10 ways to evaluate a launch partner in emerging markets
When launching a product or service in emerging markets such as Africa, Latin America, or South East Asia, it helps to have local partners. However, the success of your launch should never be completely dependent on a partner. If you are in this situation, you should redesign your project to remove this risk. For some businesses it seems like partners are a necessity, but there are usually ways to get started without the partnerships. For example, to scale a mobile payments business, you typically need to work with a bank or a mobile operator. However, if you pilot with one merchant or one localized area, you don’t need the partners at this stage. Doing things yourself in the beginning is many times easier than managing a partner. Don’t manage a partner until your own house is in order. This approach also gives you the chance to learn yourself, so you can coach the partner later when you are ready to outsource more roles to them. Partners should be a turbo boost on a winning product or service with a business model when it is already clear how the partner will achieve its goals. Otherwise, the relationship will likely become strained and fizzle out after the launch.
Partners come in many shapes and sizes. The ideas in this post come from my experience working mostly with product and brand partners as well as service providers, agencies and vendors.
In emerging markets, the largest product and brand partners are usually the government, mobile operators and banks. They typically have the most customers and most trusted brands in the market. You get instant credibility with customers when the minister of X is a speaker at your launch event, or when you name drop that you are working with mobile operator A in a client meeting or the logo of bank B is on your billboard. Even if you don’t actually need to partner with the government, mobile operators or banks you probably need to understand them and keep them on your side. They are typically the ones who feel they have the most to lose from innovative movements in their market. If they perceive your project as a disruptive threat, they will tend to be conservative and might even work against you through political channels or other means. Often times, once you pick one partner, this will antagonize their competitors. Choose wisely. Here are some quick thoughts on each of these types of players.
Government — The government can help your product or service grow big if they recommend it or if they require it by law. However, they often move very slowly on multi-year time frames. Some projects can get bogged down by politics and become at risk when elections happen and officials change.
Mobile operators — They are usually the fastest movers and most innovative in emerging markets. However, some operators can also be very slow, ineffective and political — particularly those that have a long history in the market or have some government investment / involvement. The largest operator is not always the best partner. Sometimes #2 or #3 are much hungrier, have less to lose and more to gain, have less baggage / history and thus are more willing to take risks and innovate. The operators who are a part of a group (e.g. America Movil, Axiata, Airtel, Digicel, Etisalat, Maxis, Milicom, MTN, Orange, Orascom, Telefonica, Telenor, Vodafone, etc) typically tout their multi-country reach or footprint as a scaling opportunity. In my experience, this is somewhat false, as each country operator functions almost as an independent company. This means you need to re-build your executive relationships, sign new contracts, do new technical integrations, etc. Also, the operator might be #1 or #2 in one country and be a small player in some of their other countries.
Banks — The banking industry in most emerging markets is typically very fragmented. There are usually 10+ major banks in each country so this means you can shop around to find the best partner fit. The banks who are part of a group (e.g. Barclays, Citibank, Ecobank, HSBC, Santander, etc) have the same issues as the mobile operator groups mentioned above. However, the group banks with global or regional footprint usually just have a “presence” in emerging markets. If you need a brand or operational partner, you are better off with a large local bank.
Here is some advice on how to decide which partner to launch with in emerging markets.
- Don’t be opportunistic — Try not to choose the first or easiest partner that comes along. For example, for one of my projects at Google, we picked an initial launch partner solely because one of our team members had a good relationship with the partner. However, as the project progressed, we started to realize that the partner couldn’t deliver because they were very disorganized and their company was in bad shape. We stuck with them for a while, but we eventually had to go with a new partner. The new partner had a much more conducive environment for our product to be successful and things worked out much better. (See my previous post for some ideas on picking a conducive environment for launching your product)
- Executive level support — If you don’t have the CEO or some other powerful senior executive as your champion — don’t do it! You need someone you can call when you need the partner to move fast. Also, the involvement of a senior executive signals the partner’s commitment to the relationship. Your executive champion will also be a valuable advisor for strategic thinking about partnership and business models. Some executives have a great title, but they can’t actually make things happen. Do some due diligence to figure out the dynamic of the executive team, how resources are allocated and who has influence in the organization. Try and get as many champions as possible because you don’t want to be out in the cold if your buddy suddenly loses influence or leaves the organization.
- Day to day team — Who are the members of the project team from the partner / vendor / agency who will be working with you on a day to day basis? Are they top performers? Would you hire them to work on your own team? If they are not good, your team will probably end up doing the partner’s job. Don’t be fooled by the slick / charismatic executive who gives you the partner overview presentation. These are usually Don Draper types who are very effective at selling you on the partner, but will likely not be involved in the day to day details of the project.
- Priority of your project — How many different projects does the partner have? How many of the resources will be applied to your product? Will the day to day team be dedicated to your project?
- Professionalism — Choose partners who are well organized. You can tell this from some of your early meetings. Do they always show up late or keep you waiting for a long time? Are their offices run-down? Do they have a lot of bureaucracy? If you see any of these or other warning signs, run away! This is likely how they will treat you for the rest of the relationship. You also need to watch out for unethical and corrupt practices which still plague some emerging markets.
- Size — The #1 player in the market will likely give you the largest reach, but that doesn’t necessarily mean they will be a better partner than #2 or #3. The largest partners have more customer reach, brand recognition or staff size, but might not care about the partnership or be slow and ineffective. If you go with a smaller player, make sure your partner is big enough to have the resources (money, staff, etc) to support you. Generally, startups shouldn’t partner with other startups. You are both trying to get off the ground, so you can’t really help each other. The smaller partners are typically more grateful for your partnership and might be easier to work with. If you go with a small player, ask for financial records and check for industry references to get a sense of their reliability, stability and longevity.
- Partner motivation — Try to understand why the partner wants to work with you. What’s in it for them? Do they want direct revenue? Do they want to keep you away from their competitors? Decide whether you are OK with their motivation and then leverage it to your advantage. For example, if you have a strong brand like Apple, Google, or Coca-Cola, the partner might just want to be able to say “I partner with X” to their customers, partners, or press. Once the deal is signed or the launch event happens, the partner will lose interest because they got what they wanted. If you are fine with this, then negotiate to try and get all the partner’s investments upfront.
- Business model — What are the partner’s business goals and are they aligned or complimentary to your product or service? For example, mobile operators make money by growing and retaining their customer base and increasing customers talk time and data usage while keeping infrastructure costs low. If your product or service does not make significant impact on the partner’s Key Performance Indicators (KPIs), then you will lose the attention of the partner very fast.
- Brand — How is the partner perceived in the market? For better or worse, this will spillover onto your product or service as well. If the partner is much bigger than you, many customers will think your product actually comes from the partner.
- Exclusivity — Some partners will ask you for contractual exclusivity because they don’t want you to launch with any of their competitors. Fight this because you likely want to reach the whole market. If you really feel like you have no other choice, then you can offer a first mover advantage or very limited time period exclusivity to the partner, but be warned that even this will signal to the market where your alliances are.
If you are looking for examples of new products or services that have leveraged partners very skillfully in emerging markets, I would recommend Afrinolly in Nigeria and SumUp and iZettle in Latin America.
What other ways would you use to evaluate a partner in emerging markets?