In keeping with my theme of 5, here are some thoughts on the top 5 traps to avoid (or potential problem areas to stay clear of) when it comes to partnerships and alliances.

• Not monitoring change signals from your partner
• Failing to negotiate when it’s necessary
• Trying to represent that you or your company can do more than you really can
• Waiting for your partner to dictate the direction that your partnership takes
• Focusing on individual success and not the partnership

Let’s explore each one a little further.

Trap No. 1:  Not keeping a close eye and ear on what your trusted partner is doing in the marketplace is a recipe for getting blind-sided. I’ve been involved first hand with an important alliance that we expected to move into an acquisition deal. Our discussions turned south when our partner was acquired by a larger partner of theirs, all while they were in the midst of negotiation with us. And we were even partners with their acquirer. That was a costly lesson to learn.

Trap No. 2:  Similar to trap #1, failing to recognize when to negotiate new terms and conditions, or direction, can result in unwanted results and outcomes, at least for one of the partners. When there are substantial changes in business conditions, such as when new competitors enter your field or there are a bevy of acquisitions, don’t wait to look at your partnership T’s and C’s until the contract is up for renewal. That’s usually too late.

Trap No. 3:  Trying to represent that your company can take on more than it is capable of or that your every move is firmly backed by everyone in your company can easily set you up for a fall. It’s important to aspire to success but success is more frequently attained through continuous achievement and hitting milestones than with over zealousness or boasting.  Don’t be enticed to offer your partner more than what you can realistically deliver, and target modestly at least initially. Under-promise and over-achieve as the expression goes.

Trap No. 4:  The fourth trap is allowing the direction of the partnership to be dictated by your partner, especially if they are the larger-dominant one. While you may have to submit to some of their terms and conditions, or risk endless tie-ups and delays with their legal department that most smaller companies can ill afford, you must equally dictate the tempo, rhythm and culture of the partnership. If it sounds like a dance, it is.

Trap No. 5:  While it’s obviously never wrong to focus on your success, if it’s always coming at the expense of your partners’, your partnership won’t keep its legs very long. It’s important to look at the partnership as a joint venture – each side having a stake and a gain. Look out for your partner when they sometimes can’t look at for themselves and you’ll both be successful in the long run.

As I’ve been learning the past few weeks, I’m sure there are many other traps to be aware of. I’d love to hear your favorite.

In the 90’s, I had the opportunity to represent AT&T in one of the first Information Technology (IT) benchmarking studies facilitated by the Nolan, Norton Co. The two founders and principals of the company were David Norton and Dick Nolan. David Norton became famous for his development and use of the balanced scorecard while Dick Nolan was one of the leading professors of Information Management at Harvard. Their company Nolan, Norton Company eventually was bought out by KPMG – but I believe it may be independent again or at least reincarnated.

Our 9 month IT benchmarking study that was geared to highlight IT best practices (world-class best practices actually) was conducted with around 10 companies including Boeing, American Airlines, Canadian Imperial Bank of Canada, Sprint, Ford, etc. We used a number of techniques and as I recall it was an initial exposure to David Norton’s balanced scorecard which had just come out about that time. You can read more about it below and there is The Balanced Scorecard Institute for further information.

Applied to partnering, alliance managers can use these principles to measure:

• Partnership financial performance
• Customer satisfaction and increased customer interaction
• Internal learning through understanding of complementary products and services
• Process improvement through incorporation of best partner practices

Those 4 important balances apply to alliances and partnerships in the following way:

1. Process: Too much process and paperwork can overrun the alliance with unnecessary bureaucracy. Too little and there is not enough of a framework to work within. Having a defined go-to-market partner framework puts boundaries around where to focus.
2. Management: Too much executive interference may kill off the groundswell and viral effect while too little will surely doom its failure as evidence of no real commitment between the partners.
3. Customer Interaction: Too much customer interaction early on in the relationship will result in lack of focus and potentially dissatisfied clients especially if the partners paint the expectations too high. Too few early customers will stall the partnership from lack of concrete success stories and references. Early customer interaction can also help drive new areas of co-innovation that might go seemingly unnoticed.
4. Financial Results: Expectations that are set too high, too early will damage the credibility of the partnership, while too few results ends in a non-start eventually. It’s also important to build a compensation neutral programs with early incentives for both partners so that the line sales people that drive the success of the deals are appropriately compensated. That’s a subject of its own – but is quite important in the overall financial success of most partner driven relationship.

In summary, partnerships naturally imply balance, not necessarily in exactly equal amounts, but more in terms of relative commitment. Lastly, using a balanced scorecard approach can be an important lens into looking at your valuable partnerships and is another way to make sure that partnership success can be equivalently measured and improved.

For more information around the Balanced Scorecard
What is the balanced scorecard?
The balanced scorecard is a strategic planning and management system that is widely applicable to organizations regardless of size or type of business. The system, extensively used in business and industry, government, and nonprofit organizations worldwide, provides a method of aligning business activities to the vision and strategy of the organization, improving internal and external communications, and monitoring organization performance against strategic goals.

To start this out (and to be totally above board), I’ve had the opportunity to work for Sun from 1995 – 1999 in New York City. And until very recently owned shares in the company. I still own shares of Oracle and my advisor just suggested I purchase some more a couple of weeks ago. So I hope this bodes well for both companies, their employees and customers. Here’s my analysis:

Culture: this should be one of the great cultural fits. Oracle and Sun were always linked tightly together and the employees were always encouraged to work closely together. Sun’s and Oracle’s sales forces both took the gun slinger approach, and their R&D plant was based on UNIX/Solaris, C/C++ and Java, not (dot)Net for instance. Both tended to be thin on marketing (perhaps not so much for Oracle – but similar). I think the entire marketing plan for Sun when I was first there was about 5 pages. So they tend to be less bureaucratic – although that has changed over the years. All in all looks like a natural marriage.

Products: for the most part their product suites are highly complimentary, except for Sun’s acquisition of MySQL, an open source database software, which put Larry Ellison slightly on edge. However, that hiccup should be so minor that it isn’t worth talking about. Oracle uses Java oriented software and Oracle has no hardware company, so Sun can continue to sell its wares. Oracle’s high end database software needs the compute cycles that a Sun server delivers. Again potentially all good stuff.

Leadership: Larry and Scott McNealy have typically been on the same side and are neighbors in Silcon Valley so to speak, but the top leadership will rest in Larry’s hands ( I would assume). Since the product sets are complimentary, most of the mid-senior level managers may have already been purged by Sun in their recent round of layoffs. As a result, it appears that a lot of the downsizing has already been captured pre-deal, although it’s likely that some expensive and redundant mid-layers may be further shedded.

Market: while it’s a tough market, Oracle got Sun for a decent price. It’s doing $10+B in business and with the recent cuts it could be a win-win for the customer long term. More stability for the customer, better integrated product sets and a re-focus on innovation and R&D could be forthcoming.

Cons: it doesn’t address the soft side of the business for Oracle (professional services) which is the big cash generator in today’s IT market. The EDS acquisition by HP for example. The acquisition also throws a wrench into the recently extolled relationship with HP that Oracle has been talking about (as a result of Sun’s MySQL foray mostly). But nevertheless both HP and IBM compete head to head against Sun on the hardware side, so this will not make either ecstatic. Ditto EMC, who has been an arch enemy of Sun for years. So let’s hope Oracle, while buying a great company, didn’t paint itself into a corner with its other alliance partners.

Personally, I feel that the IBM acquisition would have benefitted both companies more, vis-a-vis the entire market landscape in general, especially as IBM could have reaped some economies of scale from its own server sales units as well as having a full armament of professional services to back it up (Oracle doesn’t). This is beginning to sound like I’m about to short Oracle, but Larry’s a tough and savvy guy. I think I’ll sit tight – maybe he has another move up his sleeve to buy a services firm.