Business Development is a mysterious title for a little discussed function or department in most larger companies. It’s also a great way for an entrepreneur or small business to have fun, create value and make money.
Good business development allows businesses to profit by doing something that is tangential to their core mission. Sometimes the profit is so good, it becomes part of their core mission, other times it supports the brand and sometimes it just makes money. And often it’s a little guy who can be flexible enough to make things happen.
Examples:
- Starbucks licenses their name to a maker of ice cream and generates millions in royalties.
- A rack jobber like Handleman does a deal with a mass marketer like K Mart. K Mart gives them room in the store to sell records and gets a cut, Handleman does all the work.
- AOL buys AIM instant messaging software and integrates it into their service.
- Years ago, I licensed the rights to Isaac Asimov’s Robot novels from a business development person at his publisher and turned the books into a VCR murder mystery game which I licensed to a business development person at Kodak, a company that was experimenting with becoming a publisher. (Isaac made more from this project than he did from many of his books).
- Best Buy offers extended warranties on appliances you buy. They don’t provide the warranty, of course, a business development person did a deal with an insurance/service company to do it and they share the profit.
- The Princeton Review built a huge test prep business, but only by licensing their brand to a series of books which did the lion’s share of their marketing for them.
You don’t see business development from the outside, particularly all the potential deals that fail along the way. Many companies, though, spend millions of dollars a year looking for deals and then discovering that they pay off many times over. Others, particularly smaller competitors, are so focused on their core business that it never occurs to them to consider partnerships, licensing, publishing, acquisition and other arrangements that might change everything. Harley Davidson probably makes more money on business development than they make on motorcycles.
The thing that makes business development fascinating is that the best deals have never been done before. There’s no template, no cookie cutter grind it out approach to making it work. This is why most organizations are so astonishingly bad at it. They don’t have the confidence to make decisions or believe they have the ability to make mistakes.
Think about the Apple Nike partnership on making a device that integrates your iPod with your sneakers. This took years and cost millions of dollars to develop. Most companies would just flee, giving up long before a deal was done and a product was shipped.
Here are some tactical tips on how to do business development better:
- Process first, ideas second. If you’re going to be bringing new partners and new ideas into your organization, you need a process to do it. Professionals don’t, “know it when I see it.” Instead, professionals think about the abilities of their company and strategies necessary to bring ideas in, refine them and launch them. Great business development people don’t waste time in endless meetings with random vendors or hassle about tiny details up front. Instead, they have an agenda and a project manager’s understanding of what it means to get things done. They don’t keep the process a secret, either. They share it with anyone who wants to know. Someone needs to say, “here’s how we do things around here,” and then they have to tell the truth.
- Who decides? Because every great business development project is different, it’s incredibly easy to get stuck on who can say yes (of course, everyone can say no). Professional business development people intentionally limit the number of people who are allowed to weigh in and are clear to themselves and their potential partners about exactly who can (and must) give the go ahead. Don’t bother starting a business development deal unless you know in advance who must say yes.
- Courtship, negotiation and marriage. Every deal has three parts, and keeping them straight is essential. During the courtship phase, you win when you are respectful, diligent, enthusiastic, engaging, outgoing, and relentless in your search to make a connection. Do your homework, research people’s backgrounds, learn about their kids, visit them–don’t make them visit you. Look people in the eye, ask hard but engaging questions, you know the drill. Basically, treat people as you’d like to be treated, because the people you most want to work with have a choice, and they may just not pick you. Hint: if you skip the courtship part, the other two stages probably won’t come up.
- Buyer and seller. If you’ve ever pitched a product or service to a business, you know how soul-deadening it can be. The buyer works hard to make it clear that she’s doing you a favor, and you need every dog and every pony available at all times (and you better be the cheapest). But business development doesn’t have this dichotomy. Both sides are buying, both sides are selling, right? So talented business development people never act like jaded buyers, arms folded, demanding this and that. Instead, from the start, they seek out partners.
- Enthusiasm is underrated. Business development people are exploring the unknown. That means that there’s more than cash on the table, there’s bravery and initiative and excitement. The best business development people I’ve ever worked with are able to capture the energy in the room and amplify it. They’ll build on the ideas being presented, not make them smaller.
- Close the open door. I regularly hear from readers who are frustrated because a big company wasn’t willing to hear a great idea they mailed in. Here’s the thing: there isn’t a shortage of ideas. There’s a shortage of execution. That means that successful business development teams look for proven partners and organizations with momentum. A key part of that is the decision to say no early and quickly and respectfully to people who don’t meet that threshold.
- Call the lawyers later. A business development deal that never happens is one that’s sure to cause no problems. While the legal clarity you need is important, there’s plenty of data that shows that ten page NDA agreements and onerous contracts early in the process don’t protect you, they merely waste your time and energy.
- Cast a wider net. The Allen and Co. annual gathering is a dumb place to choose a merger partner. Limiting the number of potential partners to people you’ve met at a trade show is also silly. Business development (when it works) creates huge value for both sides, so better to be proactive in searching out and soliciting the organizations that can make a difference. Here’s a simple way to widen your net: start a blog and go to conferences to speak. Describe your successful business development projects to date and let the world know you’re looking for more of them. How many amazing partnerships could the Apple store launch? How many great books could Starbucks highlight? Not only don’t they do this, they hide. Don’t hide.
- Talk to the receptionist. This is huge, and so important. When a great partner shows up at your doorstep, do you know? Here’s a test: call your organization (pretending to be from some respected organization), describe a business development opportunity and ask who can help. If you’re not immediately transferred to your office, you’ve failed, right? Make it easy for the right people to know that you’re the right guy.
- Hire better. How do you decide who to put in this job? I’d argue that glibness and charisma aren’t as important as strategic thinking, project management and humility.
- Structure deals with the expectation of success. The only real reason to do business development deals is because when they work they’re so powerful. Andrew Tobias put his name on a piece of software that ended up earning him millions of dollars. It’s easy to get hung up on all the bad things that could happen, but keep your focus on how the world looks when you get it right.
- End well. Most of the time, even good business development deals fall down before the end of the negotiation process. If a deal doesn’t come together, say so. Acknowledge what went wrong, thank the other party and end well. If it does come together, track the integration and stay involved enough to learn from what works and what doesn’t. I’m still waiting to hear from people who said they’d get back to me “tomorrow” fifteen years ago, but I’m losing hope… Ending well not only teaches you how to do better next time, but it keeps doors open for when you need to come back to someone who you should have done a deal with in the first place.
September 21, 2009
If ads had been free, then the way people would have learned how to do TV advertising would have been by running ads. If they were free, why not? Why talk about it if you could do it? Why guess what would work if you could actually find out for yourself? Running ads would have been cheaper than focus groups. But ads weren't free in 1964, so people talked and pontificated instead of actually running every ad they came up with.
You guessed it: new media is largely free. So why teach it in school as if it were a scary theory? Why encourage people to be afraid? Just do it. Build your own platform. Appear in the places that seem productive or interesting or challenging or fun. Experiment quietly, figure out what works, do it more. No need to be a dilettante, and certainly you shouldn't spread yourself too thin or quit at the first sign of failure… but… quit waiting for the right answer.
By the time we tell you the right answer, it'll be too late.
September 20, 2009
What should you do next?
Is it better to email an existing customer, send a brochure to a prospect or improve your product a bit? Should you tweet or post a new blog post? Should you have a meeting to coordinate your team or spend ten minutes returning phone calls instead?
This is an unheralded skill, something successful people do really well and others struggle with.
How do you decide what to do next?
One of the challenges we have in reducing carbon emissions is that (as far as I know) there's no priority list. Which is worse: leaving your computer on all night or not having the windows weatherstripped? Which is worse: driving a car to Boston or going by plane with 200 other people? Is it worth driving across town to buy a pint of organic strawberries or should I get the ones from the nearby store that came from California? If you have a thousand dollars to invest in making a reduction in greenhouse gasses, should you buy new tires, switch to local foods or perhaps send $900 to help a factory in China switch away from coal and then use the other hundred to have a massage?
Without a list, you can see how making intelligent decisions is impossible, so we resort to confusing activity with productivity.
Back to your office: do you have a list? Have you figured out which metric you're trying to improve? Can you measure the impact of the choices you make all day?
I see this mistake in business development all the time. Assume for a moment that the goal of someone in this department is to maximize profit. Why then would this group spend most of its time tweaking existing deals (looking for a 3% improvement in yield) instead of spending the same time and effort doing new, game-changing deals?
September 19, 2009
I don't do any consulting, but that doesn't stop people from asking me questions. The most common question people ask me when they want a new website is, "If you were in charge of this, who are the 2 or 3 people you’d want to be sure to talk to – to help think through the issues, help us figure out who should do the work, etc.?"
The second most common question people ask me, "In addition to Apple’s site, are there 2 or 3 that you think are really appealing and work well for their business?"
I think these are perhaps the tenth and eleventh questions you should ask, not the first two. Here's my list of difficult and important questions you have to answer before you spend a nickel:
- What is the goal of the site?
- In other words, when it's working great, what specific outcomes will occur?
- Who are we trying to please? If it's the boss, what does she want? Is impressing a certain kind of person important? Which kind?
- How many people on your team have to be involved? At what level?
- Who are we trying to reach? Is it everyone? Our customers? A certain kind of prospect?
- What are the sites that this group has demonstrated they enjoy interacting with?
- Are we trying to close sales?
- Are we telling a story?
- Are we earning permission to follow up?
- Are we hoping that people will watch or learn?
- Do we need people to spread the word using various social media tools?
- Are we building a tribe of people who will use the site to connect with each other?
- Do people find the site via word of mouth? Are they looking to answer a specific question?
- Is there ongoing news and updates that need to be presented to people?
- Is the site part of a larger suite of places online where people can find out about us, or is this our one sign post?
- Is that information high in bandwidth or just little bits of data?
- Do we want people to call us?
- How many times a month would we like people to come by? For how long?
- Who needs to update this site? How often?
- How often can we afford to overhaul this site?
- Does showing up in the search engines matter? If so, for what terms? At what cost? Will we be willing to compromise any of the things above in order to achieve this goal?
- Will the site need to be universally accessible? Do issues of disability or language or browser come into it?
- How much money do we have to spend? How much time?
And finally,
- Does the organization understand that 'everything' is not an option?
September 18, 2009
It's so tempting to do a little bit of everything. All the tools are there, a click away. You can be the designer, the copywriter, the head of customer service. Hey, you can even do the manufacturing or easily outsource it to a commodity producer. One benefit of diversification is that you can average out your risk.
Or you can be a wallah. Someone who does only that one thing.
An old colleague of mine calls himself a chai wallah. Perhaps he loves spiced tea, but I'd prefer to believe it's a reminder that his success lives and dies on the performance of just one task.
When you go all in, it focuses your attention and effort, doesn't it?
September 17, 2009
Stamps (remember those?) make direct mail work. Because it costs money to send a piece of junk mail, you'll think two or three times before you mail something to a million people.
Email, of course, is free.
Except it's not. The friction that slows down sending email to everyone all the time is the cost of all the people you'll lose. You might lose them because they unsubscribe, or more likely, you'll train them to ignore you. Worse still, you might just make them annoyed enough to badmouth you.
Drugstore.com made two mistakes with their relationship with me. First, they bought the lie that opt out is a productive strategy. They unilaterally decided that I'd be delighted to get regular emails from them, merely because I bought some shaving cream.
The second mistake? They didn't bother to be selective about what they sent.
I've never purchased diapers online, since my diaper purchases predate online diaper shopping. And my hope is that I won't be buying Depends for another fifty years or so. Drugstore.com should know this. And yet, because it's apparently free to email me, some lame brand manager says, "sure, do it!"
Except then I unsubscribe and an asset that is worth ten or a hundred or a thousand dollars disappears, probably forever.
Find friction and embrace it, don't ignore it.
September 16, 2009
Non as in non-profit.
The first issue is the way you describe yourself. I know what you’re not but what are you?
Did you start or join this non-profit because of the non part? I doubt it. It's because you want to make change. The way the world is just isn't right or good enough for you… there's an emergency or an injustice or an opportunity and you want to make change.
These organizations exist solely to make change. That's why you joined, isn't it?
The problem facing your group, ironically, is the resistance to the very thing you are setting out to do. Non-profits, in my experience, abhor change.
Take a look at the top 100 twitter users in terms of followers. Remember, this is a free tool, one that people use to focus attention and galvanize action. What? None of them are non-profits. Not one as far as I can tell. Is the work you're doing not important enough to follow, or is it (and I'm betting it is) paralysis in decision making in the face of change? Is there too much bureaucracy or too much fear to tell a compelling story in a transparent way?
Beth has a great post about the feeling of vertigo that non-profits get when they move from the firm ground of the tried and true to the anti-gravity that comes from leaping into change.
Where are the big charities, the urgent charities, the famous charities that face such timely needs and are in a hurry to make change? Very few of them have bothered to show up in a big way. The problem is same as the twitter resistance: The internet represents a change. It's easy to buy more stamps and do more direct mail, scary to use a new technique.
Of course, some folks, like charity: water are stepping into the void and raising millions of dollars as a result. They're not necessarily a better cause, they're just more passionate about making change.
A few years ago I met with two (very famous) non-profits to discuss permission marketing and online fundraising and how they might have an impact. Each time, the president of the group was in the room. After about forty five minutes, the meetings devolved into endless lists of why any change at all in the way things were was absolutely impossible. Everyone looked to the president of the group for leadership, and when he didn't say anything, they dissembled, stalled and evaded. Every barrier was insurmountable, every element of the status quo was cast in stone. The president of the group was (he thought) helpless.
When was the last time you had an interaction with a non-profit (there's that word again) that blew you away?
Please don't tell me it's about a lack of resources. The opportunities online are basically free, and if you don't have a ton of volunteers happy to help you, then you're not working on something important enough. The only reason not to turn this over to hordes of crowds eager to help you is that it means giving up total control and bureaucracy. Which is scary because it leads to change.
If you spend any time reading marketing blogs, you'll find thousands of case studies of small (and large) innovative businesses that are shaking things up and making things happen. And not enough of these stories are about non-profits. If your non-profit isn't acting with as much energy and guts as it takes to get funded in Silicon Valley or featured on Digg, then you're failing in your duty to make change.
The marketing world has changed completely. So has the environment for philanthropic giving. So have the attitudes of a new generation of philanthropists. But if you look at the biggest charities in the country, you couldn't tell. Because they're 'non' first, change second.
Sorry if I sound upset, but I am. The work these groups do is too important (and the people who work for them are too talented) to waste this opportunity because you are paralyzed in fear.
September 15, 2009
I think it looks like this:
- Attitude
- Approach
- Goals
- Strategy
- Tactics
- Execution
We spend all our time on execution. Use this word instead of that one. This web host. That color. This material or that frequency of mailing.
Big news: No one ever succeeded because of execution tactics learned from a Dummies book.
Tactics tell you what to execute. They're important, but dwarfed by strategy. Strategy determines which tactics might work.
But what's the point of a strategy if your goals aren't clear, or contradict?
Which leads the first two, the two we almost never hear about.
Approach determines how you look at the project (or your career). Do you read a lot of books? Ask a lot of questions? Use science and testing or go with your hunches? Are you imperious? A lifehacker? When was the last time you admitted an error and made a dramatic course correction? Most everyone has a style, and if you pick the wrong one, then all the strategy, tactics and execution in the world won't work nearly as well.
As far as I'm concerned, the most important of all, the top of the hierarchy is attitude. Why are you doing this at all? What's your bias in dealing with people and problems?
Some more questions:
- How do you deal with failure?
- When will you quit?
- How do you treat competitors?
- What personality are you looking for in the people you hire?
- What's it like to work for you? Why? Is that a deliberate choice?
- What sort of decisions do you make when no one is looking?
Sure, you can start at the bottom by focusing on execution and credentials. Reading a typical blog (or going to a typical school for 16 years), it seems like that's what you're supposed to do. What a waste.
Isn't it odd that these six questions are so important and yet we almost never talk or write about them?
If the top of the hierarchy is messed up, no amount of brilliant tactics or execution is going to help you at all.
September 14, 2009
In the age of rapid cycles and connected data, how long are we going to have to settle for dumb software?
Here's the detail screen from iCal. If I write a long text to go with an appointment, the only way to see the whole thing is to hit "edit." But I don't want to edit it, I just want to see it.
If I try to schedule an appointment for 2 pm, it requires me to not only hit the 2, but also select pm. I have never once had a meeting at 2 am. Shouldn't it know that?
When I type in someone's name, how come it doesn't know that this is someone I know, correspond with and meet with often? Why isn't it connected?
I have tens of thousands of people in my address book. Some of these folks were put there ten years ago and, alas, are dead or long gone. Do I really have to go through and delete people manually? Why isn't my address book smart enough to sort the list in reverse order of use, so I can see records I haven't encountered in seven years first and start from there? Or, better, why doesn't this address book hook up with other address books of trusted peers and automatically correct and update?
The people who make desktop software are making themselves obsolete. When you start developing on the web, your default is to be smart, to interact and to be open (with other software and with your users). Desktop software (like Word) is insanely unaware of what I do, why I do it and who I do it with. Right now, the desktop folks have the momentum of the incumbent. Not for long. Time to hurry.
September 13, 2009
I think it's dangerous and often fatal to put free on top of an existing business model. Things fall apart.
People look at the free revolution and say, "oh, that could never work. If I gave x, y or z away for free, I'd fail." They're right. They will fail… If they keep the model the same and just give away stuff for free.
The way you win is by reinventing the model itself. So, for example, lululemon doing giant free yoga classes in New York. The more people come, the more clothes they'll sell… it'll become a movement. Or Crossfit, publishing their insane work outs online. The more people do them, the better the scarce part (private coaching, etc.) does.
We spent a generation believing certain parts of our business needed to be scarce and that advertising and other interruption should be abundant. Part of the pitch of free is that when advertising goes away, you need to make something else abundant in order to gain attention. Then, and only then, will you be able to sell something that's naturally scarce.
This is an uncomfortable flip to make, because the stuff you've been charging for feels like it should be charged for, and the new scarcity is often difficult to find. But, especially in the digital world, this is happening, and faster than ever.
September 12, 2009
