Avoiding Failure in Technology Partnerships
The advent of the "solutions-centric ecosystem" means software vendors must focus on four core competencies in order to build successful partnerships.
By R "Ray" Wang and Merv Adrian, Forrester Research
Sep. 04, 2007
As business technology providers move to expand their solutions-centric ecosystems, strategists must intensely focus on partnerships across the value chain. The sad truth is that few technology partnerships are as successful as their participants wish. Most failures result from poor alignment between parties on key objectives and metrics.
Forrester suggests 21 questions to drive that alignment across four core competencies: building technology and product strategy, aligning go-to-market (GTM) activities, investing in a support ecosystem, and executing the action plan. This excerpt looks at the most common causes of partnership failure, and recommends areas of focus for software vendors aiming to ensure the long-term success of their ecosystem partnerships.
Partnering is a Source of Confusion
Participants in today's solutions-centric ecosystems require multiple types of partners. When all the roles in the ecosystem are aligned around clear, shared objectives, strong partners provide more rapid and cost-effective reach into targeted market sectors.
But that clarity is elusive. Providers play roles in the value chain that vary by offering, market sector, or customer requirement. Large vendors build, sell, install, and support their offerings for some customers, but partner in remote geographies, in particular industries, for smaller customers or on specific platforms. Smaller vendors create parts of larger solutions, provide integration, and sell, deploy, or support offerings in concert with one or more partners to meet customers' challenges (see Figure 1). Partnerships often fail, and Forrester's research shows that lack of clear alignment is typically to blame.
Figure 1. The Solutions Centric Ecosystem
Source: Forrester Research
Three Major Forces Caused Past Failures
Technology industry firms have turned to partners for solutions, distribution, deployment, and customer support for many years. But a plethora of well-intentioned but failed partnerships dot that history, Apple's early attempt to work with HP on the iPod being but one example. And further along the value chain, small players that work with big platform vendors routinely drop out of partner programs. Failed partnerships can result not only in financial losses, but also in strategic setbacks in addressing a new market segment. In conversations with Forrester, business development and tech strategy veterans have cited three main forces behind the lessons that have been learned: - Failure to define shared market opportunities. Partnerships without an agreed joint product roadmap often devolve into relationships tainted by jealously and mistrust. As product teams fight for ownership of key functionality, misalignment delays time-to-market, sidetracks resources, and hampers existing sales efforts.
- Lack of agreement and investment in GTM strategies. Misalignment leads to insufficient budgeting for sales incentives, marketing funds, and sales engineering time. Packaging and pricing decisions that cannibalize markets further fuel discord in partnerships.
- Inability to align the whole organization with a partnering commitment. A technology partnership agreement implicitly involves sharing, or even fully delegating, responsibilities in R&D, support, marketing, and/or sales. Unless the full value of this commitment is transparent to all executives, there is invariably resistance to such changes. Often, insufficient attention is paid to this aspect of the partnership.
How to Build Partnerships that Transcend the Press Release
Solutions-centric ecosystems require win-win relationships among the players. Partners play multiple roles at different times to complete value chains in the solutions-centric ecosystem; some will play multiple roles at the same time. Each set of responsibilities must be clearly defined if the partnership is to move beyond the press release to become not just a PR play but a genuine business execution engine. In every role, the players must answer key questions across four core competencies of technology partnerships: building the product/service strategy, aligning GTM plans, creating a support community, and measuring and managing plan execution (see Figure 2).
Figure 2. Four Core Competencies For Technology Partnerships
Source: Forrester Research
Build the Product/Service Strategy
Begin by agreeing on the shared market opportunity. Identify customer/prospect needs, design solution scenarios, define product whitespaces, map the product development infrastructure required to support a partner, and then identify other potential partners. One sample question that should be answered by the participants as they build the agreements includes: - What IP will we each commit not to build? Determine how large a whitespace will be open to each partner. Identify what solution scenarios and markets will not be addressed internally, and agree not to build a competing offering before beginning a partnership. Without this commitment, players should be wary of investing key resources because of the risk that a partner will compete in an agreed upon "safe" space.
Align GTM Plans
Begin by aligning sales and marketing models, identifying sales support requirements, and agreeing on target customer profiles. A sample key question to be addressed: - How do we design an effective sales plan? Agree on principles for account "ownership" and engagement models, key incentives for collaborative selling, "shadow credits" on joint sales, etc. Agree on a budget for joint sales training. Invest in a partner relationship management (PRM) tool that will register and route sales leads, provide access to product information and pricing, track effectiveness, and administer incentives and entitlements.
Create a Support Community
Begin by defining a model for customer support that allocates responsibilities across appropriate players. The partner closest to the end consumer will typically be the first point of contact, but smooth handoffs and visibility for incident handling are critical. Build community across multiple touchpoints for multiple roles. A sample key question: - Who delivers support, and how is revenue from it allocated? Maintenance streams represent the biggest cash cow for large vendors and partners alike. Determine skill set requirements to provide first line, priority one (P1), and priority two (P2) support, then allocate maintenance fees based on development effort, bug fix responsibility, and enhancement responsibility.
Measure to Manage Plan Execution
You can't manage what you don't measure, and metrics vary by partner type and level and stage of the partnership life cycle. A sample key question: - How do you deal with poorly performing partners? Let's face it, some partners will succeed, and some will fail. Agree on procedures for those that do not meet their goals or do not provide the support promised. Define regular reviews of performance against agreed goals in both directions, and prepare appropriate remedial activities: additional training, a boost in marketing support, etc. Poor performance might result in dropping to a "lower-level" partnership or in ending the relationship.
Ecosystems Executives Will Spread In Tech Industry Firms
As technology partnerships become more complex, today's distinct positions of business development director, channel manager, and technology partnership director are not comprehensive enough to align across all ecosystem dimensions effectively. Organizations with clear ecosystems accountability will be best positioned to attract the most qualified and synergistic partners. Tech industry strategy leaders will follow the example of SAP, Microsoft, IBM, and other firms that have created executive positions with broad ecosystems responsibility.
This broader title — call it VP of partner ecosystems or VP of channels and alliances — must have the visible influence or direct authority to efficiently and effectively coordinate across multiple functions and business units. Areas of interest include: - Recruit, manage, and retain partners (of all types: independent software vendors [ISVs], value-added resellers [VARs], systems integrators [SIs], customer or industry council members, etc.).
- Train and certify partners in ISV and channel communities.
- Manage commercial relationships: compensation, funding, support, etc.
- Coordinate marketing activities like lead generation, cooperative advertising, demand management, and cross-sell/upsell with managers of various ecosystem domains.
- Create and sustain partner communities.
Foster City, Calif.-based R "Ray" Wang and Merv Adrian lead technology partnership ecosystem research for Forrester Research, Inc. The full report can be found at: http://www.forrester.com/Research/Document/0,7211,42640,00.html.