Adventures in alliances land #11 –joint solutions e_differentiation

I’ve been in a lot of debates in the last few weeks about designing and building joint solutions - which is another example of a ‘permanent conversation’.? A ‘permanent conversation’ is something that has been true forever and despite learning it well needs continual effort to align for successful partnerships.? They are points of debate, iteration and friction that are enduring and therefore need continual attention, adjustment and intervention from professional strategic alliances practitioners.?

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I’ve been doing, thinking and writing about strategic alliances for more than 20 years.? When something in the alliances space catches my attention that I can share, I will – so if ecosystems, partnerships and alliances are your gig and your passion too I hope you’ll find these scribblings useful.? If you enjoy this article please follow me, subscribe, like, comment and repost.? My book on strategic alliances is here if you’d like to read more adventures in alliances land.? https://www.amazon.co.uk/Strategic-Alliances-Fieldbook-Art-Agile/dp/103212900X/ref=sr_1_1?keywords=strategic+alliances+fieldbook&qid=1691319592&sr=8-1

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Breaking a successful strategic alliance down into its most fundamental elements, there are four key parts.? 1/what to sell, 2/who to sell to, 3/how big the size of the ambition is, and 4/how to resource and govern it.? The very first element is what to sell.? This means the general value proposition for the alliance, and the specific joint solutions.? ?This series of articles has been all about the joint solutions, and the article today is about differentiating the joint solutions.? I’ve used the model from pg 82 of the book to anchor this topic.

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Differentiating a joint solution appears in the top right quadrant because it is the most strategic client facing activity for the alliance.?I wrote in an earlier newsletter about an example of the value of having a clear value proposition for a joint solution.?The case study was a comparison of a consulting firms alliances with two different technology companies.?One was with a small tech company with relatively small TAM (target addressable market) and one was with a large tech company with huge TAM almost x100 higher.?The PS firm achieved 5× greater services revenue from the alliance with smaller TAM partly because they invested time and intellectual property (IP) to differentiate the proposition and took it to market together with the technology company.?

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The model above shows the principal reasons PS firms see value in partnering with technology firms, orientated around ‘market’ and ‘financial’.?In the ‘market’ space on the left, the PS firm could be enjoying talent retention, brand repositioning and market penetration improvements. These are prized without always having a direct and quantifiable relationship to financial value. In the ‘financial’ space on the right, investments via the tech company’s programmes to win incremental revenue from clients are the goal. The top row of the ‘client facing’ space indicates the end customer will experience the benefit directly. The ‘internal’ bottom row is less likely to be obvious to the end customer.? Overall the most important client facing and strategic benefit of alliances is to differentiate the solution. At one level, this is table stakes. If there is a market-leading technology firm endorsing some PS firms as great delivery agents via their alliance, the end customer would be taking a risk to choose a PS firm that the tech company did not endorse. Building on that, the more loudly the tech firm advocates for a particular PS firm, the more likely that is to influence the services purchasing decision of the end customer. Taking the differentiation point even further, if there are features of the product that a small number of PS firms are uniquely well suited to deliver because they are granted privileged access to source code or advanced training by the tech firm, then they are more likely to win the race in the market for implementation. Right at the apex is a co-investment of intellectual property (IP) in a joint solution for a specific industry or horizontal use case, and a ‘preferred’ status from both companies in the alliance for the solution.? This makes it a genuinely unique offering with proven value for specific cases, and whilst not exclusive a preferred status would mean it’s the default offering for the client scenario. In this case, the partnership between the firms has increased the value and reduced the risk for the end customers’ and the win rate will be higher than otherwise.

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The model also shows two other areas of value related to joint solutions; de-risking tech supply chain for solution delivery and reducing cost of initial solution build.?

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For de-risk tech supply chain. Particularly for systems integrators where their contracts typically penalise them for late delivery, they want to exert the maximum control over the timing of availability of the tech product and its performance. This is most important when they are a managed services provider (MSP) and the technology and its performance is inextricable from the service they have contracted to deliver and there are serve level penalties. There are three main ways a partnership can help with technology supply chain risk. The first is by allowing the PS firm to be a reseller and controlling the logistics for product delivery themselves, or by being such an important influencer for the tech firm that they have an outsize ability to accelerate the delivery of product. The second is through access to senior product engineers whom the tech companies typically try to ring-fence to focus on building the product rather than installing it for clients. If an SI has an influential relationship with a tech company, it will be able to spring level 3 engineers to advise on product configurations and trouble shoot issues on big projects. Third, attributable to having a strategic partnership is PS firms getting early access to the product roadmap, beta programme and/or test facilities. At the front end of the sales cycle, this helps distinguish the PS firm as having membership of an exclusive and trusted circle of product expertise. During delivery, all the knowledge they have acquired from maximising access to the product will help reduce the time to implement with the optimum configuration and therefore boost margins.

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Reducing cost of developing a new offering can be achieved in several ways by the alliance. The technology firm might provide funding to cover some of the build costs to co-create an offering that embeds their product. The tech firm might also provide credits to offset the technology costs and donate some of the engineering people needed to build a test version of the product in the PS firm’s lab and support configuration and testing for integration with other technology products. The sharing of costs reduces the load on the professional services P&L and therefore boosts ROI when the joint solution starts selling.

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Differentiating a strategic alliance joint solution – what’s the highest impact example you’ve seen?

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