Strategic Alliances Fieldbook newsletter #11 – differentiating joint propositions and IP investment

This month I’m heading back to my favourite alliances topic – joint propositions. Differentiating a joint solution appears in the top right quadrant below because it is the most strategic client facing activity for the alliance.?I wrote in newsletter 6 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.?However, one party investing IP to differentiate the joint solution is not always a sure fire route to joint success. The except from the book I’ve chosen this month dives a bit deeper on the topic of differentiating the joint solution, and a case study on where investing IP did not create joint proactive co-selling opportunities.

If you enjoy the newsletter please like, comment, share and subscribe.?

This illustration 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 and 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.

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. Another differentiation example could be an accountancy-orientated advisory firm providing services to improve financial reporting. If the market is using one technology company’s product for their ledger, then clients are more likely to choose a services partner that knows the tech and has strong credentials for implementation. In this case, the partnership between the firms increases the end customers’ perception of the relevance of their services provider.?

The case study from newsletter 6 gives an example of the benefit of joint solution differentiation through incorporating the PS firms IP in their implementation methodology.?However, one party investing IP to differentiate the joint solution is not always a sure fire route to joint success as this case study from the book shows.

In real life….a case study

To show the challenge of building a joint solution in relation to IP, consider the PS firm who built a bespoke application using a Platform as a Service (PaaS) product from one of their alliances. The consultant provided their application as a managed service. Before they could scale it, the software company launched a competing application as part of their standard product suite. The PS firm was familiar with the cycle of software features constantly being added to products, which meant they knew their managed service had to keep innovating. However, the suspicion caused by the launch of a competing application created a negative effect later. The PS firm iterated on their offering, but their concern about IP loss meant they felt unable to share the details of the proposition with the software firm. This meant that the software firm could not distinguish the proposition from their other alliance partners so their sales team could not wholeheartedly endorse the offering to their clients. As a result, the consultant was alone in selling the offering.