What happens when product, and business development people join the same squad?

Product development, and partnership teams are critical for business value creation, and growth. The product development team is key for improving a company’s offer to customers. This attracts more of them, and can also increase value from the lifetime of each customer relationship. Partnership teams aim to achieve company growth; They’re like a SWAT team that opens access for other companies’ resources, and exposes the product to new markets.

Product, and partnership teams usually operate separately. This separation seems logical. Each team focusses on what they’re good at: creating product value, and driving growth. But in this article I’ll show how the separation of functions drives a wedge into the overall business value creation process, and how collaboration needs to change to resolve it.

Product, and Partnership: Better when they’re together.
Instead of looking into ways for improving partnership, and product development teams to function separately, lets take a look at what would happen if we just put these people on the same team.

Product, and partnership teams in tandem, generate more value, than they would separately. A great example of a company that has achieved this is Nespresso. By combining Nespresso’s capabilities on (coffee) product marketing, with the coffee machine manufacturing partners’ capabilities of channel marketing for kitchen appliances, Nespresso achieves significantly more leverage from the partnership than they would from just outsourcing manufacturing.

Another example is Tesla’s (former) partnership with Toyota. By jointly working on developing electric vehicle parts, and electric car manufacturing systems, Tesla learned about mass-production of cars. This was key for launching their famous Model S. So, by not only focussing on combining technologies in the partnership, but also utilising that technology in a new way of production, the partnership actually took product development to a whole new level for Tesla.

These examples show how transgressing product, and partnership team boundaries, broadens the scope for new business value creation. Neither Nespresso, nor Tesla would be where they are today, if they wouldn’t have looked at product development and business growth in an integrative way.

From marriage to divorce…
In a fledgling company you see that the functions of product, and partnerships, are combined within the same, small group of people: the same team. Often the startup CEO takes on both product and business development roles. In this situation, it’s natural to align the functions of product, and partnerships, and make product value creation and growth efforts click.

But the moment the startup starts evolving into a real company, the product, and partnership functions will branch off into separate teams. And that is where the seamlessness of their alignment is lost.

The product team starts focussing on its own resources, and existing product development roadmap, rather than looking out for ways to leverage their work through partnering.

Partnership teams will tend to focus on the existing product and finding partners for that. They have to work with what’s on the shelf, because they’re usually not in a position to tailor the product to growth opportunities themselves.

The upshot is that both product, and partnership people each start tweaking their part of an existing business model. They gradually lose the ability to operate jointly, and invent new ones in a concerted, fundamental ways.

Re-uniting product and growth.
What can we do to put the power of product, and growth back together again?

Firstly, it comes down to a joint understanding between both teams about the process that is applied for product development. Product, and partnership teams need to jointly define, and have visibility on priorities, as well as on the big questions that need to be solved to bring the product forward.

Secondly, the product and partnership teams need to start jointly experimenting with growth opportunities for the product, and make those experiments part of the product development process. It’s not sufficient to start searching for growth once the product is done. The product will also likely need to adapt to the growth opportunities that arise.

Thirdly, product and partnership teams need to start operating in the same rhythm of iterations in product development. This means that partnership teams should be able to shift with changing priorities of the product. The other way around, product teams should also be able to adapt to shifts in opportunity on the partnership end.

To support these 3 points of alignment, visual tools like the business model, and partnership canvas are really helpful. These tools enable all participants to step in and create the alignment that is needed to search for repeatable, and scalable partnership opportunities, that sync with the direction that the product needs to take. Once product, and partnership are able to apply rapid joint framing of priorities, and decision making on what steps to take, then the business value creation process is mended. The company will operate in the mode that is once did as a startup.


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Transfer activity in partnerships: providing mutual access to each others business models

 

One of the most frequently recurring questions I get during partnership design workshops is about the transfer activity: “What is it? Can you give me an example?”

In this blog post I will therefore dive a bit deeper into this building block. Firstly, I will describe a bit about the building block’s background. Then I’ll describe what the crucial role is of the transfer activity in distributing value between partners.

Background on transfer activity.
Partnerships enable the access, and flow of resources between partners (Mowery et al. 1996). Part of creating this flow is based on synergy between the resources that partners bring in: what’s their polar attraction, and how strong is it? The other part comes from building the conduits through which partners can connect these resources. How will they provide each partner with access to the resources, and enable them to create value with the partnership. This is where the notion of transfer activity comes in.

Transfer activity describes how exchange of knowledge, technology, and other value elements between partners takes place. Transfer could occur in the form of in-person collaboration between people from both sides of the partnership. It could also be in the form of a more structural (technology) platform where partners can access resources independently, based on prior agreement in their partnership designs.

An appropriate metaphor would be to use a certain stage in a relationship between people. Say you’re taking your relationship to the next level, beyond just dating, and you’ll be inviting each other over to your houses frequently. Now the questions is how will you let each other in? Will you exchange copies of the key, or will it be a string through the door at agreed times? Both provide access, but the nature of the transfer is very different, and important to understand, and agree upon upfront.

Distributing value in a partnership through the transfer activity
The transfer activity has a key role in the partnership. There’s a reason it’s positioned in the middle of the Partnership Canvas (see diagram below). Essentially it has two functions. Firstly, transfer activity connects the value elements that partners put into the partnership. Secondly, it enables the creation of the new form of value that each partner takes back to his or her own business model. Lets look at both of these roles a bit closer.

Screen Shot 2016-05-24 at 09.58.53
A full overview of a partnership with the Business Models of both partners (rectangles), and the Partnership Model (triangles) with the Transfer Activity (highlighted)

The first role of the transfer activity is to connect the desired assets with the value offer. There are two general approaches to set up this mode of transfer:

  1. Interpersonal collaboration.
    In this case your partnership depends on joint coordination and decision making a lot. An example of such a partnership is Nespresso and its machine manufacturers, like Krups and DeLonghi. Their collaboration depends on joint design of (new) machines, and setting up the appropriate marketing that fits both of their channels.
  2. Access via specifically structured technology
    Many information technology partnerships use rule-based transfer activities. Partners define the access that each can have to data, and other forms of IP through agreements on access permissions, and use. In a collaboration like Lyft and Didi in China you’ll see such a transfer activity. Lyft users can hail Didi taxis in China through use of the Lyft app. The transfer activity is an automatic transfer of the order from one system to the other.

When designing options for this transfer, it is important to also take a temporal consideration on the exchange of value. Will the transfer be a frequent, and recurring activity? Or is it more likely going to be a limited and short-term action?

These questions help point to a critical aspect of duration for the partnership. In the case of frequent, and recurring interaction, partners remain dependent on each other for value creation, like in the examples of Nespresso and Lyft above.

In the latter case of limited, or short-term collaboration, dependency expires due to gradual learning and other forms of value appropriation that takes place on both sides of the table. The Tesla-Toyota partnership is a good example here. This partnership expired when Tesla internalized the process of mass manufacturing for their Model S, which Toyota engineers helped them get started with, and Toyota engineers learned about Tesla’s battery technology.

The second role of the transfer activity is to create a new form of value, which can be inserted and activated in each partner’s business model. Taking the examples above again, the Nespresso transfer activity would create the offering of the Nespresso machine as part of the value proposition. Also, it helps create the content that will stream through the partners’ market channels. In the case of Lyft and Didi, the partnership gives Lyft an extension of their active geography to their existing users. For Didi it means a new channel, tapping into a new customer base of travelers coming from the US to China.

Conclusion
What I see happen a lot is that partners define synergy, and then tend leave their partnership designs at that, assuming everything else will fall into place after. They neglect to define how they will actually grant each other access to each others resources, and how they will create the actual value that is needed to run their business models better. They’ll likely be confronted with the problem of deciding how to exchange value and differences in perspectives on that, very late, if not too late, in the game.

So, setting up a solid mode for transfer activity, and addressing this discussion early on in the design process is crucial. Take time in the dialogue with your partner to figure out the transfer activity, and make sure that you understand from each other how you will collaborate in your exchange of value.

Literature reference:
Mowery, D., Oxley, J., and Silverman, B. (1996) “Strategic Alliances and Interfirm Knowledge Transfer”, Strategic Management Journal, Vol. 17 (Winter Special Issue), p. 77-91

 


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