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Oct. 27, 2004 – Experts say the hallmark of a successful partnership is the ability of both sides to understand the perspective of the other and find common ground on which to collaborate.
It’s not a matter of figuring out if you’re on different pages, said Vic Kley, president of General Nanotechnology, a Berkeley, Calif.-developer of nanotechnology tools. “You’re always on different pages. But we ask them to read our page, and we read theirs, and we see if the pages fit together into a story with a happy ending.”
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Perhaps nowhere is this more difficult than when large established, multinational corporations pair up with small startups.
The benefits can be dramatic for both. When behemoth IBM hooked up with the then-two-bit Microsoft in the early 1980s, the partnership enabled Big Blue to bring its personal computer to market in record time. For tiny Microsoft, the partnership made its disk operating system the de facto industry standard, a perch the company leveraged masterfully to achieve its later success.
Today, partnerships between large and small companies are being forged in micro- and nanotechnology. Motorola collaborated with Molecular Imprints on the latter’s development of its nanolithography tools, for which Motorola became the first customer.
Nanophase Technologies Corp. has a long-standing relationship with BASF for use of its custom nanomaterials. As part of the nanotechnology research program at its central R&D operation, conglomerate General Electric Co. has actively sought collaborations with startups.
Such relationships expedite R&D and drive innovation, yet experts say there are a seemingly infinite number of ways in which large and small companies can misunderstand each other.
“The large companies tend to feel they know what’s best, that it’s ‘my way or the highway,'” said Don Bailey, vice president of industry relations at Cleveland-based OAI, a nonprofit organization that acts as a corporate relationship facilitator. “That can make (the situation) really difficult to deal with.”
OAI works with blue chip industrials like GE and unknown startups alike, as well as funding sources such as the Gates Foundation.
On the other hand, Bailey said, “the small companies feel paranoid that their information will be stolen.”
Part matchmaker and part marriage counselor to partners he brings together, Bailey said he has — like his counterpart counselors in the world of personal relationships — seen it all. The solution, he and other experts said, is clear, early and frequent communication.
In particular, they said, companies need to better understand the capabilities and goals of their partners, work harder to negotiate mutually beneficial terms governing the relationship and any intellectual property involved, and pay more attention to the cultural and procedural expectations of the other side.
In general, says Bailey, small companies tend to oversell their capabilities. “They don’t always admit what their limitations are.” That’s not to say they’re trying to willfully misrepresent anything. It’s just, as Bailey puts it, “part of the selling process.”
For example, he said, it’s common for a small company that has developed some form of hardware to think that the difficult work has been done. But, he says, developing the necessary software can be just as challenging.
Therefore, when acting as an intermediary between a large and small firm, “We probe what we’re being told.” The idea is essentially to discern how much reality is in a small firm’s pitch.
He also checks with technical experts to validate that a firm has the capabilities it claims to have. In this manner, misunderstandings are caught and clarified earlier in the process.
Bailey says large firms don’t tend to oversell their capabilities in the same way. But there is a correspondingly vexing issue when it comes to securing corporate support. The engineering team with which he is working is naturally committed to a project but the organization as a whole might not be.
The problem might not surface until later if the project hits a brick wall when someone higher up won’t approve an activity because he or she had not previously been involved.
“Make sure when you sit down and start working together that everybody knows what the ground rules are,” advised Norm Schumaker, the president and chief executive of Molecular Imprints, an Austin, Texas, maker of nanolithography tools. Many people, he said, tend to assume they’re in agreement unless informed otherwise.
“My guess is that it only comes from experience,” Schumaker said. “You get burned a few times. Then you learn to ask, who else has to sign off on this?”
Bailey also advises the engineering team of a large corporation to bring someone in from the end product group that would eventually sell the product being developed, and to get some kind of representation or input from the customer community.
Large and small organizations also come to the table with different expectations about legal issues. For example, a 30-page agreement may be easy to handle for a large organization, whereas for a very small group it’s a virtual impossibility.
The same goes for terms. The large and powerful may be accustomed to negotiations where everyone starts with a one-sided contract and negotiates to the middle. But a small startup is likely not to even have a boilerplate agreement to present.
Moreover, indemnification and “hold harmless” clauses, if enforced, could swamp a startup with responsibilities it couldn’t possibly handle.
Schumaker, who’s been on both sides as a startup entrepreneur and as a Bell Labs manager, said his approach is to be straightforward. “Quite often what I’ve said is ‘I can’t possibly agree to this. Can we simplify it?'” And then he explained his reasons. Usually, he said, “When you get down to brass tacks, they get it.”
Although potentially awkward and uncomfortable, straight talk in initial meetings can go a long way toward setting up good relations.
“We get everybody to tell us what their expectations are (at the outset),” said Bailey. In short, he tries to get each party to articulate what they need to justify pursuing the project and, on the other hand, what would make them walk away from the table.
Along the way, Bailey said, the exercise helps flesh out any hidden agendas. It doesn’t happen very often, he said, but sometimes a company may want to talk to a potential partner just to get intelligence on what they’re doing. These kinds of initial talks will usually expose such subterfuge.
They also try to establish general protocols. For example, Bailey said sometimes a strategic decision will be made higher up in the company that affects the collaboration. “We ask them that if there’s an internal change of business strategy that’s going to affect us, that they should tell us.”
At the end of the day, that’s what it’s all about. “You’ve got to have forthright communications,” said Bailey, because business relationships ultimately rest on the same foundation as personal ones: trust.
“It takes a long time to build it,” he cautioned. “And it takes about 10 seconds to destroy.”