Another place in business where greed is NOT good

For over 20 years, Gordon Gecko’s philosophy has been (in)famous:

“Greed, for lack of a better word, is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures, the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge, has marked the upward surge of mankind and greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the U.S.A.”[1]

The central tenet to this philosophy was that being greedy would drive you to create growth and profit—creating value for you, your team and your investors. This can definitely be true—but only to a point. While focusing on creating value in all that you do is a good thing, OVER-focusing on your own value can prevent you from building viable business partnerships.

Four Common “Greedy” Partnership Mistakes

Many businesses create partner models that are simply “too greedy.”

  1. They do not share enough of the pie: Many partner agreements do not share enough revenue to make it worthwhile for partners to take the time and effort to sell their products. Not sharing enough of your pie ensures it will never grow.
  2. They do not help partners: It is hard enough to sell your product to a new customer when you know it “inside and out.” Many partner models do not provide the information and sales tools needed to make it as easy for your partners to sell your products as their own.
  3. They are too jealous: Many partner agreements require both parties to be in the same room when speaking to a new customer. This creates inherent competition (the opposite of partnership) over who “owns” the customer relationship.
  4. They are too secretive. Many companies are afraid that sharing information will enable partners to reverse engineer their business model or technology. This “protectionism” blocks any creativity and innovation you would gain from your partners.

As a result of these greedy mistakes, many businesses are simply not able to cross the hurdle of using partnerships to speed expansion and value creation.

Winning Partnerships Are “Anti-Greedy”

When planned and executed well, partnerships can create enormous value. However they only work when each side creates incentives to its partner to “win” by leveraging the partnership.

  • In the B2B world, look at the value added reseller chain. Oracle and Microsoft are kings here. They both provide the incentives, collateral, certification programs and co-marketing to empower their partners to succeed. As a result, Microsoft sells more to businesses from partners than their own teams (reducing their cost of sales)[2] and IBM is the biggest implementer of Oracle (enabling Oracle to tap IBM to build market share)[3].
  • In the B2C world, both Facebook and Twitter built their networks from the start to make it EASY for external developers to build applications that leverage their networks. They gave partners instant and simplified access to millions of potential customers. In turn, Facebook and Twitter IDs have become the new de factor standard for consumers, providing both companies enormous “buying power” for advertising.
  • The new “App Stores” (not just Apple but also Android, Force.com and even the US GSA) have all but eliminated the line between B2B and B2C. Partners can build applications at home and get essentially free hosting, distribution and payment processing. Meanwhile the store owners get access to the innovation of thousands using infrastructure that scales more much cost effectively than adding thousands of people to payroll.

These partner models win by using the phenomenon of social production (a.k.a. crowd-sourcing, an inherently non-greedy thing). As a result, they—and their partners—can leverage the comparative advantages of EACH OTHER to expand their R&D, product and sales fast and at less cost than would be possible on their own.

Sorry Gordon, this is another case where, “Greed is NOT good.”

Notes
[1] “Memorable Quotes for Wall Street (1987)”.
Internet Movie Database.
[2] Microsoft Gold Partnership Certification Process
[3] Bob Evans, Editorial Director,
Information Week at Softserve Innovations Conference (2009)

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