A Christmas Tale

[Article placed on website: December 2003]

Because it’s the Christmas season, I’m going to tell you a story.

The story concerns three companies and three very different individuals, all of whom set out to develop a business distribution partnership.

Robert

Our first character is Robert Gould, a senior manager in the Shepherd Corporation. Robert had been charged with finding new sales channels for Shepherd’s latest product range. His team had approached a number of major organisations that had strong brands in Shepherd’s target markets. One in particular seemed keen to incorporate Shepherd’s new products into its portfolio, badging them under its own brand name. But the partner wanted to move fast, to meet a market window in one of its sales territories. The problem was that the Shepherd Corporation, and Robert Gould in particular, were not used to doing things quickly. They had their set procedures and processes, and Robert had to "wait in line" to get the full attention of the firm’s legal department. He also had to justify what he wanted to do to the investment approval committee, which met regularly once a month. Robert had no way of moving fast, even if he had been inclined to. Robert is worldly wise, and knows that partnerships that are not built on solid contractual foundations will not last long. The result was that the opportunity went away – which is really what Robert wanted anyway, because the whole venture was getting to be far too risky. That was six months ago, and the last I heard was that Robert and his team still had no partnership agreements in place.

Frank

Our second character is Frank, a self-made entrepreneur and CEO of a company he bought three years ago. Frank prides himself on being a canny business man who knows how to do deals. He has made his money by taking risks, certainly, but also through calling upon personal relationships he has developed over the years. Frank is street-wise: he knows that partnerships not cemented by a hand-shake between CEOs are doomed to fail. So when Frank heard that his old chum, Barry, had been appointed CEO of a distributor in his industry, Frank was one of the first to congratulate him. They discussed the outlines of a partnership over dinner and finalised the details during a round of golf. The next day, Frank told his people to work with Barry’s staff to get the deal done and ready to be signed, expecting it all to take about a week. In the meantime, Frank went off to do more deals. A month later, when not much progress had been made, Frank was upset. Then, two months after that, when his people were telling him there was still no paperwork ready, Frank was angry. Calls to Barry were reassuring. Barry said he would sort it. Barry said that there had been other pressing business which had caused delays, but that now Frank’s products were ‘top priority’. That was six months ago. Eventually a deal was signed, but hardly any of Frank’s products were sold through the new channel. It seems that the people in Barry’s company who actually had to sell the products didn’t understand the logic of why they were in the portfolio, had not been incentivised to sell them and did not have enough information about them. To cap it all, there were actually competing products in the distributor’s portfolio from a rival supplier! Now Frank was even more irate, and two months later, when he heard that Barry had resigned and was now in charge of another distributor, he was incensed!

Dennis

And so we come to the third character in our Christmas tale, a certain Dennis Muir, who had spotted an opportunity for his firm’s products in China. Dennis knew that to be successful in a foreign culture you need a partner who understands how to do business, has the right connections with the people of influence, and with the infrastructure to support your product locally. But Dennis also knew that he had never before set up a distribution partnership outside his home market. He also recognised that instructing some of his firm’s staff to set up such a deal would not only be asking them to stray into areas they had never tackled before, but would distract them from their day-to-day tasks of managing and growing the business. The opportunity costs would be high, as would the risk of failure. So, Dennis did the wise thing and sought outside help. He followed the advice he received and used the skilled external resource to help him set up the deal with a company well-placed in the Chinese market. His own firm and the new partner drew up mutually agreed objectives and developed a joint marketing plan, clearly stating what resources they would be allocating to the project and what results they expected to achieve. They arranged regular reviews of progress to keep the programme on track, and ensured that the key people in both organisations were kept fully briefed on progress against the agreed targets. Dennis also arranged for special sales support material to be developed and made available to the distributor’s salespeople. The results a year later are encouraging. Not only are sales ahead of planned volumes, but the distributor is so impressed by the support it received that it now wants to introduce Dennis’s product into Singapore, South Korea and Taiwan. So Dennis, having made it big in the West, is becoming a real star in the East!

Moral

Like all good stories, this tale has a moral, which I guess by now you will have worked out! When you next have a major opportunity to distribute your products or services via a partner, which of the three wise men will you emulate? Will you be worldly wise like Robert, street-wise like Frank, or just wise like Dennis? It’s your choice – you just have to decide how you'll react to the opportunity i.e. will you be like Gould, Frank (incensed) or Muir?

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