In the previous article, I introduced various concepts of the Business Model Canvas and indicated how we could find new partners using BMC. There are three ways we can find new partners using BMC. It can be done from the operational, customer, and value proposition perspectives. Let us explore each of them.
From the operational perspective, we can find partners to help us execute key activities and provide key resources. To deliver the value proposition, any business must execute certain tasks. These tasks can be identified using Porter’s value chain, covering inbound logistics, operations, outbound logistics, marketing & sales, and service. To support these line functions, staff functions like IT support, HR management, procurement, etc. would be necessary.
Outsourcing a function offers many advantages including functional expertise, efficiency, leveraging the partner’s scale, and industry connections. Due to the scale of operations and experience, partners bring expertise to the table from diverse perspectives. Your logistics partner is the best person to advise about the packaging size. A recruitment partner can provide great advice about the baseline salary for a specific position. They can also connect a business to the market's complementary product/ service providers through their network.
The challenge for a startup to leverage outsourcing partners would be payment terms and a general lack of credit due to non-existent credibility. However, if the founders had operated in the industry, they would have developed connections and credibility with the suppliers and service providers. If those relationships have been amicable, they could be leveraged.
Another way of developing partner networks is by leveraging customer networks. A happy customer would be willing to help a startup grow by introducing it to credible and efficient partners. However, asking for the intro of known and credible vendors, not just acquaintances make sense. We must ensure that we protect the trust and credibility and not use the customer as an arbitrator to resolve disputes.
Customers could be great validators and co-creators of the product or service by being beta sites and willing to experiment along with the startup. This way they become great partners for figuring out the best solution to deliver maximum desirable value for an affordable price. This is another important insight only customers can provide.
The third way of finding partners is through a value proposition perspective. The opportunities can be found here by exploring complementary or replaceable products. Another well-known process is value engineering where we can reduce the total cost of ownership. Sometimes, customers discover these complementary products which can be used together for great results or experiences. Most of the combo offers available in the market are conceived by observing the usage patterns of customers. The prompt that shows what else customers bought after buying the current product is a great example. These combo offerings can be identified by observing how customers use or consume our products.
Value engineering offers immense potential through material replacement, design changes, and the process. Remember the first-generation washing machines where we had separate tubs for washing and drying? Today, all the process cycles are run using automation and a single tub, conserving time, and space. Car makers moved from steel to aluminium alloys to fibre-reinforced plastic, greatly enhancing the power-to-weight ratio. These innovations help find new partners for research and supply the necessary materials and machinery.
Exploring customer behaviour also helps us in enhancing the value proposition, further increasing new partner identification for quickly getting to the market with enhancements. It is usually better to go along with partners where the startup needs more competence or scale.
There are multiple ways to engage with partners. Of course, we can always ask the partner just to build the product. We can have a build-and-operate model where the partner stays on for a longer engagement period. The build-Operate-Transfer model works for the short-term where the partner transfers the team and operations after a pre-defined engagement period. There can also be equity participation by the partner instead of cash compensation. If the opportunity is large or needs multiple competencies, we can have a consortium of partners working together on the project. The specific selection and terms of compensation are highly contextual.
In summary, Business Model Canvas can help identify and engage with partners meaningfully and effectively. Much innovation is also possible by challenging the conventional ways of engagement leading to disruptive innovations.
About the Author
Flt. Lt. Sridhar is a Startup Ecosystem Builder, Keynote Speaker, Author, Researcher, and Entrepreneur. Sridhar’s mission is to help Entrepreneurs and startups achieve incredible success through exponential growth. He brings insights and lessons from three decades of hands-on startup and business leadership experience in various verticals. Sridhar uses six different thinking processes, including systems thinking and design thinking, and helps entrepreneurs create breakthrough solutions through his unique coaching process. Sridhar launched and ran four businesses. He is a certified Startup Mentor from the Confederation of Indian Industries.