Little Brothers need to create win-win alliances with Big Brother companies to help them open new, high-margin markets, advises David G. Thomson
When high-growth companies or business units are small, they need help from larger companies to break into new markets and gain credibility with marquee customers. This type of asymmetric relationship is what I call a "Big & Little Brother Alliance"—one in which a bigger company helps a smaller company by giving it credibility in the market, offering market intelligence, and leading it to Marquee Customers. What makes these relationships work, however, is that they are mutually beneficial. Big Brothers also need Little Brothers to help them remain on the cutting edge of innovation and serve emerging markets as well as to fill portfolio gaps. Especially during a down economic cycle, large companies can't invent everything. Their product offerings will feature defined portfolio gaps that need to be filled by smaller companies. Advantage PressurePro, which manufactures and markets after-market wireless tire-pressure-monitoring systems for cars and trucks, is a 2009 recession-time case study in how leveraging Big Brother Alliances can fuel growth opportunity for a small company. CEO Phil Zaroor tells how his small, private company formed partnerships with GE (GE). "When we launched our business, we recognized that optimal tire pressure is fundamental to getting maximum gas mileage, lessening tire wear, and increasing safety," he says. Fuel, tires, and labor represent the three greatest costs for almost all trucking fleets, and Zaroor realized what impact tire pressure exerts across each of these segments. "We also identified that we had to create a product that could easily be installed on current vehicles as an after-market installation," he recalls. The U.S. Transportation Dept. states that low tire pressure causes the domestic economy to waste two billion gallons of fuel each year. Related annual losses include the unnecessary release of 57 billion pounds of carbon emissions and the premature scrapping of 58 million tires due to uneven wear. Zaroor saw that GE needed his concept
Zaroor leverages both supply-side and channel-to-market alliances. General Electric makes the sensor chips that go into the Advantage PressurePro systems and Michigan-based Lextronix handles the Advantage PressurePro's development and production. Each is a classic example of a Little Brother-Big Brother Alliance. How did Zaroor identify GE as a potential alliance partner? He did his homework. "I knew GE was making a sensor of a different type than we needed. Most tire pressure sensors are inside the tire while we needed one that was on the valve stem." He also knew that the GE's sensor unit wasn't anywhere near the $1 billion revenue mark it needed to reach to achieve GE's goal of being No. 1 or No. 2 in every business segment the company was in. "Our approach could provide the sensor business unit at GE the opportunity to close their revenue gap," explains Zaroor. Armed with the beginnings of a win-win proposal and a focused pitch, Zaroor found a way to contact then-CEO Jack Welch, who led him to his successor, Jeff Immelt. Brief discussions led Zaroor to Doug McFalls, automotive sales manager within GE's sensor business unit. McFalls and Zaroor became "Alliance Brothers," leading GE to customize its sensor chip and giving Advantage PressurePro a competitive advantage. Today the alliance is growing exponentially, based on a set of win-win interests. For GE's sensor business unit, the Little Brother partner has provided entry into the aftermarket wireless tire-pressure-monitor market. This segment offered GE opportunities for incremental revenue growth and high margins. Zaroor complements his supply-side alliances with more than 30 affiliate alliances with such distributors as Square Rigger, a fleet-maintenance-software vendor in Washington, and Transmobile, a Florida-based tech company that sells asset-tracking applications. "Instead of hiring our own sales force, our partners integrate our technology into their own product lines," Zaroor says. The result is hundreds of points of sales that deliver high gross margins. And a recession-proof illustration that filling a gap in your alliance partner's product line can form the basis of a long-lasting Little Brother-Big Brother Alliance's win-win relationship, increasing sales and decreasing the cost of selling and marketing. Insights To identify and build long-term partnerships, start by answering these questions: While alliances can be tricky to execute because of the asymmetric size between Big Brothers and Little Brothers, how well are you leveraging supply and channel alliances to break into new markets? How well are you identifying, forming, and building trust-based alliances to ensure a long-term win-win relationship? If you are struggling to find the right partner, are there opportunities to leverage any Marquee Customer relationships to play matchmaker? ActionsHere are three actions you can apply to create and leverage long-lasting alliance relationships: 1. Consider alliances at both ends—with suppliers as well as channels of distribution Zaroor's alliances with GE and Lextronix—where the former supplies sensor components and the latter provides development and manufacturing services—is a great example of how you can seek alliances of all kinds to create value for your company. Supply-side alliances let Big Brothers participate in emerging markets while smaller, faster-moving companies can leverage supplier credibility and capacities to secure large customer and market opportunities. To complement supply-side alliances, leverage market-facing alliances to address different market or geographic segments. 2. Align long-term interests Before proposing an alliance, it is important that you determine the potential for a win-win, long-term relationship. You need to identify both the company and someone within that company to champion the proposed relationship. Zaroor bases many of his alliance agreements on contracts after long-term discussions that establish and align interests. 3. Leverage your Marquee Customers to introduce you to the right partner Companies often talk about how they struggle to find the right partner or contact within a large company. Yet some have Marquee Customers that are also important customers of potential alliance partners. Ask your best customers for help in connecting with possible alliance partners. Your customers can clearly articulate the win-win-win relationship for all parties.