NEW YORK, New York — The second NetForum meeting took place on December 6th, 2012. It was dedicated to understanding how to effectively and efficiently build strategic partnerships. How do two companies align their interests to pursue a common goal? What makes an agreement a strategic partnership and not a garden variety commercial agreement? Should they be coupled with an investment? These difficult questions were tackled as members discussed examples of strategic partnerships that worked and those that did not. Five main insights were generated from the lively discussion.
- Partnerships can’t be manufactured. They must evolve over time. Many of our members are on the receiving end of “strategic partnership” proposals. These proposals are treated immediately with suspicion. Often, they are viewed as a way to get something without paying for it. Or they are deemed a distraction from the business objectives that have already been set and are already being pursued by the company. Yet, unsolicited partnership ideas are treated with a lot more seriousness when filtered by an insider — the best insider referral is NOT from someone way up but from a corp dev person whose job is to filter incoming deals, or from a mid-level operating person who is familiar with the real needs of his/her colleagues.
- The partnership offers that will get the most attention are those who are farther away from the core business of the company being approached. If the idea will yield an incremental improvement to the recipient’s business, it is less likely to be pursued as the company will naturally believe they can do it on their own. Ideas that fill a material gap in a business line or that allow a company to enter new business lines faster will be seriously considered. Yet, companies do not broadcast their strategic gaps, so figuring these out is a guessing game with lots of misses. (Here’s the value that intermediaries fill — discrete sharing of needs. The NetForum can also help here.)
- Partnerships with technology enablers will be looked upon favorably because of the difficulty that big companies have in developing new products and technology. So will partnerships that enable companies to extend their assets (usually their brands) into new markets or platforms. Small companies continue to make the mistake that by doing a deal with a big company they will have “access” to the marketing power of a big company.
- Money needs to flow to make a partnership work. Both parties need to see a path to new revenues that did not exist before. The cash is better than the PR value.
- Having an equity stake in the partner is not essential but it often creates a structure that is a prelude to an acquisition. Companies often enter into strategic partnerships to try before they buy.