One key aspect of any business is relationship. A firm can have an excellent products and offerings but without partners or alliances, it is impossible for the business to grow locally or global.
Similar to subsidiaries, strategic partners or alliances greatly contributes to the multinational firm’s revenues. It is easy to knock-the-door of your prospect business partner. Once the door is opened, discussions can be done. However, until the biggest hindrance of any business relationship is overcome, the strength of relationship is undefined.
What is the biggest hindrance?
COMMITMENT AND TRUST.
Having been working on the side of the principal (or the manufacturer of the products and offerings) company, here’s the applicability based on my personal experience:
Phase 1: GETTING TO KNOW EACH OTHER
Like any business transaction, alliances start with ‘getting to know each other’ phase. In this phase, we meet our potential partners and present our products and offerings to the market. We identify how we can create and add values to the prospect partner’s current offerings to their existing customers and requirements. It is also in this phase that we demonstrate and prove our technology’s capability and what are our competitive advantages against our competitors. It is also in this phase that both parties goals and objectives are reviewed and checked if there are any differences. Selecting the partner or alliance is critical.
Phase 2: COMMITMENT
Commitment is reached when the prospect partner promised or give the commitment to allocate resources for the partnership. A clear indication of their attitudinal commitment. It is considered to be a great leap once this phase is reached as resource allocation entails manpower cost which will be shouldered by the prospect partner. In this phase, we normally conduct partner enablement seminars and workshops (to show the fair exchange) in order to kick-start the technology transfer. The partner enablement program also provides the product and solution positioning when going to the market. Most of the time, the prospect partners already have deals in their pipeline before we even reached this state. As such, the pricing, negotiations and partner margins are very critical in this phase as part of the calculative commitment. If pricing and margins are not lucrative enough and there is no demand of our products from the market, it is unlikely that the prospect will give commitment.
Phase 3: TRUST
Expectations are very important in partnership. And strategic alliances follows the credibility trust (also reputation based) whereby our partners (whether distributor or reseller) have their annual quota to meet in exchange to our fair exchange commitment to them. We also expect the benevolent trust from our partners whereby if we are the agreed product to be positioned for a certain sales deal, the partner will remain true to its promise and will not turn to our competitors.
Phase 4: MAINTENANCE
Maintaining the alliance is a long term process for both parties. The following are key factors:
- The presence of Alliance Manager focused on partner management and growth is an important role for the global company to grow further. Some countries which deemed to be politically risky to setup the subsidiary is the good candidate for distributor and reseller business model. As such, the Alliance Manager holds a vital role.
- Partner enablement program focused on ensuring that the partners or alliances technical or R&D team are abreast for new products and offerings. Aside from new products, product releases and product roadmap updates are equally important to be shared.
Optional Phase: SEPARATION OR DIVORCE
The contract between two parties can end up in separation if one of the parties decided to terminate due to the other parties inability to maintain the previously set expectations. It is inevitable and it is normal especially when one of the parties decide to shift their business focus to other aspects or other industries wherever the case maybe.
As such, like the song ‘You and Me Against the World’ by Helen Reddy, the promise of commitment and trust is very important when building and maintaining strategic alliances.
Here’s one video discussing and giving few points for strategic alliance:
Til next time. Au revoir.