The Partner Economy: The Single Greatest Opportunity and Threat to Your Business

THE PARTNER ECONOMY: THE SINGLE GREATEST OPPORTUNITY

AND THREAT TO YOUR BUSINESS

A gentleman that I recently met at a conference said something that I found fascinating. He said that “in the old days it was the big that beat the small, but in the current economy it’s the fast that beat the slow”. This guy worked for a large company and he recognized that the old business models weren't really working like they used to. As examples, in earlier years Standard Oil (which is now Exxon Mobil); Rockefeller; Ford; and US Steel owned all the factors of production from beginning to end. They were integrated - they owned everything. They could build everything, and they controlled everything. They controlled the price of every single raw material for input. They controlled the pricing that it took to make everything in the middle. Clearly they controlled the price at which they could sell everything because there wasn't a lot of competition back then, so that was a fantastic business model. There are still some people (under the category of “control your own destiny or somebody else will”) that operate their businesses in that manner, but it is no longer the norm.  

In the mid- eighties to late-nineties a fascinating trend started with these large companies. They started focusing on their core business and they started divesting non-core assets. Does that mean that they sold off divisions? In a lot of cases, that's exactly what it meant. Did it mean they exited those activities? Yes but, more often than not, they actually kept those parts of the business. They just didn't own the activity any longer - they partnered with other companies to perform that function. This new business model became the norm and the lone wolf strategy of Ford, Rockefeller, Getty was no longer working.

As an example, when you compare lone wolves to traveling with the pack, lone wolves can do great, but typically they die by themselves. If anything happens, there's no one there to protect them, and if they can't find food, they starve. At times you may need to be a lone wolf as an overall strategy for your business, but it can be problematic. Going it by yourself in the current economy is the longest, most expensive way to go out of business.

Why is this significant to the story I’m telling you about corporations? I mentioned that, while a lot of them are divesting of business units or non-core assets, they still recognize that they are a part of the business. They also recognize that they don't need to run it -  they aren't the best in those aspects of their enterprise.

That gets us to where we are today and what I call “the partner economy”. If you don't know how to operate and thrive in the partner economy, you're going to be left behind - especially if you're a small to medium sized business. You just can't afford to compete. Imagine every time you want to go out and do something, you have to figure out how to fund it - get the warehouse credit line or use cash flow from the business. You have to staff up. You have to buy equipment. You have to figure out how to get facilities to go into a new geography. You have to put together a new sales team to go into a new market. You have got to build new manufacturing capabilities or delivery capabilities.

You're looking at huge investments. Unless your company is a 100 million, 500 million, a billion-dollar corporation, you cannot afford to play that game. So, then the question becomes “is it affordable for you - is it smart for you”? Is it the best use of your money? If you have to spend five, 10, 15, 20 million to be taken seriously in a new market or if you have to pay a hundred thousand, 200,000 or 500,000 to be taken seriously in a new market, is that the best use of that 100,000, 200,000, 5 million, 1 million or 2 million or 10 million? You sit back and you start looking at return on investment and you ask yourself if that really makes sense? Is that where you want to spend money?

So, what's your option? What's the alternative? The alternative clearly is finding a partner, then you will be sharing the risk - just like the aforementioned wolf pack. You will be sharing the risk, sharing the reward, sharing the opportunity. You will have the ability to respond quicker - to get more eyes on the problem and come up with a better solution. You will have the ability to deploy the solution faster because what you’re deploying will be utilizing the collective strength of both companies, rather than the individual strength or weakness of just one company.

For instance, app developers and technology companies partner like there's no tomorrow. They put together a project team of 15 or 20 or 30, or a hundred or 200 people from around the globe to bring a product to market. These open source projects are huge. They find partners who have the skillset they are looking for from wherever they may be, and they get the project across the finish line faster.

In practical terms you start thinking about what is it that you do well - what's core for your business? What is it that you don't do so well that you just accept - you have to have it - but it really isn't your strength? You start asking yourself, “if I had a partner, how would this work”?

A lot of people have had some really horrible, horrendous, tragic relationships with partners in the past. You may have had one and you might be thinking that, theoretically, this sounds all wonderful and all great, but let me tell you about my stories with partners. And we all have stories about partners.  I have stories, but what I can tell you - from both experience and research – is that the vast majority of failures with partnerships is because they were poorly designed. This isn't just true of us as diverse business owners or small business owners. 90% of most mergers and acquisitions - which are specialized forms of partnerships - have failed, so as a practical matter it is risky.

The history of partnerships is clearly not favorable. The vast majority of partnerships failed because the relationships were not properly designed. There was no emphasis on whether or not there was a cultural fit. There was no emphasis around whether or not the actual businesses were compatible - whether or not the business models should actually have been put together. Putting partnerships together today is fundamentally different from how they were put together in prior years, and the specific things you can do to get the right partner or partners for your business are more well-known and studied. Now there actually is a blueprint for doing this.

Why? Because companies are doing it every day. I mentioned the tech industry as one example and you're seeing even the big boy’s partner up - including oil and gas. Each one of them will put a billion or two together to go and do an offshore drilling platform - when they used to do it individually. My favorite new one demonstrates all the principles of what it really takes to make one of these things work. It is the one between AT&T and Apple and their Strategic Alliance to create the iPhone, and for those of you that are paying attention right now, you probably need to look at Walmart and Microsoft. When and why did they do that?

Now, some of the pushback that I get right now is “Okay, I get it. You're talking about all these fortune 500 companies, but can you give me an example of a smaller company - something more like mine? All the companies’ names I just mentioned are companies that your business and my business are trying to sell into. We're trying to sell into AT&T and Apple and General motors and Toyota and Walmart and Microsoft. That's our target customer. All six or eight of those are in the global 500 largest businesses in the world. If we understand what they're doing to be successful, then we can model our business just like that, and when we go talk with them, we are adopting a business model that they understand.

So yes, I can give you some examples of smaller companies that are making this work, and we'll probably talk some more about those down the road so that this doesn't seem like it's unreachable.  Right now, however, I really and truly want you to understand that big companies are nothing more than small companies that have done everything right. The vast majority of them all started at the exact same place that we started - so rather than them being something untouchable, it's more of, “what did they do? How did they do it and how do we model what they did to be successful”?

It doesn’t matter  what size your company is - whether you're a hundred thousand, 200,000, a million, 2 million, 10 million, 20 million, 100 million, 100 billion - I really don't care. You need to know how to effectively partner. You need your business partner blueprint so that you can identify your handful of strategic partners that actually builds the revenue growth you're looking for over the next five to 10 years; and your non-strategic partners to deal with the tactical issues that come up every day in order for you to make sure you're addressing the needs of your customers and the business itself. So, travel with the pack. The pack is good. Travel with the pack, but it's your pack – it’s the pack you picked that does what you need done. I really and truly want you to grasp that being a lone wolf right now, in this economy, would be the longest and most expensive way for you to go out of business - period.

I hope you have a good understanding now of why the partner economy is the single greatest opportunity, especially given that the speed of business is only going to get faster and faster and faster, and why it's also the single greatest threat to your business. If you don't understand what's going on, you are going to be left behind because - until the foreseeable future - we're going to be in a partner economy, especially in the global environment.