Business development is the process of establishing mutually beneficial relationships with other organizations.

This article will

• Introduce you to some of the most common types of business partnerships;
• Take you through the process of shortlisting potential business partners;
• Walk you through a strategy to approach the shortlisted partners;
• Briefly discuss the low-touch methods of expanding one’s business;
• Dive into real-world examples of successful and mutually-beneficial business relationships.

Kinds of Business Partnerships

• Standard partnerships are those in which two entities leverage each other’s competitive strengths. The Nike + iPod Sport Kit was a partnership between Apple and Nike that allowed each company to capitalize on the other’s competitive strengths — consumer technology and running shoes. As a result of the partnership, customers owning an iPod, Nike+ shoes, and a Sport Kit were able to improve on their fitness with the help of custom running playlists, well-designed running shoes, and more-quantified workouts.
• Distribution deals are made between parties who have products or services to sell but don’t have a direct relationship with customers. Most internet filmmakers (the producers of content, the product in this case) find themselves in such a position and as a consequence enter into ad-revenue sharing agreements with YouTube (the distributor). Such an arrangement benefits the filmmaker by providing them with a platform to monetize their content and YouTube by giving it an opportunity to monetize the ad-delivery technology it has developed.
• Supply partnerships are usually made by one party to ensure reliable availability of key inputs for certain products over a pre-determined period of time. An example of this is the agreement between Apple and Samsung that guarantees Apple a steady supply of OLED displays that are used in the iPhone X.
• Licensing deals work best when one entity has products or a strong brand that can be advantageously monetised by another. Some of the most lucrative licensing deals are in sports — the latest licensing deal between Adidas and Manchester United is worth over $1 billion over ten years. Spotify, Apple Music, and Tidal license music labels’ catalogues to provide the greatest possible selection of streaming music to their customers.

Strategic Thinking

Now that we have identified the major kinds of business partnerships out there, we can move on to the process of identifying potential partners. We call this process strategic thinking.

Strategic thinking entails:

• Identifying the key-metrics the firm has to achieve in the short-term;
• Compiling an exhaustive list of partners who can help the firm achieve the identified metric;
• Ranking the prospects on the basis of a subjective priority score.

Since business development is all about forging mutually beneficial relations, we need to start by identifying our goals; the first step of the strategic thinking process is identifying our short-term strategy. Doing so helps us identify the key metrics that we have to hit in the short-term. Once we know the metrics we need to have at a point in time, we can start to search for partners who will help us reach that future state.

The list of partners we compile should be exhaustive. Not every entity that we put down on this preliminary list will want to partner with us, and therefore we have to cast the widest net possible.

Having created a list of potential partners, it’s time to figure out which ones to approach first. We want a ranked list with the partners most likely to want to partner with us at the top and those least likely to agree to a partnership with us at the bottom. This can be done with the help of a subjective priority score.

The subjective priority score is where the second aspect of strategic thinking comes to the fore — understanding each of the potential partners’ business objectives and short-term goals. Since we are hoping to identify mutually beneficial partnerships, the process we just employed to shortlist partners will be similar to the one employed by each of the partners to evaluate us when we approach them. Therefore, we ought to have an understanding of their business objectives, which in turn will help us identify their short-term key metrics.

Knowledge of their short-term key metrics will help us formulate the subjective priority score. Once we have identified the short-term key metrics of the potential partner, we need to figure out how the product we are developing can help them achieve their goals. The greater the alignment between their goals and the outcomes achieved by our product, the greater the subjective priority score and the sooner we approach them in our business development process.

In short, the strategic thinking exercise is all about identifying the key metrics that our company has to achieve, using this information to shortlist potential partners, and then understanding each of the shortlisted partners’ business models to establish which of them are most likely to want to partner with us.

Approaching Potential Partners

Armed with our list of potential partners, ordered by their likelihood to want to partner with us, we can initiate the process of approaching them.

The process of approach potential partners entails:

• Identifying individuals responsible for the metric-of-interest at the potential partner firm;
• Mining our personal network to identify individuals who can make a warm introduction to the identified individual(s);
• Developing a value-focused proposition for this individual in an attempt to convince them to internally push for the partnership;
• Keeping the initial conversation and all follow-ups as simple as possible.

The best way to initiate this process is to identify the people who are responsible for the metrics that we identified while coming up with our subjective priority score. We made the effort to figure out why a partner would be likely to want to work with us and we can leverage this expended effort by presenting our thinking to the very person whose job we can make easier. Doing so successfully will get the individual to internally push to establish to establish this mutually-beneficial relationship. Once we have identified this individual at each company, we should put them in a contact column in our spreadsheet.

The next step in the process is to mine our network for individuals who know these people. Doing so will facilitate the process of getting warm introductions. Warm introductions are always superior to cold-calling or writing cold-emails because the former invariably lead to conversations over coffee, video calls, or phone calls.

Getting that first interaction is crucial to making a good impression and getting the word out. While reaching out to the mutual contact who will is well-positioned to make a warm introduction, send them a short proposal that he can then forward to the individual-of-interest. Once you’re on the thread, follow-up ASAP with a timeline for the next steps. Requesting a call on the same day is best as doing so minimises the chances of the opportunity falling through the cracks.

For the interactions — proposal and, hopefully, negotiation — we recommend keeping things as simple as possible. For the former, approach the individual with a value-focused proposition illustrating as-simply-as-possible how the developed product/service can help them achieve their goals. If this goes well, the terms of negotiation should be similarly simple — no more than one page that is bereft of all legalese. This will preclude the need for lawyers and expedite the process. Offering to help with the implementation can also be thrown in as a bonus to ensure the effort at your potential partner’s end is minimal and the only bottleneck is the pace at which your entity can execute.

To conclude, approaching potential partners is all about identifying the relevant people at the potential partner firm, trying to get warm introductions, making simple value-focused propositions, and minimising negotiation and implementation overhead. The steps, if followed exactly, will help you establish partnerships in the least time possible.

Low-touch Partnerships

Some low-touch methods of expanding the business are:

• Using publicly-available APIs to boost user visibility in an attempt to attract more customers, which in turn helps business visibility and prospects. Services such as Google Maps and Uber are famous for implementing this low-touch partnership method;
• Allowing for content from the platform to be easily embedded on third-party websites. Services whose business model relies on putting content in front of the largest number of eyeballs, such as Twitter and Scribd, invariably turn to this low-touch partnership method;
• Distributing content at zero-cost to the end-customer. Services that can gain negotiating leverage by distributing audio to the widest possible audience, such as Spotify and SoundCloud, rely on this low-touch method to expand business. For the longest time, trading firms have provided asset managers with analyst reports at zero cost in an attempt to recoup expenses via trading fees.

While these low-touch methods of expanding one’s business are definitely useful, it’s important to remember that getting those first few partnerships via the traditional means will not only ensure a baseline level of traction, but will also help you develop, tweak, and iterate on your product to help ensure product-market fit.

Example

Given the increased familiarity with the process, we can move on to looking at a couple of real-world business development deals struck by social bookmarking service Delicious. These are the two largest and, perhaps, most important deals made by the company. The first is the pitch made to The Washington Post and the second is the pitch made to Mozilla for an extension that was launched alongside, and subsequently featured prominently in, Firefox 2.0. The first deal gave Delicious the cachet to approach subsequent customers and increased the desirability of a partnership with them; the second deal led to a tripling of their pre-deal user-base.

The pitch to WaPo was simple — here’s a service that can greatly increase the discoverability of the content already being posted to the website. In a world in which WaPo’s content was competing for readers’ attention with other kinds of content on platforms such as Delicious and StumbleUpon and news-readers were increasingly receiving their news from aggregators such as Google News, increasing discoverability, share-ability, and driving page-views was essential to the media house’s survival. The goal was to integrate delicious tags and consequently optimise the content for sharing on social media websites, including Delicious of course. Sensing the scale of the opportunity outside of WaPo due to its prestige, Delicious offered to sweeten the deal by offering to do all the integration work at the backend. WaPo came to see the deal as a simple integration with exceedingly minor downside and was therefore convinced to adopt the solution.

The Delicious folks’ hunch that WaPo’s prestige will open more doors was spot-on. The previous deal gave them the cachet that made the process of approaching and convincing subsequent potential partners far easier. Following their deal with WaPo, Delicious approached Mozilla while they were in the process of launching Firefox 2.0 — the first edition of their browser that supported extensions.

The pitch made to Mozilla was to develop a great browser extension for their über-popular Firefox browser. The growth in Delicious users following the WaPo integration was enough to convince Mozilla of the utility of the Delicious product to Firefox users, and they agreed to sign Delicious on as a launch-partner. As a consequence of the launch-partnership, Mozilla featured the browser extension to every Firefox user who upgraded. This immensely increased the visibility of the service to users and gave them a super simple way to interact with the service. The extension had two effects — it made the Firefox experience richer for every user, thereby increasing Firefox’s competitive moat in the fight for browser market-share, and drove a significant number of Firefox users to sign up for Delicious. The effect of having the browser extension featured at launch was so great that it led to a tripling of the Delicious user-base! The greater number of users benefitted Delicious tremendously — more people bookmarked a greater variety of content across the internet, which led to a broader selection of bookmarks that competed with each other to make it to the Delicious homepage.

These examples illustrate the manner in which Delicious used a “ladder up” strategy to develop its business. It first struck a deal with The Washington Post to integrate Delicious tags into each of its webpages, making them easier to ready by the service’s crawlers, and then used the cachet generated by the deal to sign other deals — mostly notably the one with Mozilla. The deal with Mozilla worked to tripe Delicious’ user-base and subsequently led to a far-richer experience for every Delicious user, which in turn made it more likely for each user to tell their friends about the service, which led to a greater number of users, ad infinitum.