Dancing with Elephants: Steps in Big-/Small-Company Partnering
Last week, I joined a half-dozen executives and academics from around the world in a panel addressing the topic of constructive business collaborations. Never mind that First Tuesday hosted the panel on the Last Wednesday, the topic drew several hundred to the Ecole d’Ingénieurs et Architectes de Fribourg in Switzerland, where we debated the risks and advantages of collaboration.
Given a taste of my own medicine, I was allotted just eight minutes to share ideas on how small startup companies can effectively collaborate with large established companies. While not an exact transcript, what follows are some of the notes I used in the presentation.
There comes a point in almost every startup’s life when they realize that in order to get their technology to market, they are going to need to partner with a larger – often much larger – company. The mouse asks the elephant to dance.
Curiously enough, these large companies – the elephants -- have to dance. They are big animals, yet they must continue to grow. They have technology platforms and, based upon them, business franchises that they are trying to expand. But organic growth can be difficult for large organizations, and so they partner to extend their franchise, entrench their platforms, and drive new revenue into the business.
Elephants also have to innovate, another challenge for large companies that have as their priority serving current customers and keeping established products current and competitive. Small startups – the mice – can act as R&D agents for the elephants, filling gaps in the product portfolio and opening new product opportunities.
But dancing with elephants is tricky business, and it’s best to take a few lessons before sashaying onto the dance floor.
Lesson #1: Elephants don’t have to dance with you
Elephants aren’t in business to help you be in business. No matter how large or how rich, these large businesses are not benefactors for startups. They are in business to achieve their own market goals and they make decisions in their own self-interest. Elephants dance with startups not because they can but because they want to. It’s the job of the mouse to make certain the elephant chooses to dance with him.
So ask yourself:
– Does my business align with the elephant’s goals?
– Does my technology improve the elephant’s business?
– Does my technology fill a hole in the elephant’s product plan?
And then, approach the elephant with analytics to support your proposal. I recently met one smart startup, just three engineers, with some very impressive media technology. Independent of the elephant, this mouse ran real life trials to demonstrate that the elephant would see a statistically significant increase in average sales using the mouse’s technology. Needless to say, that got the elephant’s attention.
Lesson #2: Elephants are BIG
It may be evident, but it’s worth saying aloud: Elephants work on a completely different scale from startup ventures. To get the elephant to dance, you’re going to have to demonstrate that you can make a significant positive impact on the elephant’s business. That means big numbers, lots of zeros. Can dancing with you bring the elephant new customers or add significant new revenue?
If not financial returns, how will a dance with you enhance the elephant’s image, reach new markets, or otherwise advance a priority initiative? When Intel decided to get into the WiFi game, the company set aside millions of investment and marketing dollars to put into smaller companies that were moving innovative wireless applications into the market. Intel didn’t make this investment to help little companies, they did it to establish a market requirement and create demand for the chips they make for the then-nascent market.
Lesson #3: Dance a Familiar Dance
All of technology’s elephants have developer and business development programs specifically aimed at helping them find dance partners. These are well-established programs, usually with clear mandates and processes designed to scale across a range of potential partners. Elephants rarely create unique deals with small partners unless doing so will have a huge impact on the elephant’s business. It’s incumbent for the mouse to fit into the elephant’s program.
Lesson #4: Be Careful Where You – And They – Step
Even with no ill intensions, it is easy for a massive elephant to misstep. It’s important then to approach the elephant with caution. Large companies evaluate new products and markets with a build-or-buy analysis. If you approach an elephant with just an idea, you put your business at risk. The elephant, liking the idea but seeing nothing to buy, might just build it himself or find another partner whose idea has become real.
Some mice think they can solve this problem by asking the elephant to sign an NDA. You can ask, but you’re only demonstrating your naivete by doing so. Large companies don’t sign NDAs, and not because they are keen to steal good ideas. Rather, these companies are so large and host so many initiatives, that it would be impossible to know that projects similar to yours are not underway somewhere in the bowels of the organization.
If you are paranoid about losing your idea, protect it with execution (thereby making it easier for the Elephant to buy rather than build) and/or with patents.
Lesson #5: Know When To Stop Dancing
Elephants can dance on and on. They have deep pockets and market advantage. And elephants can be slow. Simply put: your urgency is rarely the elephant’s urgency. Many a startup has become exhausted and even failed waiting for a deal to move through an elephantine organization.
Before beginning the dance, know the signs and timelines that will guide your decision to get off the dance floor, preserving your time, capital, and energy for other more agile partners.
Posted by Chris Shipley at May 1, 2005 03:11 PM
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