I love what a well-run business development function can do for a startup. But I also have a lot of pet peeves with it, having run the function for multiple companies. This one in particular relates to how, too often, a PR-related effort is held up as successful evidence of strategic business development (BD).
Another BD-related pet peeve of mine is described in my article titled “More BD = More Chaos” and I highly recommend you read it if you have, or are adding, a BD function
Strategic Business Development
If it’s “strategic”, it must have some grand importance and significant future benefit, assuming things play out as desired. For startups, this often involves partners that are much, much larger than them. It’s the size, scale, brand recognition, and financial strength of the partner that offers massive leverage, assuming they can be convinced to engage in some form of partnership. These strategic partnerships come in all forms, including the following:
- Product distribution
- Technology licensing
- Joint development
- Joint marketing
What’s Wrong with a Press Release?
There’s actually nothing wrong with publishing a press release to announce your new partnership, especially if it meets the criteria for being a strategic partnership. In fact, convincing a very large organization to be named in a press release isn’t easy. The issue is that the press release itself should represent a very small portion of the total expected value from the partnership.
The way I see it is the milestone achievement of PR is positioned after the courtship and business negotiations, but before the realization of value. And since it’s the realization of value that is, by far, the most important thing, I celebrate the PR accordingly.
This means your BD team must be clear on the ultimate objectives of the partnership. It also means any MBO bonus compensation for PR-related accomplishments should be much, much less than the real value you’re seeking.
Side Note: MBOs are the way most BD professionals are bonused. Learn more about that from my article titled “MBO’s Demystified“.
Potential for BD Game-Playing
I trust that your employees are committed to your business success and operating ethically. But that still leaves room for pursuing things that are of questionable value. Be on the lookout for the following games that can be played by your BD team in order to seek recognition.
- Paying money to participate in a partner program that’s mostly open to any company that pays the fees and agrees to certain terms. These programs can offer value, but usually not the strategic value I’m describing here. In fact, if your big partner sees you as a strategic partner, they will quickly waive the fee for partner program participation.
- Getting the partner to sign a non-binding memorandum of understanding (MOU) or letter of intent (LOI) for something related to a partnership – especially if the person signing is only a manager or director at the big company. It’s possible such a signed document helps advance the pursuit of the strategic partnership, but it’s not usually a milestone that signifies high odds for great success.
I actually love getting publicity from large, strategic players in a market. In fact, playing the PR game with a strategic partner can be used to suggest traction and help drive implied valuation (for more on this, read my related article titled “Establishing Valuation Before Revenue Traction“). But at least amongst your management team, treat this exercise as “hard to get PR” rather than strategic business development. Otherwise, you might accidentally convince yourself that you’ve just struck some huge relationship that’s going to propel the company to new heights when all you really did is convince some company to do something worthy of a press release. You’ve still got more important milestones to accomplish before this partnership is going to bear fruit.
Business developers can now throw their rotten tomatoes at me. Sorry, I’m actually on your side and want you to be working towards relationships that make a difference to your company’s success. Going for the press release is equivalent to the way a sales rep pursues a demo or POC test. A seasoned sales rep has their ultimate sights set on getting all the way to the purchase order, because that’s what their commission check is tied to. They leverages demos and POC’s as milestones milestone along the way.