Creating Profit Through Alliances - business models for collaboration E-book | Page 93

handful of people. If any of these should leave the
company or lose interest, this may jeopardise the
collaboration. The smaller company may also lack the
strength or scope to go along with new
developments or market changes, which can also
devalue the collaboration.
These issues generally play a role if the difference
between the companies, in terms of turnover,
staffing and size, exceeds a factor of 10. This is not an
absolute figure. Doing business with an autonomous
business unit of a large multinational can be very like
doing business with a small company. And a hightech company with 20 people on the payroll will
often be a much stronger partner than a production
company with 20 employees.
As a „standard‟ example, consider smaller technology
firms that may have just one or a few products, but
with which they truly contribute something new to
the market. Such companies often consist of the
founders plus a few others, and they lack the size and
skills to commercially exploit their product. Here,
collaborating with a multinational is an obvious
option: it gives the larger company access to
technology, and gives the smaller company access to
the market.
However, the companies' interests may differ. For the
technology firm, the product for which the alliance is
set up may yield the lion's share of their turnover. For
the multinational, the added revenue may basically
be negligible. Certainly if the manager (at the
multinational) who made the deal leaves or makes
an internal career move, the technology company
may wind up in an impasse: the exploitation rights
have been sold but are not generating any income,
due to the larger company's lack of interest.
From the smaller company's perspective, the best
solution would be to make clear arrangements about

interim payments and the use of the provided
expertise. Every bit of knowledge transfer should be
met with immediate reward, at least partly. This
reward can be payment for a patent or an hourly
tariff for the deployment of experts. In addition, a
success fee may be arranged for every successful
market introduction.
The smaller company cannot force its partner to
market a product containing its expertise. For that
reason it makes sense to couple any exclusive
agreement to a 'shelf clause'. This means that, if the
product development does not result in a market
introduction within a predetermined period (that is, is
shelved) or does not achieve a certain sales volume,
then the smaller party is free to offer its patents and
experience to another party.
That this is something to take seriously was a lesson
learnt by the British smartphone company Sendo,
that entered into an alliance with Microsoft in 2000.
Sendo had advanced quite a way in developing a
telephone suitable for Internet applications, the Z100,
and Microsoft was developing software for it. The
agreement stated that the Z100 would be developed
further jointly, and that Microsoft would receive part
of the profit.
In 2001 Microsoft invested 12 million dollars in
development, and was entitled to appoint a
supervisor to the Sendo board. From that momen