Perfect alignment Featured

7:00pm EDT December 26, 2008

Joe Crafton says alliances can make a company stronger because a great alliance can provide a product or service that’s missing in the marketplace. Even a good alliance can provide referrals for new business and a cooperative spirit that bolsters both businesses involved.

But alliances are tricky to form and time-intensive to manage. Crafton was president of strategic alliances for CROSSMARK from 2003 to 2008 and recently moved up to president of the sales and marketing services company. Headquartered in Plano, CROSS-MARK has 18,000 employees, and last year, it had more than $500 million in revenue.

Since his position was created in 2003, Crafton has spent the past five years looking for other companies to partner with to help each other reach customers. The best of these strategic alliances is with Nielsen, the company responsible for measuring consumer interest in products.

“The synergy that comes from two companies that are dedicated to helping fulfill each other’s core businesses is very powerful,” Crafton said.

He says research indicates that more than half of alliances fail. “But that’s still ahead of the fact that about 75 percent of new ventures fail,” Crafton said. “Alliances are still ahead of new ventures.”

Here’s how Crafton creates alliances that work.

Find a partner

What helped make an alliance with Nielsen possible was the fact that Crafton and John Lewis, president and CEO of Nielsen Consumer North America, had the same mentor, who said they had a lot in common and should meet. They took the opportunity at a conference to do so — and discussed what might be possible if they built a business relationship. Crafton said that personal recommendation helped because it came from someone they both knew and admired.

“We had a common vision, and we could be helpful to each other,” Crafton said. “It was a nice cultural fit.”

Crafton gets plenty of calls from other people who want to create strategic alliances with CROSSMARK, but he doesn’t even return the call unless he knows the person calling him. Alliances take time and energy, and he doesn’t have enough to go around to talk to everyone who might like to align themselves with CROSS-MARK.

“I get these calls from all over the world saying, ‘We want to have an alliance with you,’” Crafton says. “Honestly, I don’t return most of the calls because where do I start with credibility? If a friend refers a person, I will give them an audience. But with just a cold call, it’s like dating on the Internet.”

A successful alliance can be a formal, jointly owned subsidiary of both companies that is governed by a contract and operating policies. It can also be a looser relationship that involves referring business to each other’s companies and payment of a referral fee.

Alliances can also be with competitors. FedEx and UPS, for example, put packages on each other’s trucks for delivery to rural areas to avoid expensive trips for just a few packages.

“We see that there are some strengths of our competitors that we don’t need to fight,” Crafton said. “Let’s trade my weak spots for your weak spots and see if we can’t as an industry avoid waste.”

For an alliance to succeed, the companies involved must have compatible goals, mutual gains and symmetry. Both companies must gain equally from the alliance. The companies’ leadership has to trust each other, keep information flowing from one company to the other and make decisions jointly.

How does a business leader know when to make a deal? First, look at the fundamentals.

“There has to be a clear and present business opportunity,” Crafton says. “If there is no tangible and clear win for both parties, then it is more of a parasitic relationship than it is a symbiotic relationship. Right up there along with that is culture.”

Crafton has met company leaders who he simply wouldn’t go forward with.

“We had one guy who told us that he used to have a building, and he burned it down and took the insurance money,” Crafton says. “That’s not a business partner you want to have.”

In other instances, he has had conversations with executives who indicated their sole focus was on enriching their own bank account, and they’ve had little regard for how they wanted to treat the other managers in their company after the alliance is complete.

“It tells you that at the very core of their business, they’ve treated these employees in such a way that they may not be productive in our culture,” Crafton says.

Third, check the level of enthusiasm. You shouldn’t have to sell a partner on the business concept. The partner must be just as excited as you are to embrace the new concept.

Otherwise, Crafton says: “You’re going to be taking two steps forward and dragging your partner. If they are equally as enthusiastic about the business opportunity and the market opportunity, then you’ve got a good start.”

Buy-in must occur within the ownership of the partner organization.

“You create these documents, and it goes up the flagpole, and everybody in the corporate office doesn’t get it, and it doesn’t happen,” Crafton says. “As an owner of this company, I can speak for the company. You have to evaluate if the person you’re speaking with has the authority and the power to execute plans that you’ve developed.”

More than anything, a partnership can expand a company’s offerings to allow better service to customers. The alliance with Nielsen was an ideal fit, because both firms work with the same sets of clients but do not offer the same services.

“For them, they saw (CROSSMARK as) a company with over 1,000 clients, and a field force of 15,000 people who could execute

marketing objectives in the field, and for us, we saw a company that was more tapped into the marketing departments of companies,” Crafton said. “We were able to help each other with relationships and business opportunities.”

Move forward together

Crafton and Lewis treat the alliance as they would any business. The alliance has a mission statement, milestones to meet and a group of people from both companies who meet regularly to discuss the alliance. Crafton and Lewis even hired an alliance coach to discuss the needs of each company.

“Our goals were to innovate and create new offerings to the industry that would not be possible if we operate independently, and bring out new-to-the-world concepts that would benefit our clients,” Crafton said.

Executing a strategic alliance requires dedicating staff members to the alliance. Those staff members are charged with updating the company leadership with the progress of the effort and with treating any problems that may arise.

The alliance also has two managers, one at each company, and each are incentivized on the success of the alliance — not on the health of either company. Top-down commitment is also critical to the execution of the alliance. At least four times a year, Crafton and Lewis meet and discuss business.

Getting two CEOs who know and trust each other to believe in an alliance is one thing. Getting buy-in from the sales force and others involved in executing the alliance is quite another. Crafton says hunting for, and celebrating, success early is crucial.

“If you can communicate something tangible where it’s making their life better or making people feel better about our offering to our clients, then they have to see some base hits,” he says. “They don’t have to see a grand slam right out of the gate. They start to say, ‘Well, I can see that. It’s not just a press release. This has some early wins and early benefit to me and to my client whom I am trying to serve.’ Don’t wait two years before you have your first prototype. Get some points on the board early.”

The victory has to be seen and felt by the people working in the trenches of the company. It’s not enough for just those at the top to believe in it.

“In a privately held company, I can just tell people to feel great about it because I said it,” he says. “But that doesn’t mean you have the hearts and minds of your rank and file. They have to have confidence that you have a track record of doing things that are good for our client.”

Creating excitement from clients is also key to bolstering the success of an alliance. CROSSMARK has a client advisory board, composed of representatives from the company’s largest clients, who meet periodically with CROSSMARK executives and give feedback on new initiatives.

“We socialize ideas with them to see how good response will be before we go into the general market,” Crafton says. “If you have buy-in from five of your top clients and you’re wrong, at least you weren’t deaf, dumb and blind to your clients before you went forward. We were all wrong together, including your clients.”

Accept failure

Failure isn’t daunting to Crafton. The first product offering to come from CROSSMARK’s strategic alliance with Nielsen flopped, according to Crafton.

“It was either ahead of its time or the economics didn’t work,” he says.

But Crafton and Lewis still believed in the relationship and still wanted to do business together. He says this was possible because of the contract the two companies executed together before the collaboration began, which allowed either company to get out of the business offering if it didn’t work. Also, neither party did anything for which it was ashamed.

“It didn’t taint the relationship,” Crafton says. “That’s where most of them fail. If something goes bad, everybody wants to start pointing the finger and blaming.”

The fact that the two organizations endured failure together, and it didn’t hurt the relationship, made the partnership that much stronger.

“We were able to jointly design the next program with confidence that my partner will not take advantage of me because the best indication of what they will do in the future is what they’ve done in the past, and in the past, they did not take advantage of me,” he says.

Besides Nielsen, CROSSMARK had another strategic alliance with an advertising agency. Crafton called the alliance successful, but it was dissolved when the agency was bought out and changed directions.

“It was mutually beneficial, and then we dissolved that relationship,” Crafton said. “We’re currently looking for another advertising agency partner. It doesn’t have to last forever to be beneficial.”

He also looked at an alliance with Dallas-based EDS. It involved data collection, but it wasn’t sustainable because the offering could not achieve its target price. Low-cost competitors underbid the joint offering.

But Crafton still sees the partnership as valuable for both companies.

“From that, we made some introductions, and we have relationships today where they are a vendor,” Crafton said. “They provide services for us. We have made introductions for them in a vertical they would like to grow in, which is consumer goods. We’ve opened some doors for them. We’ve maintained a healthy relationship even though our venture did not survive.”

While some are successful and some fail, there are benefits and lessons to be learned from every alliance, and as a whole, the alliances have created a winning situation for CROSSMARK.

“It has heightened our awareness that we don’t have to do everything ourselves,” Crafton said. “There are powerful partners who can accelerate our growth without tremendous capital expenditure on our part. It’s leveraging our underleveraged assets and maximizing those to find a partner who values those assets. ... American culture has always been that every gain of every share point comes from one of my competitors. It doesn’t have to be that way.”

HOW TO REACH: CROSSMARK, (469) 814-1000 or www.crossmark.com