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SmallCo vs BigCo
The Ham and Egg Conundrum
What follows is not an impartial look into the dynamics of a small company – SmallCo – entering into an alliance with a big company – BigCo. Intuition may suggest that BigCo is, by virtue of its scale, the de-facto dominant partner in the alliance. Take heart SmallCo. It need not be that way.
The intended takeaway from this discussion: SmallCo can and must lead to succeed.
“The Chicken and the Pig” Conundrum
Every day, across all industries and around the world the SmallCo/BigCo underdog story plays out. The corresponding profile characteristics of SmallCo and BigCo puts the two company types seemingly at odds with each other. But opposites often attract because each has something that the other needs in order to succeed.
Because SmallCo has fewer resources they are at a disadvantage from the get-go. They often roll the dice and bet heavily on the potential of a relationship with BigCo. Where BigCo is in a better position to weather delays or losses, SmallCo could easily see their investments evaporate. In short, SmallCo is committed all the way, whereas BigCo is simply involved.
Challenges
Let’s step back and explore where the seeds of dissonance are sown.
Misguided Intentions
SmallCo sets out to align with a larger company so that they can “punch above their weight” in the market. Their expectations of partnering with a large firm typically include immediate access to prospect lists, a customer install base and a large sales force. They are prone to invest disproportionately, which to them is a sign of their commitment to the relationship. They want someone to go steady with.
BigCo, on the other hand, scouts for innovation partners to take them into the future. They “test drive” relationships with a number of firms to see which ones rise to the surface. They look for predictable revenue. They hedge their investment bets as precursors to “greater involvement” in the alliance partnership, or even possible acquisition. They want to date, not go steady.
The Unraveling:
Together SmallCo and BigCo share in the future outcome of their relationship. Neither can claim the higher ground when things go astray, which they inevitably do.
Troubles can fester when SmallCo misreads without verification BigCo’s intentions and BigCo is not altogether forthcoming with its real interest in a relationship. Tangible evidence of those miscues might come when either partner reduces its business development budget.
Poor management decisions, such as focusing on dazzling marketing events and materials instead of closing deals, reduces the odds of success. Efforts to bolster the relationship’s progress in the public’s eye can lead to embellishing the volume of business waiting to be harvested, never a prudent move. In spite of these warning signs, neither party is willing to call it a day, just yet.
Remedies
In the early 1980’s, during the period of the nuclear arms negotiations with the Soviet Union, President Ronald Reagan repeated the mantra “Trust...but verify.” Companies that set out to lay a solid alliance partnership foundation would be well served to heed that advice. Enable trust between partners by building together an agreed to Plan of Record that documents how the alliance will achieve its goals and objectives and at what costs and by whom.
So, what must a SmallCo do in order to have an equivalent seat at the table with a BigCo?
First, exert a planning initiative to build the case for action. This can be accomplished by shaping the strategy and execution plan to capture the target market. SmallCo must demonstrate its worth as an equal partner through the quality of its insights on the market opportunity and the differentiation of its offerings. Implicit in this take-charge role is presenting to BigCo at every turn the quantified value that SmallCo delivers to their success.
Second, SmallCo must provide meaningful insights for the creation of marketing, sales, services, support and governance strategies. This begins with articulating a highly differentiated value proposition for the joint solution.
Finally, SmallCo must insist on a jointly developed Plan of Record that quantifies the resources – people, dollars and time – that each partner agrees to provide.
Simply put, SmallCo can and must lead to succeed.
Primary Source:
Philip Lay (play@chasmgroup.com): The Chicken & The Pig – The Critical but Elusive Art of Making Strategic Alliances Work, February 10, 2016