She's the Real (Internet) Deal

Would there be an Internet economy without dotcom deals? Business has always had its share of technology alliances, marketing partnerships, and R&D consortia, of course. But there's something about the Web -- the speed with which products get launched, the size of the opportunities facing so many small firms, the risks of coming in second in a fast-growing market -- that provokes deals to get made in, well, Internet time. But is there a point to these deals? Does it matter that whatzit.com and whozit.net have announced a "strategic e-commerce alliance"? How can you tell when an Internet partnership is a lot of hot air -- and when it's the real deal?

One way is to ask Larraine Segil. In her 30-year career as an entrepreneur, attorney, and adviser to such companies as Compaq, Sun Microsystems, and Synopsys Inc., the flamboyant native South African has seen (and brokered) more than a few high-tech deals. Indeed, Segil, 52, is something of a one-woman industry on the topic. She is cofounder of the Lared Group, a Los Angeles-based consulting firm with offices from Chile to China that develops strategic alliances. She lectures on the topic to thousands of executives around the world each year, and she teaches a course on the subject at the California Institute of Technology. Her forthcoming book, FastAlliances -- Power Your E-Business (Wiley Publishers), will be out in January.

So what's the deal with Internet deals? The Web has changed the way that business alliances are made, and the changes apply just as much to brick-and-mortar companies as they do to small dotcoms, Segil argues. The reasons for partnering and the capabilities needed to execute those deals are very different from the motivations and skills behind traditional alliances. "E-customers want information and access," says Segil. "They want to understand their problem better and find a solution. Traditional companies tend to provide information only as it relates to what they are selling. So the need for alliances is greater than ever before. Your company alone cannot fulfill the needs of a customer in the e-business environment."

In an interview, Larraine Segil explained the art of the dotcom deal.

How are Internet alliances different from traditional alliances?

Internet alliances are any partnerships formed around e-business strategy. They can be between dotcoms and brick-and-mortar companies, between pure dotcoms, or even between two traditional companies. They are much faster and more flexible than traditional alliances, and the depth of the relationships varies greatly, ranging from what I call a "press-release relationship" to an all-out merger. They tend not to last as long as traditional alliances; they're often as brief as three to six months. The life span of the agreement is not the central criterion anymore, whereas in traditional alliances, that's always a big negotiating point. The rules truly have changed. Nobody in their right mind would look at a 10- or 15-year relationship anymore. Your current e-business partner could be exactly the wrong partner for you 2 years from now because of changes in the competitive landscape.

But how does a press release constitute an alliance? Isn't that just a bid for attention?

It's what you're doing with it that counts. Call it an alliance, call it a press release. Semantics don't matter. But a press release causes a reaction. And the reaction may not just be that the stock goes up. It may be that people begin to link companies that have issued press releases. So if you happen to follow the press release with some cobannering activity on your Web site, you're now in the pyramid of relationships. And you're beginning to migrate upwards toward a deal with more skin in the game for both players.

All you're saying with that press release is that you have an alliance that hasn't been properly implemented yet. But there is some aligning going on. And press releases can actually create preemptive alliances, because your competitor sees a press release and says, "Oh my God, we've got to find someone to acquire." And before you know it, the whole dynamic of the industry players has changed. So it's not an insignificant thing.

How can a company get the most out of its Internet alliances?

The most successful companies look at their partnerships as a cluster, or what I call a "spider network." The network includes direct partnerships with suppliers, corporate partners, and portals, as well as indirect partnerships such as those with your suppliers' suppliers, your partners' partners, and the other companies that your venture capitalists have invested in. The idea is to look beyond the most obvious alliances to see where value lies. Once you've identified all of the alliances that you have, you should rate them for added value and added risk, and allocate resources accordingly. Too many companies pour vast amounts of resources into projects that won't make a big difference in the success of their e-strategy, or they underfund projects that are absolutely critical.