Partnerships are the Key to Differentiation in a Saturated Market—This is How You Make Them Right
Forgive the leading question, but if you could put some awesome product, sales and marketing people on your team for free that could help you stand out against your competition and deliver you net new deals, wouldn’t you? Of course you would.
That’s what great partnerships do. They put another company’s resources to work for you, and yours for them, in a way that adds more revenue than either of you could on your own. Why would you spend a huge amount of time, money and effort to build and maintain a product if someone else has already done it? Just work with them.
This article makes the case for partnerships being one of the most impactful things your org can do to differentiate your product and generate net new business, with some ideas on how you can get started.
Are You Skeptical?
Opinions on partnerships are a mixed bag. Some people have experienced worthwhile partnerships (meaning net new deals that were worth the additional effort), for others it was a waste of time. To those of you thinking “hard pass, tried and failed, not worth it” I say that you aren’t solving a big enough problem for your customer.
If you’re brutally honest, your products aren’t differentiated to your customers. Sure, you know how your product stacks up feature by feature to every competitor you have, how much faster your product is, how you’re 10% cheaper. But really, your customers don’t care.
If you work backwards from your customers’ biggest pain points, from the processes they run every day, from their desired 5-year end state, you’re a tiny piece of their world. And if you’re selling an undifferentiated, tiny piece of their world, why should customers care about you?
The Opportunity for You and Your Customers
The holy grail for revenue people is always the same thing – more, larger deals for less work. But how do you get there? You have to become more relevant to your customers by differentiating through partnerships.
What conversation do you think your customer wants to hear from you?
- “Our endpoint protection solution is 10% cheaper.” That call never gets returned.
- “We have a proven, pre-integrated cybersecurity products using 4 of the world’s leading cybersecurity solutions that prevented a $10MM data breach at a company just like yours.” That goes to the CISO, is stickier, gets you higher visibility and into more lines of business, and is a bigger sale for you on a per deal basis.
In the first conversation, you’re using standard, product-centric sales (even if you’re customer centric and use personas during your pitch, it’s still about selling your product).
In the second conversation, your product becomes differentiated – not because it’s better than your competitors, but because you’re delivering business outcomes to your customers.
Delivering business outcomes beyond what is possible for your product is the secret sauce to differentiating your product and is the basis for successful partnership.
Stop making customers do so much work to get what they want. They’re not good at it and they don’t want to do it, they want turnkey. Yeah, you might stand up the product in their environment, but anything beyond that and they have to do themselves or pay an SI.
If you worked with the other three products in the stack to build a single solution and sell your customer guaranteed protection, you make it way easier for your buyer who owns a large area of responsibility to say yes. If done well, you’ll not only solve that larger functional problem, but you’ll reduce costs, reduce implementation times (which means you recognize revenue faster), and ultimately net more new deals.
If Partnerships Are So Good, Prove It
When I was at an SI, we won three ERP service deals for a total of $50MM over a 6-month period. We did it by combining our ERP implementation process with business process mining (BPM).
ERPs are notoriously difficult projects. They’re expensive, they take a long time, and at the end you flip it on and pat each other on the back for a job well done.
But did our customers really save 10% in labor costs from a more efficient system? Before BPM, we didn’t really know. During those three deals, the client specifically said, “your approach using BPM to identify value and make sure we achieved it was the thing that made us choose you.”
The cool part about it was that I didn’t really have to do all that much other than build some new sales content… we took proven solutions and put them together in a way that was better than what we could do on our own.
If you’re thinking, “well yeah that’s cool, but that’s what SI’s do… why would I spend any time doing their work?” it’s because the more pre-work you do around your product, the more you are helping partners step over pennies to pick up dollars.
Even though we had three wins, we had dozens of times where the client said “I don’t want to pay the $500k for the BPM work… just leave it out.” That $500k – which is configuration work the BPM vendor could have done themselves and hosted as an application – was the difference between selling their software and not. It was also the difference in us as an SI being able to identify millions of dollars in savings and efficiencies for the customer by using the BPM software.
If you accept that most products are undifferentiated, then why would a partner recommend you vs. anyone else? Because you’re putting in the $500k work that your competitors are not in order to help them achieve the business outcomes related to your product. Whether it’s upfront build, discounts, or feature development on every deal that’s unique to the specific customer, you can become the go-to recommendation in your market and get a lot more deals on the board.
Ok… You’re Still Interested. How Do You Start A Partnership?
So, if you’re potentially going to invest hundreds of thousands of dollars… how do you pick the right partner? Here is how you should be thinking about potential partners and a process that should help.
Types of Partners
1. Cloud Vendors
This is probably where you want to start. It’s almost guaranteed that your product runs on one of the three public clouds, but realistically it should be on all three.
Given how standardized the partnership process is at each company, the major cloud providers are probably your highest value-to-effort partners in the near term. They’ll help you improve your product to run faster/cheaper/better on their respective clouds, promote you on their marketplace to tens of thousands of people, and even co-sell your product to their customers. Don’t just rely on your partner manager at these companies… find partners who have gone through the lifecycle at these companies and fast-follow their journey if it’s applicable.
2. Other Product Companies
This is probably your logical next step. Once you have a relatively functional product and customer wins, identifying complementary products within your function/industry/market and gauging interest is your next move. Frontline sales and customer success people are the ones with the best pulse on how your customers are using your product and what their ecosystem looks like – use those experiences to identify the best potential partners.
3. System Integrators
SI relationships should come with a big warning label: “we are selfish, make it big on a per deal basis or it’s a no.”
Generally, people want to work with SIs because they have executive relationships at bigger companies. Unless you’re an enterprise-scale product, most SIs likely want leads from you without giving you a lot in return. They might help you close a hot deal, but they’re unlikely to originate new work or recommend your endpoint protection product over anything else because to them it’s all the same.
Whatever the customer wants to use, they’ll use it. SIs begin to have a vested interest in your product the more you lean into delivering larger business outcomes through solutions. And the best way to do that is build strong foundations at the cloud and product partnership level (caveat: smaller SIs are more willing to work with point solutions on smaller deals. Act accordingly!)
The Partnership Process
Every time you think about adding another partner, you should be thinking through this process.
1. Get clear on four key questions
The more thought, specificity and detail you can put into the basics, the more likely you are to find the right partner faster. If you don’t have these things nailed down, you’re going to say yes to a lot of bad opportunities that don’t lead anywhere.
Get honest, get specific. Share this with your potential partner and disqualify as quickly as possible. Here is an example below.
- What are your goals for this partnership? We are an endpoint protection company – a point solution that is one of many products in our customer’s cybersecurity ecosystem. Our strategic goals over the next 3 years are (1) to reduce the time, money and effort our customers must spend to fully monitor and protect their businesses, and (2) address the drastic spike of cybersecurity threats that have emerged in the healthcare industry. We are looking for a partner that shares that vision and is willing to dedicate salespeople and technical employees to create a commercial offer and technical solution that achieves those goals.
- What kind of partner do you want? We want to work with a software partner who (1) has a product suite that compliments ours and (2) is known for having significant healthcare industry experience.
- What do you want to do with that partner? We want to create an integrated technical solution between our products that achieves our vision.
- What are you able to offer your future partner? In the near-term, we are willing to introduce our partner into 10 net-new deals and discount 20% of our revenue on those deals. In the long-term, we are willing to (1) spend technical hours on integrating technologies and building additional technology, and (2) marketing and sales hours to bring the solution to market.
2. Find a partner that’s a good fit
This is the step where most companies make mistakes, and it’s usually because they’re swinging for the fences out of the gate. Everyone wants to work with the top 5 biggest players in the industry, but the reality is that you’re probably not big enough for them to engage. Use your template and work other avenues.
Find ways to deliver bigger business outcomes for customers by partnering with companies that are in your market/doing similar sized books of business/have complimentary products. Penetrate your market heavily. The bigger you get, the more the big guys will take notice.
3. Decide if you’re going to Sell, or Build and Sell
What you do here largely depends on the complexity of your products and how much data is flowing between them. If you have two products that are used within a fairly simple process and don’t need to trade a lot of data, go for the Sell motion. The more complex your products, the bigger the business problem you want to solve, and the more integrated they need to be, the more likely it is that Build and Sell is your play.
- Sell. You are going to find customers that need both of your products and provide them with a better value proposition than you would by yourselves.
– Offer a reasonable discount (10-20%) right off the bat (you were going to discount anyways… throw it up front and make it seem like the customer is getting more by doing a bigger deal) and believe that the new deal flow from your partner will make your revenue net positive.
– Re-build your sales and marketing collateral to focus on the new business outcomes you will deliver together – don’t use your same content and throw in a slide at the end about the partnership.
- Build & Sell. You are going to build something on top of your products that make it easier for a customer to use both of your products and help them solve a bigger problem. The details of what you build get specific quickly; larger business outcomes is the guiding principle.
4. Cut it quickly if it doesn’t work out
A lot of partnerships don’t work. I’ve had so many partnerships that start off well, with excitement, energy, executive interest. And then they die.
We hang on because of a sunk cost fallacy, and six months later we’re still having calls and sending emails about the lack of progress.
Agree to pull the plug if you don’t have real outcomes after two months, whether that’s net new pipeline, a clear technical build, etc. Either there’s a lack of commitment or a lack of capability between you two and there’s no reason to keep putting time into it (note: this doesn’t apply as heavily to the cloud vendors. Once you get in, you’re in, and there’s not really a reason to pull the plug. At minimum you can let your product sit on their marketplace and have it be purchased on-demand with almost no effort on your end).
5. Don’t expand to new partners too quickly; double down on partners that show early success
Taking on too much too quickly is the silent killer. You won’t do enough with each partner and you’ll wonder why they aren’t showing up with new deals for you.
Once you get your first quick wins, throw fuel on the fire! Keep building pipeline, educate more sales teams on the stories, work it into your QBRs and social media presence, do all of the things you know to do with a manic focus (and have your partner go 1:1 on everything).
How Can You Help Build a Great Partnership?
1. If you’re an executive, set the vision, seek ideas, and tie compensation to innovation.
If you’re an executive, you are probably removed from the field. You generally don’t have a good handle on how customers are buying or using the product. You might know where you need to go, but your frontline sales, customer success and marketing people are the ones who will give you the “who” and “how” to get there in terms of which partners make sense.
More importantly, adjust your comp models. This is probably the #1 thing that will prevent early success. If sellers get compensated the same or worse for selling a more complex solution, it’s never going to get sold.
Offer your customers discounts, your sellers 100% quota attainment, and 5% quota retirement on the ARR of the other product. What, did you think you weren’t going to have to invest to do this?
We had an awesome solution built between a product company and a global SI, but couldn’t figure out why we weren’t getting any traction.
Once we got beyond the partner and industry teams to the sales orgs, we found out that sellers at the product company weren’t compensated for selling our solution. The intent was to set up a modernization play for the base product, but no one cared about that because of how long the deal cycle was. It was like we spent six months building this thing just to throw it in the dumpster.
If you’re not going to compensate and invest, the partnership is going to fail.
2. If you’re a manager, you’re either a catalyst or a weight.
Most innovations get killed at the middle manager level, and that’s largely because of misaligned incentives.
The Innovator’s Dilemma talks a lot about the pressure placed on middle managers to deliver revenue growth, and that’s way harder to do by focusing on innovation since returns are poor in the early years. It’s your job to help your executives realize this. Get feedback from your teams on what partnerships would make sense, build a case, and ask for quota relief for you and a small team to execute in a major way.
3. If you are an individual contributor, run ideas up the pole.
You are the voice of the customer and the one who has the clearest picture of what’s really happening. Learn your industry/function/market as much as you can, figure out what other products are crushing it, identify the ones that you hear your customers talk about most, and make recommendations to your managers.
If they don’t listen, go to your executives. The hierarchy is good for managing the core business, it’s bad for innovation. Keep pushing until someone gives you a reason why it won’t generate better returns or gives you permission to go execute.
Partnerships are hard. Most of the ones I have tried don’t work. It might feel like you’re not making any progress. However, if interests are aligned correctly and you put in enough effort, you will get to a partnership that drives enough revenue that makes all of it, even the failures, worth it. If you want someone to help you think through some of these concepts and how they apply to your world, shoot me a DM on LinkedIn and we’ll chat. There’s nothing to buy, I just want to be of service.
Chris Chapin helps software and services companies grow their businesses together by challenging them to solve the world’s largest problems. All of his opinions are his own.