Lesson: Channels & Partners with Steve Blank

Step #4 Partnerships: Who are the key partners and suppliers for your business?

Today we're going to talk about partners. Who are your key partners and suppliers? We've already talked about value propositions, customer segments, distribution channels, customer relationships, and revenue streams. But now we're going to talk about our partners. So what's interesting about partners is these are other companies who provide you resources; it might be partners, they might be suppliers, but they are needed to make your business model work. And these partners and suppliers might supply or give you resources, activities, and other things that are essential for your company to succeed.

So what you need to understand is what type of relationships do you need to have with them? Are these relationships going to be strategic alliances between non-competing companies? Are they going to be joined ventures? Are they going to be coopetition? What are you going to do and what are they going to do? And so in this lecture, we're going to explain the differences and the pitfalls and the successes between each.

What defines a partner? What's really interesting is that this has to be a two-way street. One way we say that is shared economics. Not only do you have to get something out of the relationship but so do they, and so you really need to understand what's in it for your partner. And a classic startup mistake is understanding why you need them but nothing ever are articulate why is it they would need you, and they should need you not only for success but if they don't have you, they should understand that their business might fail.

A partner might also take a form of co-development or co-invention, or you might share common customers. But one of the things to remember is all the books about partnerships and all the literature you read tend to be about partnerships of companies the same size, but you are a tiny speck to most potential partners. Remember, you're a startup and that means they barely could see you, and so there's some special pitfalls and special things to talk about throughout the rest of this presentation.

What resources can partners bring? Well, obviously if they have something you need that you would normally have to develop and they would sell to you or license to you, that allows for you to get to market faster, or it might be a complementary product or service that you just couldn't afford to build or won't get around to for a while, and that allows you to offer a broader product or offering.

Or, yes, you could do it and you could probably do it at the same time but why do something that's their expertise with your money, it might just be easy to buy their product integrated in yours and now all of a sudden you're no longer doing their invention but focusing on your core business. For startups, trying to understand what it is that you want to focus on versus what is it you could acquire in terms of activities and resources and suppliers, is a real strategy. Partnerships are not kind of an add-on. They really allow you to capitalize on the unique customer knowledge or expertise of others.

The final reason is, they might be channel partners or they might be partners overseas to new markets that you weren't planning to get to this year or even this decade. It allows you to generate a source of income that would be unavailable to you for years.