Guy Kawasaki had a nice post last week on the “Art of Distribution“. His conclusions on partnerships are spot on – among them:
“You understand what your partner wants. If it’s anything besides “additional revenue,” you’re missing the boat”
“Your challenge will be scaling up fast enough. I’ve never seen scaling up be the gating item on a distribution deal”
Having built a “partner” program from scratch at my former company, I came to quickly realize that alliances at an early stage company must be, above all else, realistic in scope and motivated primarily (if not solely) by clear revenue expectations.
The one important point that I disagree with Guy on concerns product adoption cycles and is an area that I hope to explore both in my academic research here at school and beyond. Guy writes:
“when you’re introducing a product (which is when you need distribution the most), you don’t know who will use your product and what they’ll do with it. As Chairman Mao said, “Let a hundred flowers blossom.”
I would concede that the consumer web services space that Guy is focused on in his post is a more hospitable environment to this shotgun style marketing approach than most markets. Even so, I think it assumes a somewhat haphazard approach to the fate of your product.
Even though resource barriers-to-entry for startups have declined and burn rates decreased, I believe entrepreneurs must remain laser focused on a clear business model and customer set. In my opinion, market sprawl, while potentially allowing for some creative interpretation by users, is much more likely to distract an early stage company than it is to produce the hidden home-run. While it might be nice to allow “a hundred flowers to blossom”, most ventures can realistically only afford (in time, resources, and capital) to water one or two promising plants.
With increasingly crowded early stage niches, I think it is even more imperative that entrepreneurs have both a clear sense of their market (and market size) as well as the likely diffusion path of their product into that market. Will these analyses be perfect? Absolutely not. But the more thought, assumptions, sanity checks, and stress tests that a company places on its strategy early on, the more likely it will present a clear, compelling value proposition to customers.
I think that there are great strides that could be made in helping young companies to better quantitatively model these diffusion patterns and I have a newfound sense of enthusiasm for exploring the topic.