Channels & Partners

with Steve Blank

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Alliances

What partners do you need to build your whole product?


Instructor
Steve Blank

8x Entrepreneur, Author, Customer Development Expert

Lessons Learned

There is no way that a startup can provide a mainstream customer with a complete solution early on.

Most startups sell to earlyvangelists first, then mainstream customers later.

iPod hardware, iTunes software, and record label licensing is the best strategic alliance ever made.

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Transcript

Lesson: Channels & Partners with Steve Blank

Step #5 Alliances: What partners do you need to build your whole product?

Let's take a look at the types of partners. One of the most interesting concepts is strategic alliances. One of the concepts in a startup that is important to remember is this idea of the whole product. It turns out there is no possible way on day one that your startup could provide a mainstream customer with a complete solution. You just can't. You don't have enough time or money or resources to fill out every possible thing someone in a Fortune 1000 company is going to put on a checklist or an RFP for you to provide. So the idea is to use strategic alliances to complement your core product with other products or services. It could be training, it could be installation, it could be service, that is to surround your product with a cloud of other resources to address mainstream customers. For example, in 1996, Starbucks partnered with Pepsi, to bottle distribute and to sell frappuccino which gave them access to Pepsi's enormous distribution channel.

Now, one word of caution, you understand that the phrase I used was to develop the whole product to deliver a complete solution to mainstream customers. But the mistakes startups often make is thinking that they're selling to mainstream customers the day they first ship. It turns out that for most startups, not in an existing market, you're not selling to mainstream customers, you're selling to crazy people just like you. And it turns out that those people which we called earlyvangelists are more than happy to assemble the complete solution themselves. So all the bus-dev activities that startups scramble to get ready by first customer ship actually could be deferred in most ventures to actually after you got those first earlyvangelists customers because it's the earlyvangelists who will, once they build the product themselves will actually tell you what the complete feature set is. So think about strategic alliances, don't just checklist, I need to have a bus-dev and all these solutions on day one, think about what order they come in.

Now I would be remiss in talking about strategic alliances. Not to talk about the greatest strategic alliance ever made and that was Steve Jobs and Apple when he built the iPod. Jobs understood that the iPod hardware was a wonderful device but without software, iTunes, it was still just another piece of iron. But even when they had the hardware and software ecosystem, they were still missing the content, the music that would go on. And for a hundred years, record labels had held that content so tightly, allowing no one else access but there was a moment in time with Napster and the record labels feeling threatened that Jobs understood there was an opportunity to strike strategic alliances that no one else had been able to do. And, in fact, the rest is history. The iPod, the iPhone, the resurgence of Apple, music available to everybody and anybody in their pockets, to billions of people, was in fact a strategic alliance.

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