“Pigs get fat and hogs get slaughtered.” Brad Trucksis, Associate Director of Global Business Development at Procter & Gamble made this point very clearly at the Tech Scouting Summit last week.
Win-win is the only acceptable option for a negotiation’s outcome. A win-lose outcome, in favor of your company, will ultimately translate into lose-lose, since the partner will lack incentive to perform optimally. Make sure your partner is as happy as you are with the terms.
Another point made by speakers – and particularly by Lauren Foster of MIT’s Technology Licensing Office — a good agreement rarely gets looked at once it is made. The strongest alliances are built on trust.
That said, how do you best ensure a win-win with your partners?
While no single negotiation approach fits all companies and all needs, the following tips are fairly universal:
- Make sure you are aligned internally first.
- Build the deal together with partners and in the open.
- Focus on growing the pie rather than dividing it.
- Don’t lose sight of your goal. If partner discussions suggest you’re a long way from your goal and not likely to get there, stop. The purpose of scouting is not to do deals per se, but for partners to achieve their innovation targets.
Example: Shell uses a jointly-written discussion document similar to a term sheet as a non-binding expression of mutual intent. Bullet points include:
- Background – Who are we and why are we here
- Principles – A few things to refer back to if you get stuck
- Project Plan – Who’s going to be responsible for doing and delivering what parts
- Summary Contributions & Gains – Make the big picture visible
- Key Terms
- Think like a venture capitalist. Learn to understand the fundamentals of a deal quickly and get to the bottom-line: costs, value and potential pay-off.
- Define the terms of the deal clearly using common language. Make sure both sides understand the essentials and that the joint development agreement fully addresses all relevant issues.
- Work hard with your legal department to prevent stumbling blocks.
- Take time to work carefully through the essential IP issues. Does your joint development agreement clearly specify ownership and rights regarding IP invented during the project? Are there any ambiguities remaining? Will someone stepping into the project later be able to understand the terms of the agreement?
For a more thorough and proven approach to reaching successful agreements, the Alliance Framework ™ * is a rigorous process for planning and negotiating an alliance. The idea is to put together – or kill – a deal within 8 weeks. If you don’t kill the alliance by 8 weeks, it deserves to live. If it doesn’t live, you can part on friendly terms with the door open for future deals.
The Alliance Framework ™ is most effective if used by both partners. The key areas to reach alignment on are:
1. Objectives (ours, theirs)
2. Roles (ours, theirs)
3. Overall resources
5. Market model
6. Strategic exclusivity
7. Intersections with the potential alliance
Once alignment on these points is reached, the following ‘below the line” items should be discussed:
1. Detailed objectives and detailed resources
2. Financial pie-split
3. Intellectual property
4. Working process and governance
5. Term and termination
6. Alliance structure
Most alliances fail because they skip the first 7 items and go to the others first – this is not the sequence that leads to success. If not aligned on the first 7 items, part ways now!
Overall, remember that no deal is perfect. Stay flexible – realize that deals are “living organisms” and subject to ongoing review. If you have chosen your partners wisely and clearly identified your goals, the relationship will adjust as needed.
*Alliance Framework is a registered service mark of Sagal and Associates, Inc. “Want, Find, Get, Manage” Model
The Strongest Link: Forging a Profitable and Enduring Corporate Alliance, Gene Slowinski, Director, Open Innovation & Strategic Alliance Research, Rutgers University & Matthew W. Sagal, Senior Partner, Alliance Management Group, Inc.
This article published in conjunction with MRT’s workshop series:
Technology Scouting to Accelerate Innovation – Implementing an External Sourcing Program – check our website for the latest dates and locations of this popular seminar.
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