We’ve all been to networking discussions where the ideas flow and the potential for collaboration seems infinite – and yet nothing happens after the conversations end. Some of these ideas are clearly not meant to be; for every great idea there are several hundred that aren’t worth a penny. So how can you discern the partnerships that would be mutually beneficial from the ones that will cause headaches, or worse? In giving this some thought, I was reminded of the summer I spent working in a small engine repair shop. One of the most valuable skills for a small engine mechanic is being able to give a quick and accurate diagnosis. Keep in mind there are three necessary elements for an engine to start: fuel/air mixture, spark and compression. Remove any one of those three and all you have is a large paperweight. In business development, diagnosis is no less important. To diagnose a future partnership, you need to look at it with the eyes of a small engine mechanic. In this post I will look at compression. Next in this series, we’ll cover fuel and spark.
The Importance of a Compression Container
In the world of small engines, compression refers to the pressure achieved and the tightness of the chamber that the fuel and air is combusted in. As an engine wears, there is a steady reduction in its ability to compress the fuel air mixture, and over time the power captured from a combustion event is reduced. This continues until the unit cannot create a container that can overcome the engine’s own internal friction. Let’s apply this to a business discussion. Every interesting new business opportunity needs a container to occur in. Is there an entity within the organization that can “own” the transaction under discussion? If there is not an accountable container to capture the value, then the proposed new product or service is just a passing thought – unless someone is sufficiently motivated to build a new container.
The Three Types of Partnership Containers
Most big companies have three types of organizational containers: regional, industry vertical and technology-specific. In almost all cases, one is dominant and the other two are managed, but take their cues from the “lead team.” Technology-based organizations are usually product centric, while services-based organizations are typically geographically based. It takes some work to ferret this out, but it is important in understanding who really makes the core calls on what gets funded and what doesn’t. In large organizations, it is very easy to mistake a strong regional presence for a container for a new technology. One of the most subtle ways to identify the dominant container is to ask about the organization’s history. Typically a company will develop its personality from its roots outward, and the dominant mode of organization will quickly emerge. Let me give you an example of open-ended dialogues in real life. There has been an ongoing discussion of closed loop precision agriculture for at least 20 years. You will see articles and interesting drawings of how micro sensors on grape vines will be used to control individual sprinkler heads so that the perfect amount of moisture is applied to the right spot at the right time for perfect grapes. The actual implementation of these activities commercially has been largely limited to precision planting. Not long ago, Monsanto purchased a company in this area. Why is this significant? In addition to validating that there is something that works, Monsanto now has a container to place these kind of business activities into that can capture the business and turn it into earnings.
Diagnosing Containers for Partnership
There are telltale signs that there is no container for an activity inside the company that you may be talking to. If you are talking one on one and the discussion jumps from one topic area to another with no fixed point of reference, then it’s likely they are just fishing. If you get a meeting and the room is filled with people who don’t seem to know each other – not a good sign. If the functions listed on the business cards are all over the map, with a high number of corporate staff – even worse. On the positive side, if you get in a conversation with an operational leader or financial leader, that is a good sign that they either have the business container, or are very serious about acquiring it. If they are asking for and providing key ratios and metrics that need to be met to make the partnership work, you are on the right track. This all becomes more complex if you are teaming with another business to satisfy a need based on both of your capabilities. Many times an intuitive and well meaning middle manager will strike out to find a new pathway and will begin a discussion with another organization. If you are the potential partner, you must find out quickly about the true operational commitment to the discussion. If you find that there is only a loose affiliation with core organization and value proposition, back away from the table.
Questions to Ask when Considering a Partnership
- What is the history of the organization? Which container do you think is dominant? What does that mean for your partnership?
- Has this organization partnered with others in the past? Can you learn anything from those interactions?
- If the partnership was successful, which business unit would receive the credit and profits? Who would contribute any additional capital requirements?
- What kind of distribution does the other business unit have for its products and services? Is it compatible with the solution or product we are discussing? Are they a cultural fit?
- What kind of fulfillment process is used for this type of business? Is it build to order or build to forecast? How is support and service delivered?
Once you have had this kind of discussion – and get a feel that that there may be a partnership there – it’s time to devote some serious resources to the program. What are your experiences when creating a partnership? Drop me an email, or tweet me with your thoughts.
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