerships and strategic alliances your competitors are trying to establish. Their failures could end up creating immediate opportunities for you.

 
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Posted by on August 9, 2012 in entrepreneurship, leadership, startups

 

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Partnering With The Big Guys: Some Tips About Building Strategic Alliances

In the last few months I have been working diligently trying to establish a number of strategic alliances for a new platform we are about to announce publicly. Given the nature of our product, we have been trying to nurture a group of strategic partnerships with highly diverse types of companies such as technology providers, large system integrators, boutique consultancies, cloud infrastructure providers, etc. Even though we have been fairly successful during the process, I’ve realized that I didn’t really know too much about the process of establishing successful strategic alliances and I definitely underestimated its complexity.

Particularly if you are trying to establish strategic alliances with large companies that can complement your product or service, you should expect a really complex process and a fairly large one. When you are establishing a strategic alliance with a partner you are basically requesting help to expand onto a specific area or direction in a way that can be also beneficial to the other party which, conceptually, is never an easy thing to do.

Most inexperienced entrepreneurs (count me in that group) make the mistake of thinking than having a solid product or service is sufficient to establish long-term alliances. This couldn’t be further from the truth, just like any other type of business relationships, strategic alliances are much more about the people and business dynamics of the parties involved than about the specific products or services. There is no basic training or book that can fully prepare you for building meaningful partnerships in your startup. However, based on my experience, I think I can point to a few tips that might help:

  • Remember, it’s about the people: Establishing solid strategic alliances is a process highly dependent on the people on both sides of the table even more than the target product or services. Even though you are partnering with a company and not the individuals, the people involved are the ones who can either build that partnership into a fruitful business relationship or a painful one.
  • Establish credibility: Particularly if you are the small player in the room, establishing a solid credibility is key to the success of a strategic alliance. As much as you believe in your product or service, when establishing a partnership, you are asking a bigger and more established player to rely on your product for an important part of its business. Not establishing a transparent and solid credibility, would only show a level of arrogance and ignorance about the dynamic of business relationships that could ruin the whole process
  • How does your partner win?: A key lesson I learned from reading Warren Buffett is that a deal is only great if both parties win. As simple as that sounds, startups quite often tend to propose partnership models that are mostly beneficial to them and let the other party to figure out their side of the equation. As a startup CEO, make sure you take the time to understand the dynamics of your partner’s business and propose models that can be equally beneficial to all parties involved.
  • Understand your partner’s motivation: A killer product or service is certainly a good starting point to attract the attention of potential partners but it’s rarely sufficient to get them to establish a solid partnership with your startup. At every step of the game, it’s important to understand that the same product or service can trigger a number of different partnership models completely driven by different motivations. Understanding the factors that are driving and motivating your partner is essential in order to establish meaningful strategic alliances.
  • Be open to alternative business models: When discussing a strategic alliance or partnership, try to remain very open to alternative business model that might, sometime, result very different from your original intent. Particularly when dealing with larger organizations, it is important to understand, even if they operate in the same space, different companies might like to experiment with different partnership models related to your product or service. Using the experience and resources of larger organizations to your advantage is one of the best outcomes that your startup can obtain from a strategic partnership.
  • Think long term, don’t be greedy: Establishing strategic partnerships is too painful of a process to focus on short term goals. When negotiating terms, try to think about how you would like the relationship with your business partner to evolve in the next few years and try to use that picture as the main compass to create a solid strategic relationship.

As a startup CEO, you have to set your own foundation to create meaningful strategic alliances. When studying about this topic, I didn’t come across any good analogies that can help to explain the process you go through to establish a good business partnership with a bigger player. Building strategic partnerships is really not like dating and certainly not like getting married unless you like to marry multiple people at once. Establishing a solid alliance with your partners is just like that: building a mutually beneficial business relationship between two parties. It can be a really painful process but also a really fruitful one.

 
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Posted by on July 31, 2012 in Uncategorized

 

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