Lesson: Channels & Partners with Steve Blank

Step #8 Outsource: Suppliers are more than a cost of goods

So the last type of partner are actually key suppliers. There are two types of key suppliers. One which you actually outsource part of your company to a third party. It might be your accounting functions, it might be some of your sales. It might be something as simple as doctors looking at X-rays are now done by trained technicians in India. It might be part of your supply chain for sub-assemblies. Or you might outsource your entire manufacturing line which we used to have here in the United States to a third-party company much like Apple does with Foxconn. Or your key suppliers might be traditional direct suppliers. They simply ship you components, raw materials, iron ore for you to make steel, etcetera.

In the old days, we used to think of suppliers as not a partnership, but just simply a cost of goods. Nowadays, we understand to get the most efficient use of our resources, we really need a relationship that treats them like partners. We both need to be in this to win. We both need to understand that this is more than just a financial transaction. So as your startup grows, start looking for partners where you're more than just a checklist and they're just more of a source of material and try to establish long and lasting relationships.

Now, in the Web, over the last five or ten years, we've kind of established a new type of partner. Those are traffic partners. In a traffic partner, we have long-term agreements with other companies that deliver predictable levels of customers to our website. How do we do that? Well, these are sometimes cross-referral or swapping deals. We pay another company, maybe on a per referral basis. And our partners, our traffic partners, drive traffic using text links, on-site promotions and ads on their site. Sometimes, we might even exchange email lists and other data with these partners.

So if you're on the web, traffic partners are a virtual channel partner that simply doesn't exist in the physical world.