Don't Bite the Hand That Feeds You: The 7 Rules of Technology Ecosystems

Regardless of the reason for partnering, each partner brings its own agenda to the table, and usually that agenda is to sell more of its own products. Systemic problems in ecosystems arise when the various parties don't establish or communicate rules of engagement. If you're a technology startup, here are some hard lessons from the trenches.

What I love most about the enterprise technology business is the complexity that comes with coopetition. Your partner can become your worst enemy, and your enemy your best partner. Due to this dynamic, trust must be established using certain rules of engagement. These rules must be applied with sensitivity to the balance of power. Are we equals? Or does one of us have the upper-hand? If you're a technology startup, you're probably part of an ecosystem driven by a bigger partner. You need to pay attention and read on.

But before we discuss rules of engagement, let's understand why we partner to begin with. Technology coopetition arises because comprehensive end-to-end solutions are rarely provided by just one single vendor. The most robust end-to-end solutions often come from an ecosystem of partners who each do what they do best in their respective component areas, whether it is end-user devices, business software, middleware integration, databases, reporting tools, consulting services, or implementation services.

In a business in which clients value deep industry knowledge and technology expertise, I have run into these 5 main reasons why startups team up with bigger players:

  1. Go-to-market--Brand synergies, mindshare, or credibility can be gained from co-branding or selling together to a common customer. For example, a health care software vendor may be smaller than its larger business partner, but that vendor may possess specialized industry knowledge the larger partner lacks.
  2. New solutions--The development of repeatable and innovative products or intellectual property requires more skills than what each individual partner has on its own. For example, a smaller workflow management software vendor may want to OEM the business process management server of a larger more established partner.
  3. Expand distribution--Creating new channels into markets that can't be reached as cost-effectively as a regional partner. For example, a large technology player may choose several regional systems integrators or value-added resellers to go after small/medium-sized businesses.
  4. Thought-leadership -- Creating whitepapers, conducting joint-studies, or validating new markets or new customer wants/needs. For example, a 3rd party consulting or research firm may want to partner with a large technology company in order to access its customers for a market validation study.
  5. Expand Delivery Capabilities--Some projects are can get so big in scope, it requires more manpower to design, develop, test, and rollout the solution. For example, one vendor which does the project management and architectural design for an ERP software may need to subcontract to a partner to bring on board additional resources for configuration and installation.

Regardless of the reason for partnering, each partner brings its own agenda to the table, and usually that agenda is to sell more of its own components. Systemic problems in ecosystems arise when the various parties don't establish or communicate rules of engagement. If you're a technology startup, here are some hard lessons from the trenches:

Rule #1: Don't Be a Chihuahua

A Chihuahua will bark at anything, including that towering German Shepherd that could snap the Chihuahua in two pieces. Know the balance of power. OK, you may in fact be the smartest guy in the room, the client exec from the partner vendor may be a complete idiot, and the client knows this. But if that partner vendor is 30 times your company's size, and you're still a whipper snapper of a startup, know your place. Respectfully hand the steering wheel over to that client exec if and when appropriate. Don't think you're the only game in town. That client exec may have a shortlist of alternative partners in his back pocket, and they may very well be your competitors.

Rule #2: Don't try to take more than your fair share of the pie

So, as if being a Chihuahua wasn't enough, I've seen a startup walk into a deal, fully knowing the client's budget limitations, and then propose a solution component that accounted for over 60% of the deal. Then, further inspection of their services and technology pieces showed that they padded their line items with fat margins. That's a no-no for two reasons. First, you could scare the client away with sticker shock. Second, you've just revealed your greediness. Do you think your partner will invite you back?

Rule #3: If you're invited to a wedding, don't outshine the bride or groom

Don't be that flashy overdone Auntie who just had to wear the sparkly red mini-dress and hog the dance floor at the wedding party. A portal solutions startup was invited by its larger technology partner to a meeting with the client. During the meeting, we learned that the client's main problem was the lack of workflow management, a solution which the larger partner provided. In spite of the client's broader more serious problem, the startup's sales guy kept pushing his portal solution, and revealed his complete lack of interest in solving the client's underlying problem.

Rule #4: Don't Be a Two-Timer

The biggest sin a startup could commit is to be invited to a deal or project and then recommend a solution that is offered by its partner's competitors. Yes, this does and has happened more often than you think. There are various reasons, both legitimate and not, for why this happens. Perhaps the technology partner's solution didn't fit the client's problem or the client didn't want it. Or perhaps the startup's skills are oriented more towards another solution provided by its partner's competitors. Whatever the reason, if you were invited to the deal, don't bring in your partner's competitor.

Rule #5: Give to Get

Good teaming requires that both parties put skin in the game. Startups have a lot to gain from big technology partners. Big partners can provide an army of sales people who might recommend your product to customers. They provide development resources to enable your product on their technology stack. They'll put their logo next to yours on marketing collateral and at trade shows. They'll co-invest in your pilots and proofs-of-concept. They may even acquire you if your startup fits nicely into their portfolio. Most importantly, they'll invite you to meetings with customers.

But you have responsibilities too. First, you may need to strategically align your product with your partner's platform or solution. Second, you may need to get certified and trained on their platform. Third, your partner may demand that you work exclusively with them (not recommended). And fourth, if you're developing a new product together, you may need to make an honest effort to share intellectual capital, even if it's proprietary. All of this takes real people and real resources. Your savvy partner will see through your verbal or powerpoint promises. So if you're serious about partnering, put some skin in the game and demonstrate your commitment.

Rule #6: Be like Fonzie


I love this scene from Pulp Fiction:

Jules: Now Yolanda, we're not gonna do anything stupid, are we?

Yolanda: You don't hurt him.

Jules: Nobody's gonna hurt anybody. We're gonna be like three little Fonzies here. And what's Fonzie like? Come on Yolanda what's Fonzie like?

Yolanda: Cool?

Jules: What?

Yolanda: He's cool.

Jules: Correctamundo. And that's what we're gonna be. We're gonna be cool. Now Ringo, I'm gonna count to three, and when I count three, you let go of your gun, and sit your ass down. But when you do it, you do it cool. Ready? One... two... three.

So if you're a startup, and you're with your partner's customer, you're gonna be cool. Don't be so desperate to sell, sell, sell. We know you need to close a deal this quarter, but chill the f*%k out. Stop and listen to your customer's problem. Listen for implied and explicit customer needs. And then listen to and collaborate with your partner to figure out how best to address those needs.

Rule #7: Don't be a douche bag

At the end of the day, partnerships succeed and fail between human beings, not necessarily between faceless corporations. A formal partnership agreement may exist, but if the two sales guys on opposite ends of the table hate each other, you can be sure that the partnership will not last no matter how long it's been in place.

So, if you want your partner to invite you into his next deal, don't be a douche bag and play nice, even if the balance of power is equal. Work with your partner as if you have several more deals to work on together. Put on a smile and nurture the best parts of the relationship.

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