Among the many lessons learned by Microsoft over two decades of exploring, negotiating and executing consulting alliances, perhaps the most important is that ambiguity is the enemy.
"Living through a failed alliance is far worse than the disappointment of not closing a deal."
- Geoff Nyheim
"Know what you want from the beginning," advises Geoff Nyheim, general manager of the Global Partners Enterprise and Partner Group at Microsoft, which unlike some of its largest competitors, pushes nearly all its services out to the channel and prefers commercial alliances to financial return-based (i.e. venture-capital) arrangements.
Nyheim, speaking at a recent conference sponsored by Kennedy Information, cited at least 38 good reasons for forming an alliance. And yet, he notes, companies still come together because a couple of their executives are buddies, or they think a deal will generate a little buzz.
All three phases of a partnership - exploration, negotiation and execution - have to be performed in a much more "disciplined" manner, insists Nyheim.
In the first phase, there must be shared objectives; some alignment of business models; compatible cultures, offerings and market segments, and a common language.
Also, suggests the Microsoft alliance manager, involve key stakeholders early in the process and keep out senior executives "until it's time to get the deal done." Understand your partner's motivations, work out a process that's collaborative and iterative, and nail down your long- and short-term objectives. And, before committing ink to paper, define the "depth" of the relationship - preferred, exclusive, etc. - and scope the investment and your risk/reward tolerance.
And when you've accomplished all of that, says Nyheim, you've only just begun the process.
The negotiation phase, he continues, should be tightly choreographed beforehand. Roles and responsibilities, decision-making processes, common definitions and behavior ground rules must be laid out in advance.
Like the exploratory stage, the negotiations should be driven at the field level, not out of headquarters. And the actual terms of the deal should be separated from the relationship's objectives.
Finally, cautions Nyheim, no press release or positioning document should be issued prior to the execution of the partnership agreement.
In the execution stage, some of the keys to success include managing the alliance like a business rather than a marketing relationship; constantly auditing the performance of the alliance and revising the plan and resource commitments; and having simple compensation incentives and a go-to-market strategy that tells the world that two parties are working together.
"Predictability, doing what you say you're going to do, is critical to being a good partner," concludes Nyheim. In order to achieve that predictability, a partner's client-facing teams should never be coerced into doing "unnatural acts"things they haven't done historically.
"Living through a failed alliance," he warns, "is far worse than the disappointment of not closing a deal."
Three Timely Tips
- Plan at least a year out into the future. Have a 12-month marketing plan supported by a multiyear resource commitment.
- Make sure top management signs on early. Get executive sponsorship and budget OK before negotiations begin.
- Stay "hands-on." Be prepared to manage the process like a client project.