To Go Fast or To Go Far?
Doubling Down on Partners during the Covid-19 Craziness
It feels a tad self aggrandizing to write a post on business best practices in light of the impact of covid-19 worldwide. I can’t pretend that my own developments are that dramatic when every day we read about the tragedy impacting the families of the hundreds of thousands who have lost their lives. Still, I hope that writing, and reflecting upon what is happening, provides an outlet against this common anxiety I imagine we are all feeling.
When I started writing this post I was attempting to refocus my energy towards the gratitude I felt after leaving Paris, the city my wife and I have called home for the last nineteen months. Granted, even though we had to move up our timeline, packing up our life in under a day and getting on the last flight out of the city, we had already planned to come back to California. We were lucky enough that we had family in both Paris and the Bay Area to make our hurried exit as smooth as possible. However, in light of the shutdown we still haven’t had a chance to thank nor extend our appreciation to the people in both cities that have made this adventure possible. In light of that, I realize more than ever that the highlights of my time in France stemmed from the moments where I connected with others; shared stories over a few bottles of wine; and organized get-togethers (dinner parties?) to regale each other with long winded tales.
It follows then that my professional life´s passion is colored by similar brushstrokes. My time working for a French startup, and then working at Google Cloud in Paris, was spent on connecting with other entities; driving joint benefits; and making the collaboration mutually beneficial. The French certainly have a different approach and timeline to alliances then I´ve seen before (another article on that later) but I can’t deny that I´m better for it.
In times like these I can´t help but think that perhaps marrying experiences from my personal and professional realms can help provide a unique perspective that could add a small amount of value for those active in the startup community. At worst I hope the article sends out positive energies — to use my wife´s language — to the community looking to extend their runway in light of the darkening economic climate. Hopefully my viewpoint on the value of partner networks can help you rethink some of the actions being put in place as a response to the covid-19 crisis.
Your partners are also working with your customers
My recommended course of action is probably corollary to that being shared by leaders in the startup world. Based on my conversations with startups (not just in the Bay Area, but also in Europe, as to attempt to minimize the deviation in my small data sample), there seems to be an overall consensus. One, cut costs. Two, double down on existing customers. Three, re-prioritize your product roadmap. Four, change your marketing as to be empathetic and discuss how to handle the storm… by leveraging your offering.
Allow me to address these recommendations. First, I´m not sure if slightly tweaking the marketing message to be relevant in the current context will have an effect; I believe your outbound will ultimately be suppressed, and your inbound marketing might uptick — ultimately these will cancel each other out. Transcend the short term, stand above these short terms fluctuations. Is your marketing narrative salient enough to capture the attention of CXOs, who are trimming down their list of critical vendors? Can you stand out from the digital hubbub that is certainly prevailing on the interwebs? Second, think long term. What is happening to projects that were slated to be implemented by customers that had bought in January and February? Third, rather than simply doubling down on your loyal and most profitable customers, ask yourself: what are the solutions they are deploying in tandem with yours? What percentage of your projects are deployed on top of an underlying platform; in a particular infrastructure; or connected to another critical line of business software?
If you´re wondering why I ask these questions, let us take a look at thow the evolution of software ecosystems and purchasing behavior of B2B customers have led us to the current state of SaaS market dynamics. You cannot ignore your closest product partners because customers expect you to work with them, and the rest of the software they´ve bought, irregardless if you compete with some of these other vendors. I remember at that time when Box had put ads up on Highway 101, decrying how much Box was better than Sharepoint… though by 2016 they were touting their partnership with Microsoft. Moreover, one perspective that is often forgotten by software vendors is that their customers have to change the way their users and own employees have to adapt the way they go about their day to day, and that transformation needs to be administered. For customers to do exactly what our marketing touts — ´digital transformation´ — a value chain of software components need to be interstitched. You have to keep that in context if you want your customer to be truly successful, and teach them how your software is designed to interact with those other components (hence, the raison d´être of the function ´customer success´…) Indeed, ecosystems are increasingly more important than ever as the golden age of SaaS beget tighter coupling of software in order to drive value to enterprise customers.
Lastly, do not overlook the interest your partners may have for you if you built on top of what they offer — that relationship could rekindle a dynamic that could benefit both parties. Take for example the evolution of the cloud ecosystem. Under Microsoft´s Satya Nadella and Google Cloud´s Thomas Kurian, both organizations have made an about face from building products that their partners sell on their behalf, to enabling their partners to build products on top of their tools that they then sell to enterprise customers. They are thus incentivized to collaborate with admittedly smaller players who must build on top of their own infrastructure offerings because industry customers (take retail and financial services for example) require bespoke solutions rather than having to assemble components themselves. For all the cash these firms sit on, they would allocate the funds to specialized players rather than building competitive solutions. So don´t forget that your software is not silo´d; rather, it is part of a larger fabric that has its stitching under scrutiny and potentially swapped out and improved upon from time to time. It is up to you to understand where you sit amidst the constellation of software that constitute your helps them ´digitally transform yourself´ — and be a friendly neighbor. Realistically, I would argue only two or three partners will have a statistically significant impact on your business due in part to both the evolution of software ecosystems and purchasing behavior of B2B customers.
In fact, I would argue that a sizable, addressable market — defined by a set of customers with similar specific needs that can uniquely be solved by your offering — sits at the intersection of the communities shared by other vendors. When I was both at Xamarin and Algolia, I noticed our stickiest customers were in communities where our principal stakeholders — engineers and CTOs — spent most of their time: respectively the Microsoft and Magento networks. Both our technical decision makers and buyers had a foot in both ecosystems, and often noted that our story enriched our partner´s, and vice versa. It is within these ecosystems that you must reorient your focus.
Don´t let the British shoot first at Fontenoy*
So, to ensure that you don’t get swapped out, and to be different than other vendors that might overlook the larger picture, it is more critical than ever to lean into those ecosystems. Be proactive. This doesn’t mean you have to ignore the universal feedback being touted by your VCs and the media (see Sequoia´s ´Black Swam´ post). But your return on investment and long term runway will be more feasible because your strategy will be different. By investing in your partner ecosystem, you will simultaneously protect your foothold in the customer verticals you are strong in, all while breathing fresh air into your sales and marketing. This might be counterintuitive in light of the advice to minimize costs in these two activities, but I urge you to think differently. Both you and your partner are sensitive to spend — why not combine forces and split the costs associated with marketing? Your message will subsequently stand out because you will together elevate the level of discussion: rather than focusing on what you do uniquely, you will together speak to what your solutions together can do. A network of partners — or even more, as Optimizely did with their ´Digital Experience Stack´ Alliance network — might help drown out the millions of emails and content blasts your prospects are no doubt receiving in this light of the cultural transformation tied to the new work from home standard. Rise above the fray, do not join the hubbub. Moreover, marketplaces — like Salesforce´s AppExchange for instance — rise in value especially if your target buyers are slowing down the exercise of adding to their vendor networks their procurement teams validate. Marketplaces reduce purchasing friction because they enable enterprise customers who already have contracts with the Salesforce & Adobes of the world to leverage their own credentials attached to that large vendor to buy an ISV solution whose billing is intertwined with their partners. You are thus able to reinforce your marketing story by growing the importance of your value by scooching closer to your partner, all while benefiting from lower friction in the buying process (the lower cost of acquisition also doesn’t hurt since it is done programmatically through this channel!)
Along that vein, don’t overlook your channel. We´ve seen in the last two years the transformation of the market and economics of players in the consultancy and system integration space. Irregardless if you are working with traditional IT integrators, or engaging with digital agencies building out customer experiences, these ecosystems should not be overlooked. From a purely human perspective, their businesses are suffering as well; just because their delivery and revenue model may look different than that of a SaaS provider, it doesn´t mean that they are not facing the same challenges as described in the previous paragraphs. Your first step is to rekindle all your relationships (highly recommend using this as a reason to broker leadership meetings between your organization and theirs). Re-evaluate if your joint customers are satisfied with the experience so far; for some vendors where midmarket customers are handled and supported entirely through the channel, it is primordial that any program (discounting, payment extension, etc) gets seamlessly distributed through your partners. Remember, if you are loyal to your partners now, they will remember that in the long term. Along those lines, can you pay it forward to your partners by outsourcing delivery and professional services for some of the deals you had closed in January and February? Your margins will increase as you won’t have to bill your own resources, all while feeding your partners who are probably also hurting during this downturn. While larger vendors have the legal and administrative resources to set up inbound services agreement that let their partner fulfill services they´ve sold, you might not have the bandwidth in the short term to set that structure in motion. Instead, work with your customers to see if you can´t creatively promote your partners in the post-sales lifecycle. This might conflict with the recommendation outlining that affected functions — like recruiting, who don´t have a strong mandate to grow teams— should be reallocated to delivery, support, and customer success. Nonetheless, I am confident that there isn’t a one size fit all solution here. To ensure we don´t fall prey to circular thinking, I´ll finish with this thought: if your leadership team has preached that your channel is an extension of your team, then this is the time to prove it by folding it into your covid-19 response strategy.
Once you´ve done all of this, think about recruiting one or two partners for the long term, as it will help you address the black swan du jour: how do you minimize your costs while still extending your runway? I mentioned AWS, Microsoft, GCP as candidate partners, but that is a narrow category. Alliance partners with deep pockets can take many forms. Private equity, hedge funds, venture capitalists, even banks à la SVB with deep startup relationships— all sit on cash and have a vested interest in their portfolio startup companies, and those that they would like to bring into their networ. They have a vested interest in helping these companies tweak their marketing strategy, double down on their customers, and kindle new channel partnerships; after all, their success is tied to the longevity of those businesses. When I worked at startups, capital was not a lever I could use constructing alliances. Now being on the other side, I see how much it can be a resource — limited still — that can be possibly unlocked to a startup´s benefit in exchange for a reciprocal commitment. I italicize that last word purposefully because startups forget that they can be an equal partner at the negotiating table. Think contingently — if you want something, and the other party on the other side wants something from you, and anticipates what you will need, how will you do the same to get a win-win settlement? Allow me to illustrate a real use case. According to the April 4th/10th Economist publication, Amazon, Microsoft, and Google sit on top of $570 billion of cash. Yet, don´t forget they are looking to grow their cloud businesses, but to do so, their partners need to build mission critical workloads on their platforms. Think creatively on how such a need can be contingently negotiated upon to extend your runway, refresh your marketing message, and reorient yourself towards your most loyal joint customers.
Take a page out of Airbnb´s actions: lead with empathy for all your communities
I´m quite convinced that the covid developments will accelerate our realization that we must be more thoughtful partners to our communities and their members. I keep hearing, ´ We are all in this together,´ but hopefully this aforementioned set of lightweight actions reinforces how we can go about being more inclusive.
I can’t help but end by pointing out the actions of Brian Chesky, AirBnB CEO, as the model that we could try to replicate. Brian announced that Airbnb would compensate up to 25% of cancellations to hosts, and then doubled down by announcing a $250 million fund to help them weather the storm. If I were cynical, I would point out the hosts were upset at first, but the way Brian responded and then followed through shows his mind was in the right place, and his actions speak to that ambition. In any case, his posture and message always account for the communities that Airbnb takes part in — ultimately his platform´s users benefit more from not only the supply of hosts but also the network of smaller players that compromise the Airbnb Experience platform. I imagine he is keenly aware that communities symbiotically cooperate to ensure that all are taken care of, rather than each one focusing singularily and myopically on what they can offer.
Let us not forget that to go fast, go alone; but to go far, go with others.
*Napoleon was said to have said, ´Messieurs les Anglais, tirez les premiers !´, translated to ´Shoot first, English gentlemen!´ It implies a strong defense is a strong offense.