Befriending an Elephant: Partnering with Global Giants
Paul Magelli, Jr., CEO, Apertio Inc.
When is a relationship special and when does that special relationship become a partnership? Such questions are as challenging in the complex world of global politics as they are for entrepreneurial businesses for whom growth and success is inexorably linked to securing effective partnerships with large companies.
These challenges and opportunities are best explained using an analogy from the natural world: consider the mouse — small, fleet of foot, nimble, and inquisitive — he is our entrepreneur. The elephant is large, ponderous, and potentially destructive. His is also vastly powerful and universally respected — he is our big company and our potential global partner.
So, as entrepreneurs, how do we gain maximum benefit from working closely with the elephant, without falling victim to a misplaced step that could wipe us out forever?
Flexibility and Understanding
While being a tactical supplier to your market's largest players is certainly beneficial, the failure to extend such a relationship into a true partnership can be a costly mistake. Of course, maximizing such an opportunity is far from a straightforward task, but the first place to start is by understanding that elephants will not change their nature for mice. Entrepreneurs must adapt their behaviour to create the most favorable position from which to engage with their potential partner.
In addition, to be seen by an elephant, a mouse must differentiate itself from the hundreds of others that seek to buddy-up. But to truly befriend that elephant — to create a partnership of equals — the mouse must do more than differentiate; it must prove its value.
Differentiating through Value
Anticipating a potential partner's needs is critical in the early stages of any relationship. Unfortunately, large organizations are intensely complex, political, and employ strategies that often appear unclear to all but a select group of executives. Bottom line — they are almost impossible to second guess, but successful entrepreneurs must find a way to connect.
I discovered this three years ago when, as a fourteen-person company, we began a process with one of the world's largest manufacturers in our industry which has resulted in a truly beneficial partnership. Initially, it was tough. The multi-million dollar savings, the massive reduction in time to market, and the two to three year technology lead we had over our competitors had closed numerous deals for us in the past-yet our prospective partner was unmoved. And they would remain so until we had understood the real business problems facing their executives.
In a market demanding an end-to-end solution, our elephant was unable to provide one. Indeed, a recent acquisition designed to fill the hole simply wasn't up to the job. Add this to the elephant's desire to create a proposition that leapfrogged its competition — when in reality it was struggling just to keep up — and its problems were clear.
If we could deliver a proposition that allowed the elephant to directly address these pressing concerns, we had a chance. With a little fine-tuning of our solution, we were able to do just that and were catapulted from one of forty or fifty tactical suppliers into an exclusive club of strategic partners. And why? Because we spoke their language, we spent time understanding their challenges and could deliver a solution that would positively transform their business.
Significantly, we were able to prove our value to our partner both qualitatively and quantitatively. Sure, we could help generate additional revenue, but by enabling the delivery of an end-to-end solution, our elephant became a competitive force in the marketplace. This was priceless.
Achieving Favorable Terms
After the initial courtship with an elephant, the serious business of securing favorable terms begins. While here the options are more limited, it remains entirely possible for the mouse to influence significantly the negotiations. But first, a key point all mice must remember: favorable terms refers to time as well as price. It is no good negotiating a high unit price if you don't get paid for eighteen months as the chances are, you won't be around to collect it.
Mice move in minutes, hours, and days while elephants tend to work to months, quarters, and years. Their size, power, and reputation means they can move slowly while mice can seldom afford this luxury. They must be fast paced and nimble — particularly during the negotiation. The key is taking ownership of the process: managing every part of the discussions, organizing meetings, setting agendas, anticipating and answering objections, and drafting agreements.
But process alone will not seal the deal in acceptable timeframes for a mouse. To get the elephant moving, secure a sales lead with one of their customers that depends on the successful completion of partnership negotiations. This is all about keeping the elephant under positive pressure from as many sources as possible, and is one of the most important lessons we learned during our courtship.
Defending Your Price
Finally, insist on a financial commitment. If all parties truly believe they are perfectly aligned, then your partner should be willing to invest to secure this value. In the short term, mice will invariably carry the cost of the partnership (and elephants can eat a lot). This must be recouped as quickly as possible or you face being crushed by the weight of your partner. Get your value right, and your partner will agree to a commitment.
Apertio was 90 percent of the way through negotiation before our partner agreed to a financial commitment. Of course, by this time we knew our value to their business so could confidently defend our price.
Achieving Valued Partnerships
Only by understanding and addressing an elephant's strategic business interests, and then clearly demonstrating unique value, can a small, entrepreneurial business hope to negotiate from a position of strength and ultimately engage a large company in a partnership of equals.
And how do you know when you are a true partner? Try these questions:
- Do you have strong relationships with executives across the business?
- Are you engaged with their customers?
- Do you have a long term financial commitment?
- Are they influencing your product roadmap?
- If the answers are "yes," your value is clear and your special relationship is a partnership.
© 2006 Paul Magelli, Jr. All rights reserved.