I glanced up from the conference phone positioned in the middle of the table to catch the expression of quiet resignation in Hector, my client’s new Strategic Partnership Director. Hector’s Sales VP was talking on speaker phone to a potential strategic partner’s sales and partnership team. I realized in that moment that Hector knew what was going to happen.
Hector’s Sales VP was ignoring all of the research and analysis on how to make the most of the fortuitous opportunity to partner globally with a company expanding into the same markets that was in no way a direct competitor. The opportunities for these two companies to leverage each other’s strengths made for an extensive list – a list that was literally on the table in front of Hector’s Sales VP. But that’s not what was being discussed.
Instead, we had a one-way discussion about how the potential partner could fit neatly into my client’s international channel distributor program. No matter how Hector, the other company’s team or I tried to steer the conversation towards other strategic collaboration points, the Sales VP veered back to his single-minded agenda. The potential partner was far from impressed and the conversation soon ended with a few token follow-up tasks. Hector and I glanced again at each other. We both knew that the opportunity had passed.
The Sales VP seemed genuinely proud of himself in showing us how these partnership conversations should happen. Now I understood Hector’s expression more completely. This company’s leadership didn’t understand what strategic partners were. Until they figured it out (or listened to any number of sources) they were doomed to cripple their partnership potential.
International Distribution Partners are NOT the same as International Strategic Partners
This is far from an isolated situation. We see it all of the time, companies that underestimate the value they can get and receive from partnering for further international expansion. Since strategic partnerships normally fall somewhere either under sales or marketing functions in most companies, they tend to stay close to the known well-trodden paths such as channel distributorships.
Strategic partnerships should never fit into one specific model. Instead, they should fill in the weak spots where the partner has strengths. Here are examples:
- Partner B has excess capacity in their overseas production facility. They rent out their facilities to Partner A for a reasonable compensation (monetary or perhaps a trade of some kind).
- Partner A will be exhibiting at a key international trade show. It’s a sizable investment. Partner B only needs to meet with a few key prospects at the show. Partner A gives an exhibitor pass to B’s Sales VP to have access to those prospects.
- Partner A has access to a government grant in their country that supports research and development. Partner B sends a key engineer to work for 6 months in Partner A’s overseas facility. The technology is used in both companies selling into their own respective markets.
- Partner A has a strong presence in Europe while Partner B has built up the Asian market. Since they sell different products to the same market, they agree to help each other make key introductions to potential clients in their strong markets.
The possibilities are endless so long as there is benefit to both partners and the risks are manageable. Strategic partnerships work best when both partners are dependent on each other and breaking up would be painful.
Here’s an approach to maximizing the potential of your partnerships:
- Spend time up front to develop a trusted connection with partner’s key staff. This is critical to long-term success. There has to be trust between company leaders or the partnership will quickly fall apart. This means spending time together preferably in person or at least in video conferencing. There may need to be cultural adjustments in this process depending where your target strategic partner is based.
- Ask open-ended questions about the other side’s goals, capabilities, challenges, etc. You’re looking for opportunities and challenges here. What is happening in their business that would also help your company? Is it best practices? Specific expertise? Access to capital? Client base? Key connections? Successful marketing channels? What are the challenges that they face in terms of internal limitations or external threats? The more you know, the better you can position your negotiations.
- Inventory what your side can offer in exchange. In looking for what your company has to offer, think of what would be easy to give. Space in a trade show booth is a great example. So are some introductions to some of your client accounts where it makes the most sense. But look further into areas like production, talent, finance and logistics for opportunities to build off of excess capacity.
- Look for creative trades that benefit both sides. In international expansion, one company may already have a foothold in the market, creating the opportunity to share knowledge and initial connections. If both companies want to enter the same new market, there is an opportunity to collaborate on research, saving time and staff resources.
- Continue to evaluate and renegotiate over time. In any partnership, it is smart to periodically revisit the projects or programs that are still benefiting both parties and those that should be discontinued because they have become ineffective or irrelevant due to changing circumstances. This is also the time to see if new collaboration opportunities have surfaced.
For growing companies, global strategic partnerships are a way to acquire new competitive advantages in most cases faster than developing those same assets your own. It does require company leaders to put egos and fears aside to talk about what would truly propel the company forward towards long-term goals. As for Hector’s company, leadership has yet to get past their own internal roadblocks, but Hector remains hopeful that they will.
Onward and upward!