With U.S. companies doing business in China, Chicago-based rEvolution wanted to get in on the action.
But building a new office from the ground up in a foreign location seemed too risky to the 30-employee sports marketing firm founded five years ago. Instead of fearing the competition, it looked around for an international partner and found one in S2M, a Shanghai-based sports marketing firm.
“Our competitors in the sports marketing space are all opening offices in China because it’s the place to be,” said Larry Mann, executive vice president. “We felt the best way to grow, and with less risk, is through an alliance.”
The power of collaboration can help just about any business extend into a new market segment, experts said.
It might be counterintuitive at first to team up with a potential competitor, but the result can be growth for both parties.
“It’s essential for high-growth companies to partner with other firms that have greater market reach,” said Rod Shrader, associate professor of entrepreneurship at the University of Illinois at Chicago. When two companies have complementary skills, the partnership can pay off in new sales and exposure for both.
Besides its China partner, rEvolution has four other primary alliances, in marketing, technology and creative segments, said President John Rowady.
“Alliances give us the flexibility to scale at any time without the operational expense” of building from scratch in a new area, he said.
The alliance with S2M, formally signed a year ago, has boosted rEvolution’s revenue in its sports marketing group by more than 25 percent by giving the company new expertise overnight, Rowady said.
“Instead of building that from the ground up, we had an independent partner we knew that was at the top of their game,” he said.
S2M plans to tap rEvolution’s expertise when its China-based clients look to market in the United States. And rEvolution plans to work with S2M to bring its high-end hospitality concept to the 2008 Summer Olympic Games in Beijing.
Speed to market also fueled the licensing agreement between Smarterville Inc., the Baltimore parent of Hooked On Phonics, and Bannockburn-based toymaker Zizzle LLC, which has introduced a set of electronic learning aids for children based on Hooked on Phonics’ curriculum and brand.
When Smarterville decided to move from selling the literacy program through infomercials to brick-and-mortar retail outlets, both companies benefited from quicker time to market and additional retail shelf space for Zizzle’s line of products, which teach letter sounds and beginning spelling.
“We got a tremendous shortcut,” said Roger Shiffman, founder and chief executive of Zizzle.
Alliances are nothing new to Shiffman, a co-founder of Tiger Electronics, maker of the original Furby, HitClips and lots of licensed products such as Mickey Mouse phonographs. He has continued his relationship with Disney, nabbing the master toy license for “Pirates of the Caribbean” movies among others.
Besides the brand recognition from partnering with a big name, he said, “We are getting the advantage of all their people, the work they do and their presentations to retailers.”
Size no deterrence
Even the smallest companies can forge alliances. For sole proprietor Patricia Blanchard, president of Innovative Learning By Design Inc., an alliance with Kathleen Peterson, president of Equinox Associates Inc. in Itasca, has given her steady work from Chicago clients even though she moved to York, Pa., two years ago. She estimates three-quarters of her projects have come through alliances she has forged with Peterson and others.
The two met about four years ago by organizing a golf tournament for an association they belonged to and quickly realized they had complementary businesses that could help one another.
Equinox helps companies better organize their offices, while Blanchard’s company helps organize training materials into accessible formats, from e-learning to booklets.
“When you’re a sole proprietor, setting up those alliances gives you more strength,” Blanchard said.
Many small-business owners shy away from collaborating with others for fear the partner will steal their customers, business secrets or negatively impact their reputation. While those are risks, they occur only rarely, Shrader said.
“Entrepreneurs tend to be afraid people will take advantage of them. Be cautious, but take a risk, take a chance,” he said.
Finding success through alliances isn’t a given, however, said Melissa Giovagnoli, president of Networlding.com and author of “The Power of Two.”
Nurturing alliance relationships take time and effort, so business owners should start with just one, Giovagnoli said. If that is successful, you can look for others.
Success is not a given, as half of all partnerships fail, she said.
Generally, failure occurs because the culture or personalities of the parties clash, skill sets don’t mesh, or the relationship is lopsided. For example, an alliance structured with a commission-only fee schedule is doomed, Giovagnoli said.
“It’s just not a good equation,” she said.
A relationship built on trust and open communication is critical.
“In the beginning you may hold the same vision, but there’s usually one of the alliance partners that is doing more work than the other,” Giovagnoli said. “That is something that can destroy the alliance.”
Total commitment vital
Executives must stress the importance of the alliance to the rank and file, said Rowady of rEvolution. When there’s no commitment from the top, “that’s where the alliance gets off track,” he said.
When two separate brands are involved, you need to decide which one will take the lead.
“There’s always a situation where one agency plays the supporting role so there is no brand confusion,” Rowady said.
But the biggest potential problem is poor partner selection, experts said. Often, people form partnerships with friends, but friendship alone isn’t the best criteria for an effective alliance, Giovagnoli said.
“Ask what they bring to the table,” she said.
On the other hand, you will need a good working relationship, and many business owners say the difference between success and failure often comes down to similar values and a gut feeling about whether you will get along well.
“Chemistry is the most important factor,” said Alan Maites, president of Robinson & Maites, a Chicago marketing agency with 22 employees that relies on alliances to expand its scope. “Business ethics also is critical.”
When selecting partners, it pays to do your homework.
“It’s hard to find really good alliance partners,” Giovagnoli said.
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Partnering up
Melissa Giovagnoli, president of Networlding.com and author of “The Power of Two,” suggests looking for:
* Business owners with a similar vision, culture and commitment level.
* A partner with more experience in the business area you are targeting.
* Those who are open and honest.
