One of the most effective business-development strategies for startups is a process that’s employed by mid-size to large companies every day in the United States. It’s the use of strategic alliances.
I hesitate to call them “strategic partnerships” as many do, because they’re not really partnerships per se. A partnership denotes shared risk and shared reward, but this isn’t usually the case. Typically, the parties in a strategic alliance will keep the relationship at arm’s length until the comfort level, expectations, and rewards of the relationship become evident.
Strategic alliances are business relationships that are usually built with no money or investment of capital.
- Expand visibility in a new market sector
- Confer legitimacy or prestige to the parties, especially when one is new or unknown
A strategic alliance must be a win-win, but the way each party “wins” can be quite different. Strategic alliances are most beneficial and impactful when they are built between businesses with complimentary offerings, that serve the same markets and customers. They work best when they consist of unrelated offerings that together create a synergy.
So how does this differ from sales and marketing? First and foremost, this is definitely not about selling to other people’s customers. The quickest way to kill a strategic alliance is to treat it like your new sales channel. It’s about building relationships and business development. It’s a matter of having a vision for your organization and identifying which resources can aid the strategy. What other organizations can be aided by what we do? How can our products or services help others?
Startups and small businesses have a tough row to hoe to gain traction and customers in competitive markets. Throwing money at the market is one way companies try to overcome the deficiencies, but startups rarely have that option. Even if they did, success depends on how and where the dollars are spent and the metric(s) utilized to measure it. Most startups and small businesses don’t have endless amounts of cash to spend on marketing, nor can they effectively measure which piece of the marketing and communications budget actually creates the greatest ROI. In my startup companies, we always look early on for powerful strategic alliances to help drive our agenda, identifying other non-conflicting agendas in the same marketplace. We create a more dynamic message and/or solution, and we do that on a shoestring.
Here’s an example, one we’re working on right now for my new software company. In the new company we’ve identified some real problems in the boutique hotel industry, and it’s easily costing small hotel owners tens of thousands of dollars per year and up to two hundred and fifty thousand dollars to rectify these, or upgrade. One way to get customers in the target market is to start cold-calling hotels that fit the profile we’ve identified. Anyone who has ever cold-called a market knows just how hard that is to get anyone to even listen to you, much less buy from you. The odds are in the low 2% range, which means that for every 100 calls made, only 2 will result in an appointment or sale. Those are some rough odds for anyone in this era of small business customer acquisition, and phone screening.
Our primary strategy is to align with the organizations that cater to this particular industry. It does help that in this case we have a thirty-year relationship with several hoteliers, and know the founder of an industry association that includes a membership of 20,000 small-hotel chains all around the world. We’ve pinpointed something of value for the association, are building it, and providing it to the membership as a value-add to their base dues. Then (ta-da!) there are two more tiers of premium products that will be available for the members at higher price points, providing services that tether us to the customer base in long-term ways.
Why is it important to identify key players, associations and memberships within your particular industry? There are many reasons, but one of the best is creating a legitimate one-to-many relationship. Other parallel reasons for pursuing the associations and memberships in a particular market are to create parallel legitimacy with a recognized or established organization. Being able to use of share their brand alongside your brand is a powerful message to would-be customers and other alliances.
When we founded the non-profit Entrepreneurs Assembly (www.EA-NV.org) five years ago, it was established to assist entrepreneurs and would-be entrepreneurs in honing their business models and keeping them on track in 30 day intervals. Early on, we established strategic alliances to provide funnels for the programs and legitimacy for the unique and valuable things we were doing to create and grow businesses. We worked with the folks in Reno at EDAWN, and provided them with a key entrepreneurial metric they did not have. They helped us with marketing and a bit of funding which continues to this day. We also knew early on that the university was key to many aspects of our programs and their success. Our educational courses have been accredited now for several years and 20% of our EA membership are students and former students all of whom are now building fantastic companies right here in northern Nevada, instead of moving over the hill to work for Google.
In launching EA in Incline Village, we knew that working with SNC was critical to the equation. They have an entrepreneurial program up there, but not a community outreach mechanism, which is what we have. I spoke to my pal Kendra whom I’ve worked with for years in business plan competitions. She was excited to launch, so we did, but we couldn’t have done it without the critical alliance in Incline!
Now here we are in Carson City, where we’ve been working strategically with Adams Hub for innovation to build a culture of entrepreneurship and collaboration in Carson City. This entails working closely with NNDA and other local entities to create a collaborative network of businesspeople who can help each other and drive fundamental success.
No organization can operate solely on its own. All of them need resources, networks, customers, and strategic alliances. The alliances help each entity accomplish more than it could on its own, tap into new markets, create new synergies, and most importantly help organizations thrive and prosper. It works!