Partnering Expert Ed Rigsbee Thinking about partnering with your competitors? Expert Ed Rigsbee tells you why that's not such a bad idea.
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It's not that we don't think you can go it alone.It's just-why would you want to?
Strategic alliances are struck for a variety of reasons, fromconducting marketing promotions to consolidating buying power,between the smallest of companies and the largest of companies. Andjust like any other relationship, a ton of things can go wrong. Howcan you avoid the pitfalls of partnering relationships and enjoythe benefits of developing opportunities with other companies?
In Ed Rigsbee'sbook, The Art of Partnering, he outlines thebasics of how to create a lasting and valuable strategic alliance.With his follow-up book, Partnershift: How to Profit from the PartnershipTrend, due out in October, Rigsbee let us in on a few partneringtips.
Entrepreneur.com: What arethe benefits of forming strategic alliances with othercompanies?
Ed Rigsbee: The benefits arenumerous. It depends on what you're looking for. One benefit,which is very big, is purchasing parity. For example, in Chicago,there's a group of about eight patio furniture retailers whoadvertise together in the [local] area. They buy together, allowingthem to get better prices and special deals on things they can thenuse to promote [their stores].
In Northern California, there's a group called the SonomaCounty Fine Furniture Association. It's a group of eight finefurniture companies that banded together in the early '90sbecause of the recession. They were able to go to the localnewspaper and ask for better pricing and placement of where theywanted their ads. [They also] printed brochures, so if Mr. and Mrs.Customer show up and [the store doesn't] have what they want,they give them the brochures and say, "Well, why don't youtry one of the other stores that are part of our group?" So[partnering] is also a way to refer business.
|"Themost prevalent mistake people make is jumping in bed with oneanother before they've gotten to know who their partneris."|
In Texas, there's a group of patio furniture companiesthat-because patio furniture is pretty bulky-band together to buytruckloads to lower their shipping costs.
There's another group called World Sign Associates [made upof companies] that make large neon signs, and they have a nationalalliance where they'll work with one another. One company maybuild the sign and ship it to another state, and instead of sendingtheir crew to install it, they'll pay one of the other WorldSign Associate companies in that area to install it.
There are a lot of reasons why [companies form strategicpartnerships,] but generally, purchasing, advertising and marketingtend to be main reasons small businesses band together.
Entrepreneur.com: Somecompanies might be reticent to band together with the competition.Is that an important concern?
Rigsbee: The interestingthing is, it depends on your mentality. People who think small andwho probably aren't going to be in business for a long time aretruly afraid of their competitors. You have to ask yourself, Do Isee the world as a zero-sum game-meaning for me to win, you have tolose? Or do I see the world as full of possibility where we canwork together and build a bigger pie?
For people who see it as [the latter], if you're workingwith competitors to build recognition of your product or industry,your percentage of the pie may not increase. But if [your alliance]makes a bigger pie, you'll get more total pie.
If a person sees the glass of water as half empty, they'renot going to be a good person to work with because they'regoing to come from a place that's win-lose. People who see theglass as half full are going to work better together becausethey're going to see that by working together, they can createsynergy where one plus one equals three, where working togethercreates more than just double. And that's what we'relooking for-how can we create that one plus one equals three? Ifyou can't do that, why work together?
Entrepreneur.com: Are thereany major mistakes entrepreneurs make when choosing partners forstrategic alliances?
Rigsbee: The most prevalentmistake people make is jumping in bed with one another beforethey've gotten to know who their partner is. I was speaking ata large conference on mergers and acquisitions about a year and ahalf ago. I went to different sessions, and I was listening topeople talk about conflict resolutions and exit agreements. Later,I was on a panel discussion about partnering and the same subjectskept coming up. And I said, 'If you guys put a little bit moreenergy into picking your partners right in the first place, youwouldn't have to spend so much time trying to get out of lousyagreements.' People tend not to do their due diligence. Ifyou're going to partner with somebody, show up unannounced. Seewho they really are.
A great example of this is the owner of an electricalcontracting company who was looking for a supplier. [He wasconsidering] Graybar, a big national electrical supplier, and somelocal ones, too. The owner and some of his people just showed upunannounced at one of the local electrical suppliers, and thecompany didn't know what to do because the manager wasn'tthere. They put them in a conference room and they sat there for 45minutes. And the owner said, 'Are these the type of people Iwant to work with?' Then they showed up at Graybar unannounced,and although the branch manager wasn't there, the people knewexactly what was going on and showed him around. You have to knowwho your partner really is. It's more important to see theiractions than to listen to their patter. That's going to giveyou an idea of whom you're working with because relationshipsare really important when the unexpected happens and problemsoccur.
Entrepreneur.com: Do youhave any advice for keeping your partnership healthy?
Rigsbee: In the book, I talkabout relationship-value updates, and there's a form in thereyou can photocopy. This is absolutely mandatory. If I'm goingto have a great relationship with another organization or person, Ihave to create value for them. If I don't understand whatcreates a value for them, if I lose sight of the value they need,or if their needs change and I haven't learned their new needs,I might be doing things that I think create value for them butreally don't. It's crazy to do that. You're wastingenergy.
So if you want to keep your alliance healthy, at least every sixmonths-or better, every quarter-do a simple value update with yourpartner. The minimum elements are: the value you're gettingfrom the relationship, the value you think your partner is gettingfrom the relationship, and your ideas on how you and your partnercan make the relationship better. Now if your partner has[evaluated] the same thing and you switch [papers], it's a verysafe, nonthreatening way to find out what's going on with theother person [and] to keep issues from blowing out of proportion.It's like, instead of leaving a splinter in your finger andletting it fester, every quarter you're going to pull thatsliver out and make sure you deal with it. Because if you don'tdeal with conflict early, quickly and swiftly, it gets out of handand starts getting personal. And you don't want to take thesethings personal.
I've been married for more than 25 years, and in marriage,there are ups and downs, but what you have to focus on is why did Ipick that person in first place-what was it about them that I sawas valuable. Focus on that instead of on all the little piddlythings that bug you this week. In a business relationship, it'sno different. You've got to focus on why you selected them asan alliance partner and not on what went wrong this week. Whattends to happen is you spend so much time putting out fires thatyou don't spend enough time talking about possibilities andopportunities. That's why relationship-value updates are socritical.