Phoenix Pheathers

The ROI of Loyalty (Part I)

I was approached by a client some weeks ago to present at conference some work we did on Developer Loyalty.  Now there are a lot satisfaction type surveys out there, but my client presented a very specific challenge. She was new in the role as the Director of the Developer Community and needed to understand very quickly "Who are the developers?"  What do they care about?  What is their impact on the business? What  investments would most improve their productivity? and increase their usage of the company's service and thus increase ROI to the company?

 

At the outset we knew we had a very diverse community, we needed to segment that community and understand what made each segment unique.

 

Technical Segmentation:

We found an entire spectrum of technical skill: intrepid amateurs to industry experts.  We found a corresponding spectrum of commercial influence: one time implementors to serial implementors. This enabled the client to differentiate technical support and documentation for different segments.  Targeting the more sophisticated (and costly) benefits to the serial implementors who could best drive repeat business.

 

Geographic Segmentation:

Where developers were located did not correlate one to one to market penetration of commercial services. For example, not surprising India represented the third largest geography of developers, but the client had almost no commercial business there.

That finding prompted more specific developer marketing to India where there corporate marketing was not reaching a key community.   Additionally, a key growth trend was spotted in Australia which became a focal point for new market development.

 

Vertical Segmentation:

Another actionable learning was in identifying non-traditional vertical market segments that could represent opportunities for growth. Vertical segmentation revealed a large number of developers in the non-profits sector signaling a growing market for the client services. 

 

Beyond the straight forward segmentation that enabled better targeted benefits delivery, we also segmented by Loyalty Profiles, using the Apostle model.  This model provides much deeper insight into behavior and motivations than a Satisfaction Index or the popular Net Promoter Score.  More on that in  the next blog - Part II!. 

Strategic Alliance Bookshelf

 Have you read a book in the past year that made an impact on you and how you manage alliances and partnerships? Could even be one you've written!! 

Here are some that I read this past year which I found had relevance to the field of alliance management. NOT listed in any order other than how they were stacked by my desk.

1.  The Innovator's Dilemma  - Clayton M. Christensen
An oldie but goodie, copyright 1997, this book focuses on disruptive technology and how it can leave market leaders of mainstream technology in the dust.  Required reading for anyone working with technology alliances and perhaps insightful as we try to navigate a disruptive economy, a prime time for disruptive technologies to take root.
 
2. Coolhunting: Chasing Down the Next Big Thing - Peter Gloor & Scott Cooper Trendspotting.
 Don't we all wish we had crystal balls.  One of the more interesting facets is how to leverage social networking to spot trends.  Who is linking to whom.  What ideas get picked up most by bloggers? The idea has some interesting implications for alliance networks.
 
3. Divide or Conquer: How great teams turn conflict into strength - Diana McLain Smith
I had the fortune of hearing Diana address a local (to me, Silicon Valley) chapter of the Association of Strategic Planners (ASP).  She provides sound and practical advice and frameworks for altering how we interact.  Her approach had very strong appeal to a community of engineers and technology nerds, not known for being touchy/feely, mainly because there was a defined framework for action vs emotions.

4. Fierce Conversations: Achieving Success at Work & in Life, One Conversation at a Time - Susan Scott
 "You get what you tolerate"  That was the fierce nugget that caused me to sit up and pay attention.  Scott provides a recipe for those difficult conversations in a way that elicits cooperation and change. I've tried it, it works, usually.  I haven't gotten my husband to clean the barn, yet.

5. The World is Flat - Thomas L. Friedman
Globalization means more businesses depend upon a network of worldwide alliances.  Alliance management skills have never been needed more. I reread this book this year trying to better understand how we position our profession in the context of a global economy.

6.The Speed of Trust - Steven Covey, Jr.
I am frequently asked "How do you build trust? How do you get it back when it is broken?"  I found many good answers here.  I now recommend this book to everyone who asks me about trust issues.
In fact, I think I loaned my copy out, since I can't find it.  Now who would I trust with that?

7.  Strategic Alliances: Three Ways to Make Them Work - Steve Stienhilber, V.P. Strategic Alliances, Cisco
I put this on my favorites list of books regarding strategic alliances. This is a short but powerful read, chocked full of straight talking advice about what it takes to make alliances succeed. As we know by all the research out there, the success rate is less than 50% and largely because organizations still approach alliances in an ad hoc fashion. Stienhilber addresses the issue to the CEO on how to get it right: the right framework, the right organization, and the right relationships.

What do you have on your list?  Why would you recommend it?

Alliance Strategy in Challenging Times: Rebalancing the Portfolio

Is it time to reevaluate your alliance investment?  Do you have the right partners to weather the economic climate?  Are you retaining the right partners to ensure you have a strategic advantage when the thaw comes?  

 Regular portfolio rebalancing is a best practice even in good times, but especially important now.  How do you know if you are wasting resources on a non-performer?  How do you rank the alliances that represent the best long term strategic bets if you can no longer afford to support all of them?  

 Well don’t go wading in with the loppers until you reassessed your alliance strategy.  In the best of worlds, you do this in concert with your corporate strategy to be sure that you align and that you appropriately invest in partnering.  Once you’ve identified which product lines are the most recession resilient, where the shifts in buyer behavior will occur and which customer problems cannot wait for an economic upturn, then you can align your alliance strategy accordingly. And consequently you will have better understanding what your portfolio should look like. 

 This is also a great opportunity to reopen a strategic discussion with your partners. How are they adapting to the economic situation?  Do they have insight into opportunities you may want to partner on?

 Most organizations have a few ‘zombie’ alliances, those alliances that you keep around because they’ve been a partner for years but no one can really articulate why the alliance continues to be strategic or whether the performance level makes the cut.  Take a hard look at these.  It may be time to put these to rest. On the other hand, if the working relationships are sound, these alliances are potential transformation targets. Rejuvenate them with a new strategic direction.  Given that it can take a new alliance 12-18 months to build the operational linkages and relationships required to deliver performance, these alliances could represent a significant advantage in time to results.  They may be a vehicle that just needs a destination.

 Also rethink what performance metrics will have the most impact on helping you manage through the next few quarters or years.  Don’t rely solely on revenue history. Remember buying behavior will change.  Past performance doesn’t guarantee future results.

 A cross portfolio evaluation will enable you to stack rank alliance performance against strategic importance so that you make clear and informed decisions given the changed dynamics of today’s economy. 

 

Alliances in the News

Plans for Strategic Alliances on the Rise 

Nearly one-third of consumer products companies plan to forge new strategic alliances in the upcoming 12 months (30 percent), up 8 points from the second quarter of 2008 according to PricewaterhouseCoopers

NEW YORK, Dec 4, 2008 (GlobeNewswire)

 

Chrysler Presents Reorganization Plan to Congress
"To further enhance its product portfolio, support growth, and improve its cost structure, Chrysler continues to aggressively pursue strategic alliances and partnerships.”

CEO Robert Nardelli - Online News Desk (12/03/08)

 

I've been seeing heads lines and lead-in like these of late.  And while I am heartened that companies are recognizing the value of strategic alliances, it drives me nuts to see them positioned as the last ditch attempt to revitalize an ailing company.  One wonders if these companies had engaged in strategic partnering prior to hardship, if they would be much stronger position to weather the economic climate.  Never-the-less, a lesson learned late is better than never. 

 

As noted in previous artlicles and blogs, the reasons to partner for growth, is the reason to partner to reduce to costs and risks. The reason is the leverage of strategic alliances - the more for less benefit of shared risks, costs, and rewards.  But what also goes along with that is shared CONTROL!  Ahaa! maybe now we are getting to the crux of the matter.  Shared control is not always easy for the X / alpha personality commonly in leadership roles in many organizations and it is critical to the success of any partnership. Organizations must be willing to give to get. They must willing to invest in the time and attention to collaborate rather than to dictate. And when you are finally resolved to ask for help from a partner, perhaps that is the time you are more willing to collaborate.

 

Alliance management is part operational skill and business acumen, but another vital job skill is the ability to collaborate and more importantly the abiltiy to coach, lead, and influence others to do so.

Alliance Strategy Realignment: Finding Opportunity in Economic Disruption

Have you rethought your alliance strategy in terms of what new opportunities lie ahead? Are you prepared to find the opportunity in disruption?  We can assume that business as usual is not going to work in today's volatile economic climate because business has become unusual. Yet, disruptive times are times of great opportunity for those who are alert in spotting them.

 

I recently dusted off a white paper written in 2004 which discussed the results of Cisco's alliance strategy during the dot.com implosion. By continuing to invest in alliances and realigning their strategy,  Cisco generated 12% growth in alliance revenue during a time of economic contraction.  In today's environment, they are realigning their alliances around technologies they believe will address shifting buyer behavior.  With businesses restricting travel to control costs, telepresence is a lower cost alternative to business travel and has stronger appeal now than in prosperous times.  

 

A colleague of mine works with partners who specialize in the financial sector. I erroneously assumed that his business cratered with the financial institutions.  I was wrong. Business is booming. Financial institutions are facing mergers, acquisitions, and consolidation. They are addressing compliance and regulatory issues that were overlooked, leading to this crises and looking ahead to new regulations and compliance issues that are likely to be legislated. My colleague is in a unique position to help solve the big problems these businesses are facing.

 

In the last downturn a marketing colleague shifted all marketing spending to co-marketing with partners  resulting in lead generation at half the costs. A bonus of this strategy was that cross marketing on partner house lists yielded much higher quality leads.

 

Follow the shifts in buying behavior. Spending might be reduced in a recession, but it also shifts.  Buying behavior changes.  Smart businesses realign their strategies to take advantage of those shifts.  In the last downturn, there was greater emphasis on cost saving technologies. Webinars replaced seminars. Companies that marketed those technologies, such as WebEx, did well even as many internet companies collapsed.

 

Solve the big problems created by disruption.  The financial sector is not the only industry facing restructure. Auto manufacturers, transportation companies, pharmaceuticals, and retailers are facing industry restructuring.  These are opportunities for those who can address those pain points and provide solutions. How can you realign your alliance strategy to focus on where companies will be compelled to spend to stay viable?

 

Share costs and opportunities.  Leverage partner marketing and combine forces to provide even stronger customer value.

 

Disruption creates opportunity and those who weather the economic climate successfully will be those who can adapt their strategy to take advantage of the changes ahead. 

 

Strategic Alliances - More now than ever

Strategic alliances are often viewed as a strategy for growth and perhaps not always a strategy for economically challenging times. But many of the reasons that make strategic alliances a good idea in good times make them an even better strategy for uncertain times. What are these reasons to partner?

Create greater value for customers.  With businesses and consumers becoming more careful with spending, products and services must provide compelling value and solve real problems.  Well crafted strategic alliances are built around customer needs and are differentiated from offers from the competitors. Cisco Systems maintained their investment in alliances during the economic downturn earlier in this decade and refocused those alliances to create differentiated go-to-market solutions for joint customers. They consequently saw an increase of 12% revenue in their alliance related revenues, while revenues across the company over the same period of time remained flat. 

Leverage new sources of innovation. Innovative new products or services that serve unmet customer needs create new sources of revenue often at lower costs and shared risks with your partner. Proctor and Gamble is an example of a company that was struggling in 2001 with a dearth of new products in the pipeline. They adopted an innovation strategy that sourced 50% of their new products from external sources. While the business press touted this as a break through innovation strategy, an alliance professional readily sees this as a partnering strategy as well.

 Shared risks and costs. This kind of leverage is critical when resources are dear. One small, startup decided during the last downturn, to leverage all their marketing efforts through partners, thus sharing the costs of marketing and sharing their prospect and lead lists to generate sales for both companies.

Harnessing economies of scale, reducing costs of production and distribution are also benefits of strategic alliances and also a great strategy to economize in uncertain times.  Recently, United Airlines was actively searching for a merger partner to help create these economies in reaction to rising fuel costs and industry restructuring. They courted Continental Airlines and US Airways, but ultimately decided to partner with both in order to gain many of the same benefits of a merger but to avoid the high costs of acquisition and integration.

A white paper describing the Cisco case study is available on the PhoenixCG website: http://www.phoenixcg.com/documents/recessionstrat.pdf

Coopetition - Sleeping with the Enemy

The April meeting of the Silicon Valley/Norcal Chapter of the Association of Strategic Alliance Professionals featured a panel discussion on Coopetition. It turns out to be as hard to pronounce as it is to do. The panel often struggled with every verb and noun form of it: Coopetive, co-opeting. It might have been humorous, but the topic is so difficult. How do companies partner with their arch competitors and why?

 The panel consisted of some old pros in the alliance area: an IBM Alliance VP for the Oracle Alliance, his counterpart, a VP of Alliances for Oracle charter with managing the relationship with IBM, an Alliance Director from PWC who worked co-opetively with both (hard to spell too).

 So why do they do it? In a word: Customers. Customers do not have pure play computing environments. They have products and services from multiple vendors and insist that they all work together. Ultimately, these fierce competitors realize they each have more to gain through collaboration than not. Not that it is easy. We asked how they did it?

 Four key reasons emerged:

1.  Focus on market segments or niches where they can differentiate themselves, where they have a unique value proposition for customers. The traditional partner math: 1 + 1 > 3.
2. Define clear rules of engagement. Where will they compete openly and where will they cooperate?
3. And most importantly communicate this clearly to both organizations, especially to field sales organizations.
4. Escalate conflicts and issues quickly before they can spin out of control and damage fragile relationships. In cooperative partnerships in particular, trust is hard gained and easily fractured.

While the Silicon Valley Chapter of ASAP as the name might imply is heavily technology, Coopetition is a growing trend in many industries and always an uncomfortable proposition but always driven by the promise of greater gains. One very large coopetive relationship exists between the US Postal Service and FedEx. FedEx provides air transport for much of the daily postal service as well as providing the overnight, priority mail service for the post office. Why would they do that? Well it is very lucrative business for FedEx and takes advantage of a very expensive asset, their air fleet. Conversely the Postal Service does not need to maintain an air fleet. And if you have a few grey hairs you may remember a time when the “check is in the mail” meant you might see it in a week or two.

Collaborative Innovation: Leveraging Partnerships

"Collaborative Innovation: Leveraging Strategic Partnerships for the Global Playing Field"

Sunday, March 30, 2008
BlogTalkRadio: www.BlogTalkRadio.com/CoachforInnovation
6:00 p.m. Pacific/9:00 p.m. Eastern 

Collaborative innovation is rapidly becoming a key differentiator for organizations. But as enterprises rush to take advantage of global opportunities without effectively playing the strategic alliances card the risk of stifling innovation increases.

Join Dee McCrorey, host of the CFI Radio Hour and strategic alliance experts Robert Porter Lynch, founder of the global Association of Strategic Alliance Professionals, Norma Watenpaugh, and Brian Handley and discover how you can play the strategic alliances game card as competitive advantage:

- Collaborative innovation – what it is and is n not
- Collaboration skills as key differentiators
- Art and science of alliance management
- Trends and global competitiveness
- What's happening in Silicon Valley

Join us Sunday, March 30, at 6:00pm Pacific /9:00Eastern for the Coach for Innovation Show – Change that Makes a Difference 

Strategic Alliance Secret #4 - Success Begins at the Top

A successful alliance program begins at the top with the support of the CEO. Like many other things, the CEO influences company culture, models the behavior, and sets the priorities in collaborative relationships. CEO support and that of the CXO staff fosters the environment where alliances can thrive and deliver results.

When you look at the management model of strategic alliances, it becomes clear why this level of support is critical. As strategic alliances stretch across a company’s value chain, you find that company to company collaboration touches multiple functional organizations – R&D, Operations, Marketing, Sales, etc. It takes the active involvement of senior management to keep the behaviors of the functional organizations in alignment with the company’s strategic goals in partnering with an alliance.

Companies that are well known for alliance excellence not only foster the partner friendly environment from the top down but they assign executive sponsors to shape and manage the strategic intent of the most important relationships. IBM is one of those companies that has a well developed Executive Sponsorship program built into their most important alliances. For the largest and most strategic alliances, alliance strategy and performance is reported at the Board of Directors level and the CEO, Sam Palmisano, regularly meets with his alliance CEO counterpart. Key business leaders are assigned as executive sponsors, especially to those partners that are considered important to the success of those lines of business for which they are responsible. These executives are actively involved in those alliances and have a clear stake in their success.

Secret #4 is the fourth installment to the Eight Secrets of Successful Strategic Alliances webcast broadcast by the American Management Association.

For more information, download the white paper: "Effective Executive Sponsorship" in the Resources area of the Phoenix Consulting Group Website.

Driving Growth through Win-Win Alliances

What do you think of, when you think win-win?  Most business people will interpret that as "I win and my partner wins". Unfortunately quite a number will behave differently: "win-win means I win twice!" This, as you can imagine, does not produce sustainable partnerships. Smart business people will not stick with a losing proposition and the alliance collapses or just never performs to expectations. Strong alliances and smart alliance managers ensure that there is benefit and return on investment for all partners in the alliance - a win-win value proposition.  But something is still missing from this value proposition.

Sustainable alliances are formed around creating a winning value proposition for customers. So great alliances keep a clear focus on the customer - a Win-Win- Win. Alliances can be formed at any point of the value chain and can create great gains and benefits for partners and customers whether they are formed to develop new innovative products, drive operational efficiencies and better service, or create competitive advantage for your customer. 

 The Starfish Alliance is an example of an alliance formed in Rolls-Royce Logistics supply chain to increase service level to customers and to decrease costs for the partners.  Rolls-Royce chairs a community of five logistic suppliers to optimize end-end performance of the supply chain instead of the individual business silos. Through open collaboration, the alliance has decreased costs by 20% and has a record of 99.9% on-time delivery to customers.

Initially Rolls-Royce faced distrust and skepticism in their vision. "Logistics companies don't think this way".  They were able to overcome that attitude through a system of Alliance Core Values that was mutually accepted by the partners. These values included "focus on the customer" foremost as well as "open, honest, proactive communications", "promote environmental responsibility and business ethics", "create opportunties for growth and breakthroughs".  These values became the governing principles for the alliance and helped to foster win-win-win thinking and behavior.

To learn more, read the white paper on the www.phoenixcg.com website:
Building Win-Win-Win Value Propositions: The Key to Sustainable Partnerships