Saturday, March 28, 2009

Mutualism as a Business Strategy

In these difficult economic times there is lots of discussion around capital drying up and how to make a startup or even any size business successful.  The answer is quite simple - mutualism, and a great example in nature is a cleaner fish.

These small fish maintain so-called cleaning stations where other fish, known as hosts, will congregate. Remarkably, these small cleaner fish will safely clean large predatory fish that would otherwise eat small fish such as these. The cleaner fish get the nutrition that they need, and the larger fish get a service with the removal of dead skin & parasites. This is an example of mutualism, an ecological interaction that benefits both parties involved

Use mutualism to your advantage - Instead of trying to attract the attention of your end customers directly, why not add value to a larger enterprise player (i.e. host) and help drive their revenue.  Co-market with the enterprise player, use their channel, and show their sales force and SEs how selling your solution will help them make their quotas.  Make the value prop to the SE or sales person and you both win.  Like the cleaner fish, your 'host' will not eat you as long as you are continuing to provide a valuable service.

This was the exact strategy behind Netoria in the mid-late 90s - we added value to Novell's strategic direction, Novell Directory Services (NDS).  Our products simplified the deployment of NDS, and added additional value to demonstrate to customers what could be done with a directory - a perfect example of mutualism - Novell wanted customers to hear about our products because it helped to position and sell NetWare 4 - and drove upgrades from Netware 3.  What is critical here is that we attached to a Novell strategic imperative

All Netoria marketing and lead generation was centered around Novell - Novell partner pavilions at N+I & Brainshare, advertising in Novell publications, speaking at Novell sales and SE events, meeting with Novell analysts, and reviews in Novell centered publications.  One of our most successful strategies was to travel the world meeting with local Novell sales offices, buying them lunch while we explained our products and the value to them.  This is something that many startups misunderstand - a strategic partnership with HQ is cool, but to drive revenue you must be out in the field with the people who actually sell (heck, you can do this without a strategic partnership).

At Brainshare we even had the "three amigos" use our products in the product keynotes - this strategy drove us to profitability every month, and over 1 million installed enterprise seats. The ultimate outcome was when Novell acquired Netoria in late 1999 - so although they did "gobble us up" it was on excellent terms.  If Novell had not acquired us, then our plans were to look closely at mutualism via Microsoft's Active Directory.

Another perfect example of mutualism is Citrix Systems and Microsoft - no other company has been as successful as Citrix at long term partnering with Microsoft.  Primarily because Citrix has always been able to demonstrate to Microsoft the added value and revenue - I can't recall the exact figure, but Citrix helps sells hundreds of millions of dollars of Windows Server and terminal Services licenses, all with minimal effort from Microsoft.  

The lesson here is not to dismiss mutualism as a strategy just for startups or small players. You can continue mutualism to a $1bn company and beyond like Citrix.

Right now there are hundreds of large companies out there forging new strategic directions, who need smaller companies to build out their eco-systems.  Personally I feel that there are huge opportunities in mutualism with the virtualization players like Citrix, Microsoft and VMWare, in the consumer space with Google, Facebook, et al, and what about the cloud players like Amazon, Microsoft and Google.  Just make sure that you are focused on a strategic imperative, not just a "nice to have", and be able to demonstrate how you drive revenue.  That's mutualism.

2 comments:

  1. I have been talking with my partners about developing a similar mutualistic strategy, but haven't got their buy-in. They look at it as too complex, but I feel it is critical to our long term growth and success. What are the starting components you need to build a mutualistic partnership?

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  2. Without understanding the dynamics here it's hard to be precise, but in it's core mutualism is based on benefit to both organizations. Unless each organization sees benefit, then the relationship will never progress, so this is the key - spend as much time as you need with the stakeholders to get this alignment. Feel free to send me an email with more specific details and I'll see if I can be more specific.

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