Expanding With a Business Alliance
At a typical 8minuteDating event, single men and women gather at a restaurant, chat one-on-one for eight minutes, and then move on to the next table. After the event, couples who like each other can meet again. Last January, Adam Segel, an executive with Tele-Publishing International(TPI), happened to be having dinner with his mother at a restaurant that was hosting an 8minuteDating event at the same time. TPI runs the personal ad pages for 550 newspapers in the United States.
Never one to pass up an opportunity, Jaffee, 40, introduced himself and sat down at Segel's table for about eight minutes. Each quickly described what they did, their needs and what they could offer the other. So, like many singles at the event, they exchanged e-mail messages and eventually met again in person to see if they were right for each other. It wasn't the typical way to form a business alliance, but it worked.
No matter how it is formed, a smart business alliance can help you enter a new market, reach more customers, freeze out a competitor or fill a gap in your company's abilities. These partnerships take many forms, from joint sales calls or distributing each other's wares to developing new products or services. And this newfound competitive advantage can happen without a major cash infusion.
The first 8minuteDating event was held in Boston in February 2001. The company has since expanded rapidly and will host more than 1,000 events in 40 cities by the end of 2003. While the 8minute formula has been successful, Jaffee struggled with the issue of reaching audiences in 40 different locations. At the same time, TPI's Segel was looking for a way to add more customer value to his product.
TPI made an offer. They would work with newspapers to advertise 8minuteDating events in the personal pages, and, in return, the newspapers would be co-sponsors of 8minute's events. "Speed-dating is the hot thing among singles, and we wanted our name associated with it," Segel says.
For Jaffee, who expects 8minuteDating to bring in more than $1 million in 2003, teaming up with TPI's personals sections seemed like the perfect way to reach his audience. "People who check out the personal pages are already taking action to meet people," Jaffee says. "We're just offering them an additional way to do it."
The cross-promotion worked like cross-pollination. At 8minuteDating events, free coupons and contests spurred the attendees to try the local newspaper's personal ads, and in the newspaper, advertisements for the 8minuteDating events drove attendance. Jaffee's 8minuteDating has grown tenfold in the past year. He hasn't measured exactly how much of the growth can be credited to TPI, but he thinks it's significant.
Jaffee believes the alliance has been a success because each company made it a priority. "We shared a goal that was critical to the success of both businesses, to reach more people in our target market," he says.
Now the two companies are going further, with TPI appearing on the 8minuteDating Web site. More joint activities are being planned. "A partnership in stages makes a lot of sense," explains Emer Dooley, a business professor at the University of Washington, Seattle. "Once the two organizations start working together, they can see how well they operate as a team, if their joint objectives are being met, etc. From there, they can add layers or activities to benefit both."
"The beauty of our alliance is that it can expand with 8minuteDating's growth," says Segel. "Every time they start events in a new city, TPI will already be there with our personal ads in the newspapers. Talk about a match made in heaven."
Buying Your Way to the Top
While some entrepreneurs find a partner through serendipity, others take a much more studied approach. Nancy Michaels, president of the Lexington, Massachusetts, consulting company Impression Impact, was casting about for a place to offer her small-business seminar, "Creative Marketing Strategies." After some research, she saw that Office Depot was trying to differentiate itself from competing office-supply chains. "Just looking at the Office Depot Web site, you can see they want to add value to their small-business customers," says Michaels, 39. "They want to provide knowledge and expertise."
As an entrepreneur, Michaels lives by one rule: Go to the highest-ranking person in an organization for a decision. So when she came up with the idea to give seminars in the Office Depot retail space, she decided to speak to Office Depot CEO Bruce Nelson. But how does a small-business owner meet with a captain of industry? In Michaels' case, by bidding a thousand dollars at a charity auction in January of this year to have lunch with him.
Michaels heard Nelson speak at an event set up by the Women's Business Enterprise Council (WBENC) and Office Depot in Boca Raton, Florida. At the event's silent auction fund-raiser, she bid $1,050 for lunch with Nelson.
At the ensuing lunch two months later, Michaels pitched Nelson on her idea: She'd give small-business seminars at Office Depot retail sites. Offering business classes could make Office Depot a regular destination for more current and potential customers each week. Attendees would be charged a small fee for the class and given in excess of that value in Office Depot coupons, another incentive to buy in the store.
Starting at the top worked. From her meeting with CEO Nelson, Michaels then met Office Depot president of North American stores Jerry Colley and worked out a verbal agreement to test the in-store seminars. "The key to selling the idea of an alliance is doing your homework," says Ian MacMillan, professor of management at the University of Pennsylvania's Wharton School in Philadelphia. "Spend time getting to know all your putative partners, then carefully target the potential partner that best fits your needs. Then spend time putting together a professional pitch showing why the two of you fit."
Teaming With a Customer
Jeff Brown, the 43-year-old CEO of Seattle's RadioFrame Networks, takes a different approach. He says a great alliance is all about matching corporate cultures. "Two companies can have a common goal, but if they approach it in different ways, both can get incredibly frustrated," he explains. "We were lucky and found a partner who approached things just like we did."
It all started when Brown and RadioFrame founder Rob Mechaley, 52, saw the frustration of people who had to run to the window to make cell phone calls at conferences. They figured installing radio transmitters inside buildings would make cell phone signals clearer, take the load off the local cell phone tower, and pave the way for a wireless LAN inside the building as well.
Before the partners built the system, though, they wanted to make sure someone would buy it. RadioFrame then focused on Nextel as a potential customer because Nextel didn't have as much network capacity as some other telecommunications carriers, and would therefore value the additional bandwidth that the indoor radio transmitters would provide.
Mechaley and Brown had previously worked for McCaw Cellular and knew some former colleagues who had gone to work for Nextel. Those colleagues helped them find the decision-makers in Nextel's technology area. By 2000, just a few months after RadioFrame was founded, the team had already drawn up a bill of materials to show Nextel how much the system would cost and a general technical plan of how they would create it.
Fortunately, the managers at Nextel were so intrigued by the idea, they decided they would not only buy the finished product, but would also help RadioFrame create it. The two companies were eager to work together, so even before the contract was signed in April 2001, engineers were flying between the Reston, Virginia, headquarters of Nextel and Radio-Frame in Washington state.
Nextel offered up senior engineers and product planners with suggestions on the features customers would want. After initial development at RadioFrame, the team flew back to the East Coast to test the product in Nextel's labs.
RadioFrame used its innovative business idea to enlist cash, infrastructure resources and guaranteed sales--all from one source. From initial talks with Nextel in mid-2000 to a product on the market at the end of 2001, RadioFrame now supplies systems to Nextel every month.
"We really worked hand-in-hand with Nextel, from user requirements to how to physically get the finished product into their distribution systems," says Brown. "When people from both companies refer to each other as 'we,' you know it's a close relationship."
Find Your Match
Alliances can get you on the fast track to become more competitive. With a complementary partner, your business can blend products, distribution, technical knowledge, infrastructure or cash to propel you to a new level of success. The flexibility and power boost they provide can be a key strategic tool for today's entrepreneurs. And the best part is that they can go wherever your ideas take them.
Don't just check out your prospective partner's financials--check out their integrity. What have other companies' experiences been working with them?
- Brainstorm as many potential pitfalls as you can. It's easy to imagine all the upside (but often not all the downside) scenarios.
- Once you've found a partner, use a letter of intent to outline goals and objectives. This document can clarify the project, and if it's not looking great, you can get out of the deal before you're in too deep.
- Limit your own liability: Don't guarantee anything with personal assets.
- In case things go sour, create a backup plan for your company to use your resources another way or get your money back.
- Monitor the work. Make sure whatever is supposed to be happening is happening. Audit personally.
Get Some Answers
Questions to consider before finalizing an alliance, from Emer Dooley, who lectures on strategic management at the University of Washington:
- What are everyone's objectives? There are three sets of objectives: yours, your partners' and the alliance's. Figure out all three in advance and determine whether they're compatible.
- Is it a great deal for both sides? Don't just negotiate to get the best for yourself. If the other side thinks the deal is unfair, they won't put much effort behind its success. Who's holding the reins? Know how dependent you will be on your partner. Negotiate a credible commitment so you're not subject to "hold up," where they've got you over a barrel.
- What happens if you break up? Establish a set of exit conditions around default and failure to meet objectives. Make sure you understand and have control over how (and in what jurisdiction, if it comes to that) these disputes will be resolved.
Julie Bickis the author of All I Really Need to Know in Business I Learned at Microsoft.