Showing true colors in partnerships

Partnerships are an odd part of the business model. It’s often very difficult to understand them, or even figure out if you’re really looking at a partnership in the first place. Recently I encountered such a weird case, when I read a headline about booze multinational Diageo, partnering with a scrappy hipster startup called Bespoke Post. Lets find out more about this partnership in this blog post by applying the newly designed Partnership Canvas; an add-on tool to the Business Model Canvas

The two partnering companies
Diageo is a global player in marketing alcoholic beverages. It holds big brands like Guinness, Johnnie Walker, and Smirnoff. The company had sales of € 15 billion in 2013, with a strong growing emerging market presence.

Bespoke Post is a online subscription-based product box startup. The startup has a highly targeted approach for selling gift boxes filled with artisanal, high-grade products, both food and non-food, to young US career makers with cash to burn, aged between mid 20’s to mid 30’s, and mostly male. This startup landed a seed round of US$ 850k early 2013, and is probably still figuring out how to generate revenue.

The big question is: what on earth are the elephant and the mouse trying for on the dance floor?!

On the face of it, it seems that Bespoke Post pitched the right concept to Diageo. Bespoke created a product box called Alchemy. It contains the essential wares in any mixologist’s den, as they put it. The pitch would be that Bespoke Post offers a joint marketing initiative, where they provide the hardware for mixing, shakers, and bar spoons and all, and Diageo would supply the required liquors to enable the mixing. The accompanying video with Diageo’s “head mixologist” applying herself to the toolkit would seem to give that impression. (Here’s how to make a Manhattan) Sketched out in a partnership canvas, the partnership would look something like this

Bespoke Post - Diageo partnership at first glance
Bespoke Post – Diageo partnership at first glance

But something odd is going on. With this given partnership foundation (the bottom 3 building blocks), it’s impossible to come up with a logic what new value this combination would be able to create. Couldn’t Bespoke Post just purchase the liquor, put one of their own staff in the video, and sell the box themselves, or vice versa? Is this actually a partnership?

Prompted by this caveat in the partnership logic I looked a bit closer at the Alchemy box. If you look at the box content, you’ll find that there is actually no liquor in the box. It’s just the hardware that gets sold with the Alchemy box, accompanied by some mix recipes, which promote the well-known branded alcoholic beverages. So what’s this all about? There must be some other value that gets exchanged to make this a partnership.

Legal print
The answer comes from elsewhere. Digging into some articles on the legal constraints imposed on marketing alcoholic beverages, I found this Wall Street Journal blog article, which explains new legislation for advertising, and marketing alcoholic beverages on social networks. Apparently alcoholic beverage advertisers have to meet a requirement that at least 71.6% of the social media advertising audience is old enough to legally drink alcohol. That’s quite a tricky limit to take heed of. A company could find itself easily crossing that limit, be it intentionally or not.

So my hunch is that this is where Bespoke comes in as a solution. Bespoke Post is a highly targeted initiative that addresses a key demographic of Diageo customers. Bespoke might be Diageo’s marketing experiment to avoid the risk of having the wrong audience engage with its social media advertising. This partnership could well be an experiment to see if an initiative like Bespoke could actually be a social media advertising tool for Diageo. Having this logic sketched out in a partnership canvas, you would get something like this, which makes a whole lot more sense partnership-wise:

Bespoke Post - Diageo partnership upon closer inspection
Bespoke Post – Diageo partnership upon closer inspection

Key take-aways
Apparently the experiment didn’t work out that well, as the Alchemy box is not offered anymore by Bespoke Post. But the example is interesting to show the potential of using partnerships for business model experimentation. This specific case highlights the following learning points about partnerships:

  • A partnership is not about the transaction between 2 businesses. It’s about a non-monetary value exchange that takes place between partners.
  • When figuring out a partnership, try to formulate the logic of the foundation of the partnership (the 3 bottom building blocks of the partnership canvas) first…
  • … but don’t leave your thinking at the foundation. Also think about the value that needs to be created based on this foundation. A partnership needs to create some new form of value as a result of connecting the existing values that partners contribute.
  • By connecting all 4 building blocks of a partnership in a single logic, you will make surprising discoveries on what the true color of a partnership is.
  • If you’re interested to explore partnerships for business model innovation, you can read the primer on the partnership canvas and download it.

Join the Partnership Design Linkedin community!
Link up with other partnership professionals? Advice or input on your partnership design? Join the Partnership Design Linkedin community!

The Partnership Canvas

It’s been more than a year since we introduced the Partnership Proposition Canvas as a prototype tool for modelling key business model partnerships. Since its introduction, we’ve been testing the tool and refining it. In this post we share the latest version, which has proven to be simple in use, and more effective in getting the conversation of business model innovation through partnerships going. Allow us to introduce the Partnership Canvas: an essential tool for designing, negotiating, and adapting partnerships. This tool works as an add-on to the business model canvas.

What, another canvas?!
The reason we’ve developed the partnership canvas is that many organisations struggle with their partnerships. One of the main causes is that there is no structured approach available yet to help design strategies for partnerships. Naturally, the partnership discussion itself between organisations is often veiled in mist. As Henry Chesbrough, the figurehead of open innovation, wrote:

“few companies in our experience take the time to articulate their own business model. Fewer have any clear idea about the business models of their external relationships.”

That is not a good basis for creating a collaboration. People leave too many assumptions about their partnerships unaddressed, and that backfires the moment they go live.

What is a partnership?
The first hurdle in the partnership discussion is definition of the term partnership. You won’t be able to define a partnership by only mapping out the two partnering business models. That describes the result of the partnership. It doesn’t explain how the partnership works.

A partnership is more. It is an entity that sits in between the two business models that make up the partnership. This entity enables value to flow between two partnering business models. By combining value inputs from both business models in a partnership, they are able to create new forms of value that they both benefit from. (I’ve written about what can best, and best not be defined as a partnership from a business model perspective in a previous post).

Value exchange between two business models

The partnership canvas was created to demystify the partnership entity by defining its building blocks. The tool can be used to map existing, and design new models for partnerships. The partnership canvas helps to break through the boundary of possibilities for innovating with only your own business model.

The building blocks of a partnership
The first question you need to ask yourself when orienting on a partnership is what will be the purpose of the partnership. The key to defining this purpose is to question yourself on how you can contribute to a better, more complete experience for your customer. This could relate to aspects of availability, convenience, speed, price, performance, etc.

Some things don't change

Visual by Dave Gray

Based on definition of this purpose, you will be able to describe the missing element from your own business model, for which you are seeking a partner. You can use the definition of this element to screen candidate partners on a (set of )value(s) that you desire. This desired value makes for the first building block of your partnership design.

PC Presentation 1 DV

The second question is about your own contribution to the partnership. If you have identified what value you desire in a partner, then you need to develop a matching offer that connects with that value. A value offer is required, which is based on one or more elements from your own business model. An effective offer either complements or enhances the value you would desire from a partner. Only if this connection is made, do you have a basis for creating a relationship.

PC Presentation 2 VO

The third question demands clarification on how you will connect the desired and offered value. Through what collaboration activities or through what form will these values be connected? It is essential that both parties find a way to integrate the value that they are putting to the table. This transfer activity building block is the exchange by which synergy between the partnering business models is created.

PC Presentation 3 TA

With this third building block, an engine is created that enables value to flow between partners. But the partnership discussion doesn’t end there. Essentially what we’ve defined so far is a basis for connecting values. The ultimate question is whether this value engine enables you to create a new form of value that you can utilize to innovate in one of the building blocks of your business model. This question on created value makes up the fourth building block of the partnership.

PC Presentation 4 CV

Using the partnership canvas
Once you have mapped your business model, and desired value from a partner, you can use the partnership canvas to see how you can connect with a partner. The value flow between the both partners is made by linking all the building blocks together through a single line of reasoning. Use post-its to describe the elements of your partnership. If multiple value elements are involved in a partnership, then you can use color coding of post-its to connecting lines of value exchange.

PC w Post its

Another important feature built into the design of the partnership canvas is that it enables communication between a business model and its partnership. The value offer, and created value both have links to the business model of one the partners, and the desired value should relate to an attribute of the other partner.

Screen Shot 2014-10-17 at 22.37.00

Lastly, but perhaps most importantly, the partnership canvas is designed in such a way that it accommodates the comparison of a partnership from both partners’ perspectives. By laying the foundation of the partnership canvas against each other, you will be able to compare whether:

  • Your desired value is what your partner is willing to offer
  • Your offer is the value that a partner desires from you
  • You have a same framing of the transfer activities, required to connect your values.

The figure below shows how a partnership can be compared from the perspective of two partners, each with their own business model. Screen Shot 2014-10-17 at 21.39.34 By comparing two perspectives, prospecting partners can sense each other out early, and also learn from each other on the various opportunities that exist. Also, they can find out early on whether there actually is a partnering perspective in the first place. This might be a painful realisation to make, but it could save a lot of more hurt from a painful divorce in the future.

IMG_3342

Conclusion
The partnership canvas creates empathy between two prospective partners on the strategic importance of the partnership to each. The canvas can be used as a stand-alone tool to quickly identify a partnering opportunity. But for full strategizing value, it’s better to use it in conjunction with the business model canvas.

The partnership canvas has been tested in various workshop settings with students and entrepreneurs. It has demonstrably contributed to better partnership discussions. Parties become clear about each other’s strategic objectives. Also, they learn from each other about the various opportunities there are to partner. It’s not a matter of making one grand master plan for an offer the partner can’t refuse, but more of finding out together what the opportunities are.

Stay tuned for more guidelines on how to use the partnership canvas on this blog. You can freely download, and use the partnership canvas [SlideShare login required, or send me an email: info@partnershipcanvas.com. The tool is published under a creative commons license, so it’s free, but please review back to the source. I hope to hear from your experiences!

Join the Partnership Design Linkedin community!
Link up with other partnership professionals? Advice or input on your partnership design? Join the Partnership Design Linkedin community!


Word of thanks
I couldn’t have developed this tool without the help of some special people. First I would like to thank my colleagues and students at Wageningen University for creating opportunities to test out the canvas. Next, I would like to thank Mike Lachapelle for some really foundational feedback on the design of the canvas, and Salim Virani for some interesting pointers on shapes. Lastly, a huge thanks goes out to Ernst Houdkamp, whose visual thinking skills kept me sharp on finding improvements for the canvas, and who had the patience to stick with me through the many iterations of the tool.