Are alliances part of growth hacking?

October 22, 2013

Most people familiar with early stage companies understand the concept of “growth hacking.” If you’re not, you can see one definition here but basically it refers to creative uses of product design and data to enable users to discover, use, and share new web sites, SaaS applications, or mobile apps.

So perhaps is a purist sense of definitions, alliances and partnerships are not part of growth hacking since they don’t tend to involve product modifications (other than into the partner’s site/product) or viral hooks.  Most of the best examples of growth hacks, like the example with Twitter onboarding where Twitter discovered that users were more likely to tweet and return if they followed five people, are product centric. BTW,  Twitter started making suggestions of who new users should follow.

But really, growth hacking is about getting new users with little to no marketing. So yes of course, alliances and business development is part of that, because alliances are about distribution. It’s a rather fine line between partnering with a company for distribution, and engineering it (like AirBnB did to enable its users to crosspost to Craigslist).

I think Brian Balfour captured a number of interesting examples of alliance hacks (like Match.com and Kayak) here:

http://brianbalfour.com/post/60293339476/complete-guide-growing-consumer-startup-partnerships

These examples are good ones, one generation removed from Monster partnering with AOL and MSN to power those companies’ Jobs portals.

In my view, startups absolutely should look at alliances to supplement their own organic growth tactics. But because of startups size and limited resources, they need to be even more thoughtful, strategic, and aggressive. I have a longer post on early stage Business Development, but here are a few tips:

  • You need to articulate why you matter to the big company. What’s in it for them?
  • You need to wait for the right time. Big companies don’t often create prove demand, they fulfill it. In other words, you need product market fit first before you go seeking partners.
  • You need to hold your partner’s hand. They are offering you access to their users. You need to be willing to do (almost) everything else. I agree with Balfour that you need an implementation team. For your partner, this is a product launch and you should treat it that way.
  • You should measure and modify your tactics quickly. Big companies lose interest if things aren’t working. They don’t have the same iterative approach that you will, and they don’t tend to tolerate “failure” as well.

There is also the important issue of who should take on alliances activity. Personally, I think it should either be the CEO or a dedicated business development person, preferably one who has been through a few battles and seen deals work and go south. I don’t think you want to risk your company’s reputation because your alliances person is learning on the job. Or worse, if you need to unwind the partnership, you don’t want to find out that your green biz dev person didn’t really understand the contract.

Lastly, if one or two alliances are moving the needle, I think it’s important to understand why. Do a periodic review, prioritize your efforts for current partners, and also for your future partnering activities.

Advertisements

Is Microsoft Giving Up?

September 19, 2013

Yesterday brought news that Microsoft is raising its dividend by over 20% and allocating $40B of its cash horde to buy back its own stock.

Rational stock market investors and business school graduates will probably applaud the move. Generally speaking, it is better for a company to give money back to shareholders through dividends or buybacks rather than spending it on uncertain initiatives with unknown paybacks. That is true in many industries and I’m sure we’ll see Microsoft stock move up as a result.

However, Microsoft isn’t in most industries, it’s a technology company. Technology companies are supposed to make bets on uncertain initiatives in the hope of producing exceptional returns. In consumer and enterprise software, consumer entertainment technology, Internet media and search, and consumer and enterprise communication (and mobile phones and software), the world is changing rapidly. Competition is coming, and coming hard. And many of Microsoft’s emerging businesses, like Skype, Bing, Windows Mobile and Xbox are not dominant and could use additional investment or influx of talent from acquisitions.

By moving forward with the buyback, Microsoft seems to be signaling that it does not intend to invest further in these businesses, nor does it want to acquire large technology companies to pursue new talent, new technologies, or new ideas in order to stake a leadership position in an emerging area. (To be fair, Microsoft will still have billions available for acquisitions of smaller innovators). The company has been playing catch up in mobile, in search, in SaaS, and in consumer platforms like tablets.

The combined buyback/dividend raise seems to me like a very strong signal that they won’t invest internally NOR will they invest externally. While the PC isn’t going completely away, and Windows and Office will continue to generate substantial cash flow, it seems quite clear that Microsoft isn’t sure how to pursue dominance in any of these emerging areas. While they did just spend $7B to get Nokia’s mobile business, I’m not sure exactly what they got for it.