Let’s forge partnerships for success and profit

Last week we saw how Harley Davidson built a successful business model of making money out of rebellious customers. That was building block number six. This week let’s explore whether there is any merit in partnering with people and organizations to build the most cost-efficient and profitable business.

When you zero in on your business idea, there are basically two ways you can build your product around it and take it to market. One is to do everything yourself. You hire the people, you think through the functionality, you work on the site map, and you design the most compelling customer interface that magnetizes customers to your product. What do I mean by this? The best illustration of this is 1-Click of Amazon.

One click wizardry

Remember in 1999, Amazon added one button on its product page and how that button changed your whole shopping experience? The world has never been the same, since. What did this button do? This button said, you don’t have to enter your billing details or shipping details or payment details every time you shop. It said, if you are a frequent shopper, this single button will eliminate six steps in the check-out process. And not just that, you now can focus, enjoy and repeat the only reason for which you went on the Amazon site, which is to choose your product. Let nothing, said Amazon, dilute or diminish that experience!

The other way of doing this is that you identify what your business idea is and then your core competency. Let’s be realistic. We all don’t have all the skills to build the entire business by ourselves. Some of us are good with technology while others are brilliant at using technology to build a product. Some have phenomenal vision to identify who are the people whose lives our product will change, and there are those who know just the right trick to get this product to them with the most appropriate messaging. Some understand what it takes by way of costs to get the idea from our head to the market, and we have some who know intuitively, maybe serendipitously, all the opportunities we have to make money out of our business. But none of us is good at all of it, right?

Should we hire or enter into a partnership?

So like I said earlier, we can do one of the two things. We can hire people and do all this in-house, or we can partner with organizations whose core competency it is to do these different pieces.

The downside of hiring our own people are threefold; first, it is a tedious process of identifying and hiring talent. Second, even if you go through this process, you should know enough about the subject to brief your team on the mandate, monitor their progress, and evaluate their output. Third, there is no guarantee that the hired team will see through the mandate successfully till the end. We know many instances where the team walks out midway leaving the entrepreneur high and dry. Either they disappear with the source code or even if they don’t, no new team will continue to work on the code worked on by someone else because apparently, each code is unique to the coder, like fingerprint!

The best option therefore is that you partner with organizations who can be held accountable to deliver as per service level agreements. The end result is that the best in the business come together to build your product and your business in a time-bound, cost effective manner. Win-win, right?

This is our seventh building block, how to forge partnerships for building a seamless customer experience and a successful business.

Rules for Partnership

The best partnership is one where the service provider is an ideator too

But there are some rules that you should diligently follow before you embark on this partnership route. Here are those that are absolutely inviolable and sacrosanct:

* Choose your partner for the right reason. And that reason is that they are the best at it.

Not because they are the cheapest. Or they live next door. Or you wanted to give them a chance. Or they agreed to deliver in the shortest possible time.

* Never choose a partner who is a one-man operation.

We don’t mean one man literally, but has a single-person-single-activity team. Like one coder. Who also doubles up as a tester. One UI designer-cum-visualizer-cum-graphic artist-cum-UX designer. The biggest downside of this is obvious. When one of them disappears, everyone else does too.

* Do word-perfect documentation. The Service Level Agreement should be signed by both parties, clearly delineating scope, delivery schedules which include milestoned activities and final testing, non-disclosure clauses, payment terms (which include bonus for delivery ahead of schedule and penalty for any delays). Payment should be broken up into tranches and each tranche should be specifically linked to a milestone in delivery.

* The scope document should be detailed and take into account all ‘what if’ scenarios. Even the best of product specialists will not be in a position to spell out every feature and functionality at the start of the journey. A number of things pop up or become self-evident as you go along.

The best partnership is one where the service provider becomes an active ideator too - along with the entrepreneur, by virtue of his domain competence and experience. The partnership choice should factor this flexibility.

* If you have multiple partners for a single activity, - for example, someone is doing the coding, someone else is doing the UI and UX, and someone else is hosting - make sure you have them all on the same page from the word ‘go’.

* Don’t poach from your partners. To my mind, this is the most crucial rule. Not only because it embodies business ethics but also because it might turn out to be an unwise business decision. When he worked in a design studio, maybe the habitat brought out the best in him.

Now that you have plucked him from his natural habitat and planted him in a technology company, you may actually have killed his creativity, created a misfit and lost out in terms of your business.

* Before you sign on the dotted line, check out references. Talk to their clients. In detail. Not just cursory conversations. Don’t get carried away by brand names that your partner may share. Find out what work they did for the brand. Find out who was the pointsman from the brand side who interacted with the partner on an everyday basis. Don’t just call up the CXO or CEO who signed the deal.

The pointsman is the only one who can tell you whether it was pleasurable or painful working with the service provider.

Now let’s try to understand, as always, within the framework of the four Buddhist truths, with the use case of Netflix.

They call it the classic ‘co-opetition’. Netflix and Amazon. The fiercest rivals in the business of streaming video. And the most symbiotic business partners. Netflix is the biggest customer of Amazon Web Services (AWS) who leaves no stone unturned to make storage continuously cheaper for Netflix.

Just ten years ago, Netflix was in the DVD-by-mail space. And then it happened. A database corruption incident disrupted DVD shipping for three days. Like an alert and agile customer-centric player, Netflix decided to cut its ties with relational systems in their data centres and woo the cloud. And one company gave Netflix the luxury of scaling as much as they needed and wanted to – AWS. And the rest, as they say, is history.

The President and CEO of Netflix has gone on record to discuss how much he loves using Amazon’s cloud to run his business. Call it complicated, call it nuanced or plain befuddling, it has been a partnership that has worked very well for both Netflix and Amazon.

Amazon is making money from Netflix – in fact they are the most visible face as an infrastructure customer. And Netflix is running its entire business on Amazon infrastructure.

What is the pain point this partnership tried to address?

Like we said before, Amazon had two choices on its infrastructure requirements – build it in-house, or outsource it. From about 1 million hours a month of streaming content to 1 billion in less than ten years – it is a cost curve that made it impossible for Netflix to do it themselves. And if they were to outsource, for its size, there are not too many options to get instant access to the thousands of servers Netflix needs every day.

AWS thus became a natural choice to address this pain. And ironically so, by enabling its competition.

What was the origin or source of pain?

Growth. In fact, unimaginable exponential growth. Netflix, in their latest quarter, has reported outperforming subscriber growth - 5.46Mn net new international subscribers against the guidance figure of 4.9Mn and 1.96M net new domestic subscribers against the guidance of 1.45Mn. Netflix also accounts for 77 percent of the U.S. video-on-demand (VoD) market. Scalability was a huge issue with physical data warehousing.

The superior technology of AWS in machine learning-powered security, developer apps, and scalability was the best option for Netflix to address this.

How did the Netflix-Amazon partnership put an end to this pain?

Prior to AWS and the cloud, the Netflix team had to sit with their IT team to move the scale up and down. AWS provided elastic and seamless scaling of petabytes of data within minutes. Netflix relied on AWS to do the heavy lifting of infrastructure development – in fact, it has moved its entire technology infrastructure to AWS – shutting down its last streaming service data centre in early January 2016.

Thanks to the AWS partnership, Netflix today streams about 15,00,00,000 hours of video content per day to 8,60,00,000 members in 190 countries.

What did AWS do to make Netflix avoid the path of pain?

It is a cozy partnership between AWS and Netflix development teams. They use machine learning-powered security to assess and eliminate any breach in real-time. They have developed scalability to create, grow and innovate quickly.

Together, they try out new ideas in seconds without waiting for IT’s approvals.

Let us now see how the Netflix-AWS partnership operates within the eight guideposts of the Buddhist doctrine:

Netflix’s senior executives are clear. They do not want to own the data centres to run the company.

Because, building out data center infrastructure is not where they feel they can create competitive advantage. Creating original content is where the pot of gold lies for them.

In fact Netflix’s Chief Cloud Architect voices his conviction that if they had extra money, they would rather make another ‘House of Cards’. Absolutely, the right view!

AWS is more than happy to have Netflix as its poster-child customer – never mind if they are their parent company’s arch rival.

As they maintain ‘If Netflix will run its business on Amazon, anyone can’. And why not? As long as AWS delivers strong performance, innovation, value and customer support with integrity, nothing can beat this right thinking.

“We put just as much care into Netflix on AWS as we do Amazon retail,” says Jeff Bezos. “We may compete on Prime instant video, but we bust our butts every day for Netflix on AWS. The whole point of what we are doing is to standardize that layer. Amazon retail gets the benefit of standardizing that layer.”

Nothing we say can add to the integrity and eloquence of this right speech!

Here is something to chew the cud on.

During peak hours more than one-third of North American internet traffic traverses Netflix’s systems. “Supporting such rapid growth would have been extremely difficult out of our own data centres; we simply could not have racked the servers fast enough,” admits one of Netflix’s blog posts.  

It was the right action to leverage the elasticity of the cloud, and shake hands with the best player in the business. AWS had made it possible for Netflix to add thousands of virtual servers and petabytes of storage within minutes.

The Netflix partnership has been the most eloquent testimonial for AWS to be the partner of choice for many of Amazon's competitors.

From retailers and E-commerce companies (startups and large enterprises) use AWS, secure in their trust that Amazon will keep their IT infrastructure unit separate. Such goodwill is indeed the secret sauce of the right livelihood – especially in today’s cut-throat competitive business.

Secure in its infrastructure partnership with AWS, Netflix is ploughing its resources back into more original content production. 20 brand new shows will debut this year, and they have borrowed a billion dollars to invest in original content. But they have done it with the right diligence.

20 million people watched their inaugural season of Stranger Things, making the return on investment disproportionately higher than the cost.

It may not be AWS all the way if reports of Netflix glancing at Google Cloud for certain workloads are to be believed. But we would call it the right mindfulness for two reasons.

One, Netflix is moving into artificial intelligence-oriented model and choosing the best partner for its initiative. Two, the partnership model still thrives and spreads it wings – while providing Netflix a sensible hedge as they continue to grow.

Partnership is Netflix’s forte and they have shown the right concentration in this regard.

Apart from infrastructure partnerships, they are also partnering with cable providers and pay TV operators to diversify their subscriber acquisition. They are also pursuing proposals to package Netflix in certain bundles to propel international expansion and higher engagement.

So make a choice to be super performer with the right partnership – the Buddhist way!

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