Situation: A CEO is evaluating a horizontal market development opportunity to markets related to their current market. There may be branding implications. The new opportunity focused on a different sector and can add business unrelated to current customers. However, the new opportunity will stretch current resources and potentially impact current business and service delivery. How do you expand into new markets?
Advice from the CEOs:
Because the new opportunity utilizes known capabilities the company should be able to segue into the new market relatively easily.
Because the company is already familiar with security and other issues relevant to the new market, compliance should present no challenge.
Consider the impact on company time and resources. Building any new business will challenge current priorities and will require a careful balancing of efforts to assure that both current and new customers’ needs are being met.
Build workload and service schedules for both existing customers and the effort that it will take to develop the new opportunity including the time needed to create and build new customer relationships. Take your best estimate of resource utilization for the new effort and double it, then ask whether your current staff and capacity can handle both markets. If the answer is positive, then you can be more comfortable with the decision to expand into new markets.
As you evaluate the new market opportunity, look at both anticipated and unanticipated but predictable challenges that customers may face over the next five years.
For example, is there misalignment between future challenges likely to be faced and the current expertise and skill sets of managers who will be tasked with addressing these challenges? If so, tailor the sales pitch for new capacities to address these challenges.
Are there existing mismatches between products and services currently offered in the new markets, and do proposed solutions help to address these mismatches? If so, there may be significant opportunities in addressing these mismatches across multiple customers within the affected markets.
Situation: A company has an opportunity to use equipment supplied by a partner to create a demonstration project that will highlight their capabilities. They want to create the best buzz possible through this effort. One idea is to work with local service agencies to create a demonstration that will be highly appealing to news outlets. How do you create the best buzz?
Advice from the CEOs:
In addition to working with local agencies in your target localities to create publicity and awareness, work with the local newspaper reporters who write about the areas served by these agencies. City reporters are always looking for fresh stories, and will help you to generate instant news that may be picked up by other local and possibly national media. This form of building awareness virally is much more effective than traditional advertising campaigns.
Use industry trade shows of potential partners as demo venues by collaborating with the trade show organizers for a live demonstration that benefits the organizers. Let technical trade publications know about your demos. Stories that catch the attention of technical publications can also get the attention of national media and give you visibility far beyond the trade shows.
Use YouTube to highlight use and the impact of your service. Assure that your YouTube videos are interesting and attention gathering. This will help generate viral awareness.
Look at how Google helped to make Mountain View, CA a wireless city. They worked with the city and created great excitement both locally and nationally.
Consider using actors to stage demonstrations, followed by actual demonstrations.
Situation: A company wants to add off-shore manufactures to its supply chain. This is a new experience and the CEO seeks guidance on how to negotiate supply agreements. They want win-win agreements with their new suppliers. How do you optimize supply agreements?
Advice from the CEOs:
No supplier relationship is risk-free, especially if you are a small company. Be sure to cover ownership of new IP developed during the relationship. For example, assure that the supplier adds no new developments without communicating these to you in writing. You may want to fund new developments selectively to assure protection of your IP. This is essential if you need to switch or add suppliers rapidly to maintain adequate supply.
A service agreement is not always about cost. It’s about deliverables, and quid pro quo is important.
Manage your key supplier relationships as diligently as you manage your key client relationships. They are equally critical.
In a contract negotiation between supplier and OEM or customer, both sides need to clarify customer needs and supplier capabilities. The greater the transparency on expectations, deliverables, and contingencies, the better the agreement and contract.
In negotiating an agreement with a Chinese company, make the enforcement jurisdiction either Hong Kong or Macao. Why? So that courts can enforce terms of the agreement on the Chinese party in the case of a dispute.
Post-termination obligations are a key to any negotiation – you want this clarified in advance.
Contracts serve two purposes: a legal tool, and a way to drive behavior. They provide an opportunity to assure that both parties are on the same page and, under the best circumstances, serve as process documents.
Special thanks to Bijan Dastmalchi of Symphony Consulting for his contribution to this discussion.
Situation: A rapidly growing company is expanding both in its primary market and into new verticals. A number of companies are interested in strategic partnerships. How do you select the right partner in the right space?
At the end of the day it’s about a connection with the partner which extends across both organizations.
Look for cultural synergy with the other company. Do your and their managers and employees “click” or are they oil and water? This is a gut assessment.
Is the quality of people in both companies complimentary? Is there similar drive for quality and attention to detail?
Will technical integration be smooth? Are systems complimentary? At a minimum are there the right skills on both sides so that this won’t hinder the project.
Are sales and marketing approaches compatible? Will teams be able to work together? What about other departments?
You need to have strategic commitment across both organizations.
Partnerships don’t work if there is only alignment at the top. Executives can’t shove a new opportunity down the throats of those who report to them. There must be excitement about the opportunity across both sides of the partnership.
There must be complimentary competencies, capabilities and commitment.
Is there a clear understanding of the goals and objectives succeed?
Reward structures and incentives must be aligned down through the two parties. Conflicts will lead to struggles.
There must be a strategic alignment between the two organizations so that both see the partnership as complementing their broader strategic plans.
There must be a fundamental strategic win-win. The venture must be seen by each party as core to their business, plans and results. If this isn’t present, the collaboration can be drowned when a better opportunity that comes along.
Look for some gauge that the partnership is as important to the other party as it is to you. What other partners do they have? Is the size of the opportunity enough so that you are assured of their ongoing attention?