Monday, August 10, 2020

8 Ways To Stay Competitive In Today’s Technical World

robot-technologyTechnology is so key to every business these days that experienced business-smart but non-tech entrepreneurs are feeling deeper and deeper in the hole. Even if they realize that they need real technical strength at the top, they are not sure how to attract and select the talent and expertise they really need. Should they go after high-tech nerds for partners, or professional technologists?

The right answer for a good business partner today is neither of the above. Startups succeed most often when the founding partners know how to build and run a business, rather than how to build and run technology. Only one component of running a business is managing technology, but it is a critical component, so no entrepreneur can afford to ignore it or totally delegate it.

That means every entrepreneur needs to learn how to attract, hire, and manage technical people for their team. Just like you don’t have to be a financial guru to recognize a good CFO, or a marketing genius to hire a VP of Marketing, you can find the right technical partner or team member by using the right evaluation and hiring steps, including the following:

  1. Engage a technical advisor to assist with recruiting and early interviews. Just like executive recruiters recognize the best executives, a technical expert in your business domain will recognize the right combination of skill, creativity, and experience you need for a co-founder or key team member. Don’t fall for a technical pitch you can’t fathom.
  1. Look for a match in culture and values, as well as technical strength. A great technical LinkedIn profile is a good start, but not enough to assure success in your environment. The non-technical leadership attributes of excellent communication skills, high integrity, passion, and perseverance are critical for the success of the whole team.
  1. Spend time informally with candidate peers and former employers. This approach works best with business associates that know you, or peers that you meet at industry conferences, or technical gurus that have no business connections to the candidate. Former employers will normally only give you candidate employment dates or good news.
  1. Let candidates educate you on attributes you need and they bring. The key here is to do more listening than talking in both formal and informal interviews. I find that many entrepreneurs are so passionate about their own idea that they can’t stop selling it to potential partners. They are attracted to people who agree, but may not be able to help.
  1. Evaluate their problem-solving ability in the context of your business. A business startup is not an academic environment, or a big company research organization. Practical problem solving, and communicating to business people, is often a big challenge for technical experts. Test them with problems outside their comfort zone.
  1. Challenge current team members to bring in the best and the brightest. Start with existing co-founders, extend the request to advisors and investors, and finally to existing team members. Make them part of the interview and decision process, since they all have a large stake in ultimate success of the new venture.
  1. Continually ramp up your own technical competence. Although technology is getting more pervasive in business, it’s not rocket science. If your kids can use computers by age six, every entrepreneur ought to be able to stay current with the latest social media marketing and e-commerce technologies. You can’t manage a technical team or negotiate with technical partners without understanding their view of the business.
  1. For non-core technical strength, look for outside partners. Outsourcing to expert freelancers or business partners is often a better solution for startups than managing everyone into the inside team. You may not have the breadth of technical challenge, or the budget, to lure in and keep motivated the caliber of technical expert you need.

Even if your company doesn’t sell high-tech products, like Zappos sells shoes, having and using the right technology in the business, for distribution, marketing, and customer support, can easily make the difference between winning and losing in today’s high-tech world. It’s no anomaly that Zappos CEO Tony Hsieh graduated from Harvard with a degree in computer science.

On the other hand, there are many technology companies successfully started and run by non-technologists. For example, Richard Branson, CEO of Virgin Group, with no technical background at all, has started and run many technical companies, including the futuristic Spaceship One and an orbital space launch system, and reportedly does his own social media work.

Thus non-technical entrepreneurs must not shy away from technical issues, and must also learn to find and effectively work with technical partners, inside their company and outside. Street-smart today means the ability to survive and prosper in a technical world. Are you there?

Martin Zwilling

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Sunday, August 9, 2020

5 Keys To Negotiating Your Fair Share Of Any Startup

Gates-and-BallmerI always tell entrepreneurs that two heads are better than one, so the first task in many startups is finding a co-founder or two. You need to find the skills or experience you don’t have in business, technology, or money. So the first question I usually get is what percent of the company or equity is that person worth? Giving a co-founder a salary won’t get you the “fire in the belly” you want.

The default answer, to keep peace in the family, is to split everything equally, but that’s a terrible answer, since now no one is in control, and startups need a clear leader. The next default of waiting until later is equally bad, since partners who bow out early will still expect an equal share of that first billion you make later.

Now comes the reality check. Just because it was your idea doesn’t mean you “deserve” 90% of the equity. The value in a startup is all about tangible results, so I see no equity value in the idea alone. Thus the real discussion must start with who will be doing the work, providing the funding, and delivering results. Each co-founder should get equity for value, based on these key variables:

  1. Lived a key role in a previous startup. Building a new business is quite different from an executive role in a mature company, so people from these backgrounds are often a liability. Value is embodied in previous success with investors, proven problem solving ability, and having built and executed a business plan with minimal resources.

  1. Experience and connections in your business area. Textbook knowledge and academic degrees don’t count here. Value factors include your related product breadth and depth, relationships with thought leaders, key vendors, and large potential customers. Building the product may be the easy part of your startup challenge.

  1. Key to required patents or trade secrets. In many cases, one of the co-founders may bring some work in progress that can be patented, trademarked, or copyrighted. Your idea is not intellectual property yet, so it has no inherent value. Every previous experience filing and winning a patent is a rare and valuable asset.

  1. Level of responsibility and time allocated. Co-founders only able to work part-time, with responsibility and major income sources elsewhere, don’t carry the same risk as others with more operational responsibility. Less dependence or startup success, or more cash compensation, generally means less equity assigned.

  1. Amount of venture funding provided. Investors may not be called co-founders, but they always get equity, commensurate with their share of the total costs anticipated, or share of the current valuation. The challenge is for real co-founders to keep their equity percentage above 50%, or they effectively lose control of operational decisions.

If none of these five items is a clear differentiator in your case, a logical approach would be to assign each an equal weight of 20% of the total, and partition the total equity based on each co-founder’s correlation to each variable. A friend or family investor thus might get 20% of the equity, even with no business activity contribution.

Because these considerations can be quite complex, very emotional, and have long-term implications, smart entrepreneurs don’t hesitate to get some legal advice at this early stage, in drawing up an agreement document to be signed by each of the co-founders. Obviously it should be amended later, as roles are more clearly defined, and execution proceeds.

Even with an agreed initial equity split, it’s smart to have Founder’s stock actually issue or vest over a period of at least two years, on a month-by-month basis. That way, if one of the partners disappears, or their role changes, a portion of the equity can be re-captured and reallocated to the other members. Other common terms, like the right to re-purchase, should be investigated.

In all cases, roles and titles should be clear, but not necessarily tied to any given percent of equity. In other words, the CEO need not be top equity owner, but should be the one with the most business skill and experience. The CTO of many technical startups was the original founder. The CFO may have a major financial background, but might be a minority owner.

Of course, all co-founders need to remember that allocated percentages will be diluted as angel and VC investors are brought in. Keep your wits about you to make sure that dilution is done equitably and evenly. Naïve cofounders have found themselves squeezed out in some well-known cases, including Facebook.

But don’t get greedy. It’s the power of the team that makes the business. Major equity in a startup that goes nowhere is not my idea of fun.

Martin Zwilling

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Saturday, August 8, 2020

5 Keys To Reducing Startup Risk By Building On Trends

Socialmedia-trendsIt may not be as sexy, but starting a new business which builds on an existing technology or business model is usually less risky than introducing that ultimate new disruptive technology. There are many levels of innovation that go beyond copying someone else’s idea, but stop short of pushing the leading edge (bleeding edge).

Many of the major business successes started this way. McDonalds didn’t invent the fast food model – they simply improved on the cookie-cutter White Castle process. Before Wal-Mart made the low-cost high-volume business model famous, there was Ben Franklin and Two Guys who touted it way back following World War II. And we all know Facebook didn’t invent social media.

The advantage of imitation, with innovation, is that it gives you a solid base for building experience. There is always time later for your next startup, using that disruptive technology of your dreams. Or you may decide that your dream was not really the great idea that you thought it was.

So don’t be intimidated by the negative image that imitation currently has in the startup world. Certainly I’m not recommending just one more Facebook, with a couple of features from Twitter, since social media has an unlimited potential for innovation. Risk level has always been directly correlated to the number of unknowns, so eliminating even one variable will improve your odds:

  1. Eliminate one aspect of research and development. According to a classic Harvard Research study, first inventors spend at least a third more on their initial technology than later innovators. In addition, we all know that patent disclosure rules often facilitate legal reverse engineering, and innovation at this point is now much cheaper.
  1. Capitalize on the lessons from early adopters and competitors. Smart startups save cost and time by capitalizing on the pivots of others before them. Market research can thus be based on real customers and a previously tested market. Studying and learning from the mistakes of others is the best way to reduce your own risks.
  1. Attract investors who fear pioneers catching arrows. Banks have always been more likely to support the franchise model of cloning an existing business, while they avoid, like the plague, a new and untested technology. Most equity investors tend to avoid truly disruptive technology startups, since they take longer and more money to scale.
  1. Imitation with continuous innovation predictably drives progress. The auto industry and others have used this model for generations, so business processes and metrics for innovation are well documented. Disruptive technologies are random and their success is unpredictable. Good imitators, like McDonalds, often bypass the original innovator.

  1. There is always a related market or new country. The world is now a small place, but startups usually don’t have the resources to saturate all the related markets at once. Imitation with innovation is a great way to jump ahead of the curve. Especially if that new market is your home country, you will have the advantage.

But don’t be fooled by thinking this approach is easier than rolling out a disruptive technology. In many ways, more effort and attention is required to make sure you know what works and what doesn’t work in a given domain. Timing is critical, as well as focus on marketing and customer satisfaction. Competitors can move quickly, and there is no huge technology gap to protect you.

If this approach appeals to you, I recommend that you start by looking for successful businesses, rather than failing businesses, and focus on innovations you could offer to make the businesses even more successful. Innovations are often as simple as better delivery, more customization, or better distribution. Who knows, your imitation with innovation may turn out to be the bigger than the disruptive technology of your dreams.

Martin Zwilling

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Friday, August 7, 2020

10 Strategies For Success Long-Term As Well As Today

strategies-for-successEvery one of you has had to deal with the conflicting requirements of optimizing your business in the short term versus the long term. In the short term you need customers to find you at any price, and in the longer term you need revenue, profit, and return loyalty. Even a million users on your social media site won’t pay the bills until you sell some advertising or a premium service.

In a larger public company, it’s all about making your quarterly numbers, versus investing in strategic growth alternatives that may not pay off until several quarters later. The challenge we all have as business leaders is balancing the focus between business today and tomorrow.

Based on my own experience in both large and small companies, I agree it can be done, with the essential principles outlined in a new book, “Winning Now, Winning Later,” by David M. Cote, former Chairman and CEO of Honeywell. Although his focus is naturally on bigger companies, I contend that his recommended strategies apply equally well to entrepreneurs and startups:

  1. Demand a mindset of deep thinking for the long term. Don’t allow you or your team to succumb to the mistake of narrowing the scope of thinking to solving today’s problem only. That keeps people from pushing themselves to develop the kind of new solutions that will permanently change the business for the better, versus short-term band-aids.

  2. Connect operations today with long-term goals. In my experience, even in startups, longer-term strategy often gets pushed off the agenda due to current challenges. Overtly connect every operational problem to your strategy, rather than putting strategy on a different plane and making it only an annual event. Don’t make growth a big-bang event.

  3. Separate serious business threats from daily crises. The natural human tendency is for people to treat all problems as short-term, and apply patches rather than solutions. Strategic threats, including new competitors, market changes, and environmental issues need deeper analysis and full resolution, before they jeopardize your business survival.

  4. Make process improvement a constant focus. Don’t wait for a short-term crisis, or a long-term one, to force process improvements. By being proactive, and empowering and rewarding your frontline employees for improving processes, you will enhance your business productivity and growth in both the short term as well as the long term.

  5. Build and model a high-performance culture. Every business team becomes inwardly- focused by default, comparing themselves only emotionally to others they know within the organization. It’s your job as a leader to be the model high performer, quantify the team view with metrics, and expand awareness to the best outside competition and new tools.

  6. Attract, train, and reward only the best leaders. This strategy requires allocating a significant portion of your time, even as daily crises grow, to the nurturing of the leadership pipeline, mentoring high potentials, paying them well, and rewarding results with positive short-term feedback, as well as strategic promotional opportunities.

  7. Constantly scan the horizon for growth opportunities. Distinguish growth opportunities from survival efforts, and make sure they are adequately funded, rewarded, and measured. Get outside the company regularly to get feedback on future customer needs, emerging technologies, and the views of influencers and experts in the field.

  8. Explore partners and M&A to solidify your strategy. These days, the market is moving so fast that it is rarely adequate to rely only on internal development to keep up with change. You need to be constantly assessing mergers and acquisitions, as well as divestitures. Hone your process for due diligence and integrating these new elements.

  9. Proactively prepare for downturns and recoveries. Make sure you are paying attention to macroeconomic and customer trends, and planning early moves, rather than waiting for the crisis. This means identifying initiatives early, communicating openly with your team, and asking for their help on the dilemmas of production cuts and layoffs.

  10. Initiate succession planning for all roles, including yours. Don’t let promotions and succession planning be driven only by your HR function. Everyone, including your Board, should have a role. Make sure internal top performers are vetted, as well as outside candidates. Can you name the top three candidates for key roles in your organization?

If you look deeply into the success of the most recognized business leaders today, such as Jeff Bezos, you will find that they practice many or all of these principles. Even though your work and solutions for short-term objectives often seem to conflict with strategic goals, I am convinced that, with focus, you too can balance these priorities, and build a legacy for all of us to be proud of.

Marty Zwilling

*** First published on Inc.com on 07/23/2020 ***

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Wednesday, August 5, 2020

7 Ways Every Entrepreneur Should Evaluate A New Idea

Board-Artificial-RobotAs an advisor to entrepreneurs, one of the most common requests I get is for an evaluation of a next startup idea. I try to explain that even the most innovative idea will fail if it is not a good fit for you at this time, so the question I ask them is “why you now” rather than “why this solution now?” The right person can make any idea a business success, and the wrong one will always struggle.

The reality is that I can’t judge any idea in your context, because I don’t know your passions, knowledge base, and experiences. If you show me a written business plan, I can assess it from a technical perspective, but that doesn’t tell me if you are the right person to create the business. Thus I can only recommend some context for you to make your own idea and business decisions:

  1. Play to your passions and personal interests. Pick an arena that gets your creative juices flowing, rather than one that everyone says is the next big thing. If your goals in life revolve around social change or the environment, aim in that direction for your startup, rather than maximizing revenue and profit. If you are not motivated, you won’t succeed.

    Entrepreneur Tony Hsieh, who founded Zappos, was passionate in his belief that he could “deliver happiness” to customers, before making a profit, through innovative moves like surprising 80% of customers with free overnight shipping. He succeeded well in both.

  2. Trust your background and intellectual strengths. The most successful entrepreneurs focus on solving a problem that they personally have experienced, and are convinced they fully understand. Also the same applies to dealing with the business elements, such as marketing, business operations, and finances. You may need a partner on this one.

    Bill Gates learned to appreciate the power of computers at a very young age, but was frustrated that available models were large and hard to program. He invented BASIC and Windows, snagged Steve Ballmer for marketing, and Microsoft helped change the world.

  3. Consider your access to resources for startup efforts. Take a realistic view of your ability to assemble the necessary funding, and attract the right people. Your strengths in physics and electronics may be excellent, but most of us could never attract the funding required for a new microchip process. Maybe you need to start with a smaller idea.

    Experts estimate the cost of the first next-generation chip factory to be at least $10 billion. Unless you have deep pockets, you probably need some strong connections and support from the people at Intel or AMD before committing your entrepreneurial life to this effort.

  4. Assess the time and effort you are willing to commit. Most startup ideas will fail, if you approach them like a hobby that you can work on occasionally and on weekends. It’s hard to win when other entrepreneurs, such as Elon Musk, are known to work hundred-hour weeks, and don’t have a family to balance. Your time is a critical limited resource.

  5. Count the depth of your relationships with key people. Most successful startups have deep relationships with experts who can mentor and support them, or provide access to critical resources and funding. There is no entitlement in this business. You need to enjoy building the new relationships you need, and nurturing the ones you have, to succeed.

  6. Check your interest in learning how to fill the gaps. No matter how experienced and knowledgeable you are, every startup is a new learning process. If you don’t enjoy learning, stick to ideas and businesses that are “cookie-cutter” versions of what you already know. Your success depends on enjoying the journey as well as the destination.

  7. Test your ability to communicate value to others. Some of the highest potential ideas and businesses require a massive educational and sales effort, which may not be your forte or interest. Very few ideas these days have such obvious value that “if we build it, they will come.” Most startups require leading a team of people, and engaging customers.

So before you make those cold calls to me, or any other constituency, for an assessment of the viability of your next great idea, my advice if for you to take a hard look at your own drivers and resources, per the items listed here. I’m convinced that there are more than enough startup ideas around, such that you can pick one to match your profile, and we all win with your success.

Marty Zwilling

*** First published on Inc.com on 07/21/2020 ***

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Monday, August 3, 2020

7 Success Factors When Your People Are The Solution

Business-Customer-ServiceThe critical success factors for a product business are well known, starting with selling every unit with a gross margin of 50 percent or more, building a patent and other intellectual property, and continuous product improvement. If your forte is a service, like consulting or web site design, it’s harder to find guidance on what will get you funded, and how you can scale your business.

On the product side, once you have a proven product and business model, all you need is money to build inventory, and a sales and marketing operation to drive the business. With services, scaling the business often implies cloning yourself, since you are the intellectual property and the competitive advantage. You have no shelf life, so you can’t make money while you sleep.

Indeed, there are some success factors that are common to both environments. For example, both need to provide exemplary customer service, build customer loyalty, and provide real value for a competitive price. Here are the additional success factors that are really key to a startup with a services offering:

  1. Get your service out of your head and down on paper. If you can’t quantify or document your service for repeatability and new employee training, you will kill yourself trying to grow the business. Even artisan-based services, like graphic design and writing good ad copy, have innovative processes and principles. Capture your “secret sauce.”
  1. Start with a service you know and love. A successful services business, more than a product business, comes from a skill or insight that you have honed from experience. If you don’t have a high level of commitment and passion, you customers won’t seek you out. Now all you have to do is pass it to the many new members as you grow your team.
  1. Don’t let your service be viewed as a commodity. Low cost and low margin products can be winners, if the volume is high enough. You don’t have enough hours in a day, or trained people, to succeed with lower margins in a services startup. Thus you need to highlight how your service is more innovative and higher value to your target customers.

  1. Recruit only the best people, with the right base skills. Customers won’t pay to see your new employees learning on the job, and outsourcing the real work to a cheap labor source is a recipe for disaster. Make sure they bring solid base skills, so your training can focus on the innovative and unique elements that your service brings to the arena.
  1. Be a visible and available expert in your domain. Be accessible on social media, write a blog or articles for industry publications, and participate in conference panels and speaking engagements. This substantiates your expertise and value, builds peer relationships, gives you access to the people and technology to keep you current.

  1. Practice being a good communicator. Customers can touch and see a great product, but services are a bit ethereal. You have to communicate how your service is the best, to your own team, as well as to your customers. If you deliver a great service, but no one knows it, your business will suffer. Make sure everyone knows your vision and values.

  1. The customer experience is more than the service. Product companies sometimes equate customer satisfaction with customer service, but it’s more than that, especially with services. Make sure that every interaction with every customer is positive, the service delivered is exemplary, and always follow-up for reference and repeat business.

For some entrepreneurs who feel the need to attract outside investors as a critical success factor, they should be aware that professional investors almost never invest in a services-only company. The investor perspective is that no manufacturing or inventory implies a minimal need for capital up front. They tell these entrepreneurs to sell themselves, execute well, and grow organically.

Thus your services business success totally depends on you, your skills and resources, and your ability to bring customers to the table. You are the ultimate critical success factor for your business. Are you ready to make it happen?

Marty Zwilling

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Sunday, August 2, 2020

5 Ways To Build Startup Resilience And Avoid Failure

entrepreneur-resilienceOne of the characteristics that every good investor looks for in an aspiring entrepreneur is resilience, or the ability to learn from and bounce back after a failure. You don’t have to have previous startup problems to show resilience – everyone should have a story of tackling a tough challenge with minimal success, but using the failure to move on and achieve an objective.

With startups, almost every entrepreneur I know has failed at least once, often several times, but never gave up, and ultimately achieved their goal. Evan Williams, for example, before cofounding Twitter, started a podcasting platform named Odeo. The platform couldn’t compete with Apple’s podcast section of iTunes, so he recast his efforts into microblogging, and the rest is history.

The challenge is how you can enhance your own ability to bounce back, and highlight that attribute to your team and outside constituents, including investors and business partners. If done well, such failures can actually give you an advantage, rather than a disadvantage. In my experience, here are some key preparation strategies that work:

  1. Practice and highlight your conviction to never give up. Many experts tell me that more startups fail simply because their founder gives up, than for any other reason. Real entrepreneurs have told me that they become energized when told that they are facing an insurmountable barrier. Their satisfaction comes from proving nay-sayers wrong.

    Howard Schultz, who built Starbucks into a billion-dollar success, started with a strong conviction that people would pay for “an experience” of fresh-brewed cappuccino by the cup, rather than buying equipment. He never gave up, despite multiple setbacks.

  2. Actively seek and learn from the counsel of smart people. Some entrepreneurs, unfortunately, become more and more isolated in hard times, or surround themselves only with friends and supporters. Make sure you actively interact with and show appreciation for people smarter than you, even if they don’t always agree with you.

    Both Bill Gates and Warren Buffet, although extremely successful in their own domains, share a great relationship as mentors for each other in learning how to deal with today’s challenging business and social problems. People who listen are always more resilient.

  3. Demonstrate decisiveness rather than paralysis by fear. Making any decision is almost always better in business than no decision. You have to look at making decisions as a positive learning opportunity, rather than a chance to fail. Every investor wants to see entrepreneurs who are willing to take responsibility for action, and get it done.

    When it’s time for a decision, your gut instinct should never be your only input. All of us have access via the Internet to multiple expert sources, insights, and data to support our own experience, to make more relevant and timely decisions.

  4. Maintain an optimistic outlook, rather than pessimistic. Optimism is a mindset fueled by confidence in yourself and an ability to gather and filter knowledge. Confidence is built by finding your purpose, playing to your strengths, and taking tough challenges in small steps to show progress. It also helps to emulate the success of others with similar goals.

    Don’t be lulled into thinking that optimism is a personality trait you either have or don’t. Optimism can be learned, by really looking for your successes, rewarding yourself for your progress, and using a mentor to steer you in the right direction.

  5. Use metrics in lieu of feelings to measure progress. Don’t let your feelings get you down, with no quantification of what failed, or what you need to do to come back. People who set quantified goals and objectives for themselves and their teams, and measure results, always know where they stand and are not surprised by feedback from others.

The ability to bounce back also requires continuing attention to your physical needs and feelings. Don’t forget to maintain a healthy balance between business and personal demands, including family, sleep, and time off for enjoyable activities. Make sure that you take the time to internalize the strength that comes from struggling, and the insights that come from failure.

Then you too can become one of the rare entrepreneurs, sought by every investor, who continually bounce back stronger from every failure until they achieve success beyond everyone’s wildest dreams.

Marty Zwilling

*** First published on Inc.com on 07/19/2020 ***

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Saturday, August 1, 2020

7 Ways Getting In Bed With The Enemy Can Be Win-Win

handshake-hands-teamworkEntrepreneurs seem to have blinders on when looking at competitors. Generally they are so focused on killing competitors that they fail to see the positive potential of a strategic partnership or some other type of collaborative relationship. Sometimes you have to put aside the emotion and the passion, and just look at what is best for your business.

Strategic partnerships in this context can take the form of joint ventures, intellectual property licensing, outsourcing agreements, or even cooperative research. All of these offer the potential for a win-win relationship with a nominal competitor, rather than a win-lose deal, as long as both sides can remain humble and not try to dominate the relationship.

Always start with a formal proposal, limited in scope to a specific common objective or technology, for a limited amount of time, bounded by a two-way non-disclosure statement. With this agreement in place, there are a host of ways that both sides can win:

  1. Share common technology. Every startup has a core competency which should not be shared. Beyond that, there may be a large percentage of common technology where they both need to minimize cost to gain share from the big dinosaurs who already have this advantage.
  1. Expand the market for both. Typically, there are market opportunities that neither of your core competencies can win alone. A strategic evolution of your combined strengths may be able to open up a new segment that neither of you could do alone in the same timeframe or at the same cost.
  1. Up-sell related products or cross endorsement. If your customers would benefit by having products from both companies, you might negotiate the opportunity to include the other’s product as an add-on. Where your competitor isn't really competing with your direct market, you can refer business to each other without anyone losing customers.
  1. Benchmark your practices against a true peer. The best way to do this is to establish specific performance targets with incentive-based rewards for meeting and exceeding these targets. The information exchange from day-to-day interactions of engineers and marketers will drive you enhance your own processes to be more competitive.
  1. Expand core competency and solidify strengths. Both partners must not forget they are still competitors. By sharing and learning in non-competing areas, they can focus their limited resources on solidifying their core competencies, and expanding their unique segment of the market. Let market response dictate a later split, merger, or acquisition.
  1. Willing to learn from each other. Learning from each is part of the win-win equation. No entrepreneur has all the insights they need, and none should be so arrogant as to assume they hold all the cards. Of course, it’s important to start with a bounded agreement which clearly lays out expectations and areas that are off-limits.
  1. Think about the future. Once you have established your credibility and value, a strategic partnership may extend to a financial relationship. They may have the finances you need to invest in a business area they know, where you have the core competency. Longer term, when ready, it may be time for merger or acquisition.

While most entrepreneurs think of strategic partnerships as big company deals, it actually works better for small companies. In large corporate environments, competitor cultures may be so set that collaboration is difficult, while I find that small company peer competitors usually have no trouble at all getting along. The industry leader arrogance has not yet set in.

Even for small companies, it is critical that all employees be well-informed about what skills, technology and information can be shared with their partner and what is off-limits. This will offset the normal instinct to think of a competitor only as a threat. It is smarter to capitalize on the positive aspects of a competitive situation rather than killing each other so no one wins.

Marty Zwilling

*** See Turkish translation, thanks to Zoltan Solak ***

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