Defining "Success" for BD professionals

Well, I am back from an extended vacation spent at the 38th annual Kerrville Folk Festival (http://www.kerrvillefolkfestival.com/), which is a special place and time to share music with old friends. I am well rested, albeit a bit sleep-deprived!

At first glance, it may seem trivial to spend time discussing how to define success for the Corporate and Business Development executive. But, over the years I have seen cases where results would have been very different had the goals & incentives been wrong.

As an example, when I engage with a potential partner for a client, one of the first things I determine is the organization and role of the people I am dealing with. Who does the partner BD person report to?; are they in sales? , or do they report to the CEO in a Corp and Business Development team?; are they part of the product team? We've all seen the BD title used in the sales organization, and it usually means something very specific relative to revenue - often with an OEM or reseller revenue goal, coupled with a Market Development function driving new business opportunities for sales. Some of my best friends are sales executives, but they will all acknowledge that their focus on revenue is paramount, and that strategic business development is different.

So, if I am discussing an alliance someone who has a revenue goal, and my expected outcome for the alliance doesn't involve direct revenue for the partner, there is going to be a mismatch at some stage, so it is better to find that out sooner rather than later, and finding another contact in the organization with a more strategic focus.

Why does this matter? Well, we all know that people tend to optimize their own incomes; that is why companies have variable incentive plans! So, working across from someone carrying a primary revenue goal will always drive the conversation to how much revenue I am going to provide for them, resulting in frustration and wasted time if I don't share that goal.

Here's a more interesting example. Many times, my clients seek alliances as defensive moves - either in an attempt to prevent a smaller direct competitor from gaining the upper hand, or in order to prevent the partner from entering your market in competition. In either case, while revenue may be important, the critical goal is to engage with the partner, even if it doesn't result in substantial revenue, or even result in an alliance. So, while the intended goal may be to form an alliance if possible, "distracting" the partner for a period of time is just as effective, so signing a contract and generating revenue are both secondary. If the person assigned to handle this transaction is measured and paid primarily on revenue, it is easy to see how they could fail to achieve the strategic goal.

But, defining measurable goals for BD is important for both the company and the individual. Direct or indirect alliance revenue is obviously important to the business, and is always a component of that goal set. BD professionals who are tasked with forming and managing Strategic Alliances should be goaled and measured on quantitative strategic outcomes aligned with business objectives, such as:

• Forming a specific number of alliances in a specific period of time, possibly with a list of targets or classes of prospects;
  
• Managing a review process with the executive team to define the target list of partners over time - at least quarterly - so that the goals remain fresh, reflect market dynamics, and changes in company strategy;
  
• Generating marketing success - measuring Press Releases, positive analyst coverage, lead generation resulting from activities with partners;
  
• Engaging with a specific target partner to limit or prevent competitive threats, and of course
  
• Generating direct or indirect revenue from partners. Indirect revenue is that generated by the business as a result of influence by the partner. Direct revenue is that generated through and by the partner.

I welcome hearing examples from readers of situations where goal-setting was used effectively, or resulted in disasters - nothing is better as a learning tool than seeing the results of such a mistake.

Next week, I will spend some time discussing the Alliance Spectrum: different types of alliances and how each adds value to the business. Suggestions for future topics are always welcome!

Until then ... thanks for listening!

Michael

Alliance Life Cycle

Unlike buying a house, forming and managing a strategic alliance involves a life cycle - embracing a relationship and negotiation that starts with the first conversation between potential partners.

Alliance strategy development evolves over time as we've discussed. From that strategy, identify target partners and the alliance development phase begins. The rolodex is king.

Finding a receptive partner starts the process of developing a joint value proposition. That it is joint is a distinguishing aspect of strategic alliances. Defining ways to grow the pie, so each share is larger makes for the highest probability of success for both parties. Ideally then, this discussion leads to negotiation of a business description of the deal, a term sheet, that when approved by both business negotiating teams can form the basis of the legal contract. It is during these early phases of discussion that the social contract forms, where the principal stakeholders and executives identify a shared vision, approach and the overall tone of their relationship.

With the signed contract and launch of the alliance, the real work begins to make the relationship successful, and to anticipate and solve problems. Enter sales, product development, support, training, marketing, etc, etc. A good BD leader will ensure that all stakeholders have a clear understanding of their roles in the alliance's success.

Important alliances undergo re-negotiation on a regular basis, sometimes in specific legal terms, but more often in the changes to the social and business context that occur. Regular executive review meetings during the life of the alliance can help keep things on track, change course when necessary, and measure mutual success.

At some stage before reaching the end of the term of the contract , the executive sponsors will decide if and how to adjust or extend the alliance to match corporate and market dynamics, and continue to drive success for another several years.

Move an alliance effectively through this process is critical to meeting your company's goals in forming, negotiating and managing alliances that meet your goals - whether revenue, marketing, competitive or any of the other important reasons for forming an alliance.

After a spot of R&R, I will be back next week to talk about setting goals for BD. It is no easy task for management or the BD professional that aims to meet those goals, as we shall see.

See ya,

Michael

Graphic in part courtesy of John Soper, New Paradigms Marketing, Los Gatos CA. Copyright (C) 2008-9.

Musical Chairs?

Many of us will remember that game of Musical Chairs we played as kids! It was a simple game, played with 33 1/3 LPs and a parent lifting up the stylus in my time! When the music stopped, everyone tried to sit in a chair, but there was always one less chair than kids, and someone had to step out of the game - a chair is removed and the game continues until there are two people and one chair. Then one winner!


What does this have to do with Business Development? Well, the rules of Musical Chairs change in BD, but the game is similar. Chairs come and go, sometimes in blocks, at an alarming rate, and it is hard to hear the music. Mergers change the layout and comfort of chairs, and market evolution serves to add or removes chairs over time. The goal, nonetheless, is to sit in the most comfy chair in the room at the right time. The "Chairs" in our version of the game are potential acquirers, the "Players" are typically venture-backed companies evolving from incubation through revenue, to some level of market recognition, trying to guess what the right time is, and who their eventual buyer might be. Sitting in a chair means you have reached your exit, and the comfort of the chair is a reflection of the "best price" for your circumstances. With the state of today's public stock markets, an acquisition is the most likely "liquidity event" for most of today's startups, so this should be important stuff to today's entrepreneurs and investors.

But, why does this really matter? In Three Dimensional Business Development, 3DBD, we need to consider our alliance strategy from now until the music stops as a game of Musical Chairs, and plan alliances that take us ever closer to our favorite chair. And, as most of us are probably a bit picky, our choice of favorite chair can change over time, which adds another dimension to the game.



Let's look at an example: Argon Tech has the opportunity to do an OEM deal with Immense Business Networks, IBN. They consider IBN one of about 4 potential acquirers they see today, but don't yet have the revenue to justify the required exit price. So, as they are working on a deal, a 3DBD approach would suggest taking some steps including:

1. make sure that the terms of the deal are not so good that IBN doesn't need to acquire Argon,


2. this deal doesn't "repel" Argon's other chairs - potential acquirers, and


3. that this is the right time and sequence for this deal with IBN.

So, having a naturally evolving strategy for who your potential acquirers are as well as an optimum path to reach them is critical to forming strategic alliances, even in the early years. An evolving strategy deliberately includes key company stakeholders in an ongoing discussion of the chairs in the room, and which seem most comfy in your chosen exit time frame.

So, next time you grab your kids or grand kids and that old LP and record player (OK, OK, CD and remote control) to play some Musical Chairs, think about what names you would put on the chairs today - or in 6 months.

Next time I will dig a little deeper into the alliance life cycle...

Peace,

Michael
CMT Consulting, Inc. - Business Development Consulting Services

What is 3DBD?

Hello friends and colleagues,

For some time I have been thinking about putting my thoughts and insights into Business Development on paper - blogging seems like the most effective and interactive way to do this, so here goes. My first foray into the world of blogging after some 38 years in this crazy business we call "High Tech"!

3D BD - or Three dimension Business Development" is an approach to Corporate & Business Development that I have developed over the past 20 years of forming alliance strategy, developing alliances, negotiating agreements and considering exit options for venture-backed companies. In future blogs we will cover a variety of topics that I hope will be of interest to BD professionals, CEOs, VPs Marketing and CTOs at startup companies hoping for a structured way to approach the formation and execution of partnerships and alliances. While my experience is largely in the High Technology and Music industries, I think this approach maps to other industries.

See ya next week.

MJDE