As technology becomes increasingly complex and its applications ever more ambitious, companies are having more and more difficulty developing scalable, market-ready solutions. This challenge is particularly acute as technology is adapted to new industries and applications – from healthcare to oil and gas, power, manufacturing, and commerce. In these domains, vendors must contend with huge variations in customers’ operating environments, a messy installed base that presents integration issues, cultural resistance to risk and change, and increasingly overwhelming amounts of data. Success requires a strong mix of technical competencies and domain expertise, put together under a scalable business model. It is easier said than done.
Partnership is becoming an important piece of the answer, and an increasingly essential pillar of vendor strategies. But there are many types of partnership, some more straightforward than others. Let us consider three types of innovation-oriented partnership, and why they might make sense strategically:
»Co-development with customers is becoming standard practice in new tech markets, and for good reason. In exchange for deep discounts, customers contribute time, expertise, and insight into their business processes, and tolerate some disruption of those processes as a vendor works through a deployment. Vendors benefit from customers’ domain expertise, get the opportunity to perfect solutions before a broader launch (minimize some go to market risks), and generate a real-world proof point for their solution that is valuable marketing collateral. Incentives and roles on both sides are well defined.
»Ecosystem enablement is a necessity for companies that provide the core architectural building blocks for new computing systems (i.e. IBM, Intel, Microsoft, Google, Apple, etc.), but it’s particularly important in industries that require a high degree of solution customization. The better companies can enable partners to easily tailor solutions to meet specific needs, the more companies are able to participate in the market. Large players rely on these networks to drive adoption and fuel market growth.
»Co-development among vendors, typically structured as a Joint Development Agreement (JDA), enables both parties to benefit from a big product win, while reducing risk. JDAs can be the key to solving pervasive, stubborn, and complex challenges, but they require a lot of foresight and thought to pull off. Success requires clear definition of the objectives and roles of the partnership, alignment of strategic priorities and values at a leadership level, and most importantly – trust. This tends to be easiest to achieve when parties come from two distinct fields, each have well-protected protected IP, or at minimum have clearly defined and distinct commercial roles.
It is worth noting that JDAs have a significant advantage over licensing when pursuing ambitious innovations, in that neither party is required to forfeit upside. If both parties are making essential contributions and investments, then both parties should share in the reward. This gives both sides strong incentive to stick with projects over the long term.
For the biggest ideas – the kind that must necessarily bring together expertise from a range of disciplines – deep partnerships are needed early on. JDAs have tremendous potential, but many leaders are understandably hesitant to consider this type of arrangement: Forming and navigating JDAs can be a major challenge, and success requires foresight. But the risks associated with JDAs are all manageable under the right circumstances. We recommend vendors weigh the following questions as they consider entering a co-development partnership:
- Alignment – is my organization’s strategic vision and values compatible with my partner?
- Commitment – Is my organization prepared to commit focused resources to this partnership? Is my partner equally committed?
- Trust – How well do I know my partner? Do I trust them?
- Roles – what is expected of my organization and my partner?
- Measurement – how will we measure success? Have we defined key milestones for development?
Preparing for Success (and Failure)
If you are pursuing or considering an ambitious project, weigh your options carefully. But do not be afraid of a JDA: under the right circumstances it just might be the best strategy to create meaningful value for all stakeholders.