Bill Gallagher talks with Pamela Kahn, head of Bishop Weiscover, about why strategic partnerships fail and succeed. They cover territorial boundaries, cultural fit, and IP ownership. Kahn shares lessons from her family business about treating suppliers as partners, not vendors.
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Foreign. Hello and welcome again to the Scaling Up Business podcast. I'm your host and growth coach, Bill Gallagher. We've got a great show today talking about strategic partners. We're going to tell you how to make strategic partners work and we're going to share both some examples of things that worked and some things that didn't work. I'm very excited to have on the show a great old fan, Pamela Kahn with Bishop Weiscover. Welcome to the show, Pamela.
Hi, Bill. How's it going today?
Awesome. So people don't know that we were on each other's advisory boards in a peer group years ago and we don't get to talk often, but we live not far away. So Pamela is the second generation head of a company founded within her family 67 years ago. Now 61 roughly person firm at about $25 million. So really. And the work they do is really cool. So she's a certified woman owned business, but in a STEM world. Right. So they make linear and rotary motion, multiaxis motion systems that you'll find everywhere from things like the Hubble telescope to chicken processing plants and even to the development of some. We can't say who some of the autonomous vehicles being tested and developed out in the world today. So I'm so excited to have you on the show, Pamela.
Thank you. Thank you for inviting me. Look forward to speaking with you.
Super cool. So we're going to talk today about your experience with strategic partners and what works and doesn't work. You're going to tell us a few stories of some that did work and some that didn't. I think it's a little sexier. It's a little fun to talk about. First, the things that didn't work. So the tales from the dark side. Right. The things that didn't work out. And then we'll get to what actually works and what you've learned about that. That people can apply for themselves. So we can learn both from the successes and failures. I think sometimes as a growth coach, you know, when I'm working with a team, I may have interesting successes of my own past or of clients to share, but. But they may or may not apply. And yet the application of our mistakes and failures are even more universal. So when somebody's willing to talk about it, it's really powerful. Thanks for doing that with us today.
Oh, hey. That's how we learn, right?
Right. Okay, good. So tell us all about it.
So starting off with our learning experience, which is what I like to see failures as, as a manufacturing and Engineering company. We really try to have a culture of learning from our failures and trying to fail fast. Unfortunately, we didn't fail too fast in this one, so we actually did burn some money. But we partnered with actually a competitor in our industry, which might have been possibly the first red flag on this one, to do a joint development on a product.
And.
So we spent a lot of time, we had a lot of alignment in the management teams between the two companies and worked for quite a while on this to the point of having a design for the product and actually already ordering parts to make this joint product between the two companies.
So you're partnering with or trying to partner with a competitor and you're pretty far down the road of developing and prototyping parts.
Yeah. So money has been spent, especially on my side. We had already extruded the aluminum bases that this product was going to go on, so we had already committed some pretty big dollars to it. And ultimately the whole project failed. And the reason why it failed was though there was an alignment between the people and the management between the two companies. A couple things we're not in place that we're going to make this successful. First and foremost, this was a company that was owned outside of the United States. And what I learned from going through this venture is even if you're working with counterparts and other C suite individuals on a strategic partnership, you need to make sure that ultimately they have true decision making power. And while we thought since we were working counterpart to counterpart that that was the case, what we didn't realize is that we actually did not have the blessing of the parent company outside of the US and so when our counterparts then told the parent company about this whole project, it was not supported.
Wow. So the buck stops with you in your case. But in their case, they had a parent that was.
And we were not aware that they did not have the authority to be entering into this partnership, nor did we actually understand that they actually had not told the parent company about this partnership till the point where we were really far down the rabbit hole and money had already been spent. And ultimately the other part of the issue that led to the demise was that there was not similar cultural beliefs around the product line and what the product line should be doing for both companies. And that was also the reason why the parent company did not want to proceed.
So you're talking about a difference in values really between the two. And was that to do with the company culture, the country culture, or both?
So, you know, we unfortunately still have some of this product collecting Dust out on our. So it's sort of a reminder daily about how not to partner up with somebody.
Totally get it. Yep. So culture mismatch and perhaps dealing with parties that don't actually have the authority and you're far down the road before with money spent before those kinds of things get clear. Yeah. Yes, I can relate. I had something recently where I was invested in a particular initiative and it was counting on a bunch of parties to play and people all said yes. And I tend to take people at their word, but they hadn't put up money or signed anything and they all started to bail at the last minute. And we did get something, but, you know, there was an investment and a lesson learned about when is one really committed.
Yeah, yeah. And like I said, when you're dealing with counterparts. So, you know, I, as the owner and president of my company, was dealing with the gentleman who was the president of this company in the United States.
Yes.
And I just never stopped to think about the fact that because of the structure of the company where we were dealing with, he might not have scope and authority to be doing what we were spending a lot of time and money putting together.
Yeah.
So that's always the first question now.
Well, in this case. Right. You can end up with all kinds of problems, like too much shared information that go beyond just dollars spent, but. And you can end up in lawsuits and things like that. So.
And this was the case, we were sharing internal IP with each other. So yeah, it was a bit of a mess at the end, to be honest.
Yeah, I really get it. So that one's pretty clear. Values mismatch and authority. Tell us you had another one that went bad too. Huh? Oh, no, you had two that worked, one that didn't. I thought we had two that didn't work. No, no, no, it's fine. Yeah, one failure is enough for a day. So tell us about one or two of the ones that did work and what were the common elements there?
So one of our longest term successes is actually with a UK company who we have been in a strategic partnership and alliance since 1984. And we were brought together by a common distributor out of Italy who looked at both of our product lines and said, well, you were selling similar things, but back then, especially for the size of our companies, we were quite a bit smaller in both respects. It was competitive but also complementary in our product offerings. And so we came together and we formed this partnership. So I exclusively sell their products in North America and a couple other places in the world and they exclusively Sell for me in the UK and the EU and a couple other places as well. And it's been a really great partnership because as the two companies have grown, it's really loud, economical scale to do this because for me to try to be over in the EU with bricks and mortar and inventory and sales structure and the marketing especially until recently, would have been a really huge resource drain for us. It would have been really tough to achieve and then vice versa for them. And the thing that's been great about the partnership is we know each other's markets, our home markets, we are experts. So I can rely on them to know the best way to sell my product in that market. And they rely on us to sell their products the best way here because there are very much regional country nuances that once again I don't have to worry about learning about because I have this partnership. So that's been a big win. The other thing is that by coming together we scale off of each other's R and D, which is a huge expense. There are years where I'm able to leverage off of new products they're developing and years where they've leveraged off of what we've developed. Once again, it keeps both of our product lines fresh because it's not just solely what we're developing in house. We're able to share both of those resources. And so it's been a great partnership. And then as we've grown to this point, I mean, honestly, if we weren't partners, we would now be actually each other's largest competitors. So it is definitely stronger to stay together because once again, if we were to not have this alliance with each other, we would be spending time and resources competing against each other.
So the area that I hear that works particularly is you have very clear sort of sandbox division. This is your part of the sandbox, we think globally. This is your sandbox. This is my sandbox. And there's clear definition of roles that has let you play nicely with each other.
Yeah. And then culturally this is where I've learned really allows you to have that true long term successful partnership. And is that both companies started with exactly the same type of culture and viewpoint on the customer. So my father started the company and my father was ultimately a custom machine builder. And this partner, same thing, the gentleman who started the company was a custom machine builder. And so therefore our philosophy around doing custom solutions for customers and how we view how we service the customer is completely in line. We don't ever have issues around the ability to customize product, whether we should or shouldn't customize product. Both companies have a business model predicated on the fact that this is how we service the customer. We give them what they need for that machine, not what's necessarily in our catalog. And that's what's allowed the partnership to be so strong for so long. Because at its core, we sell, we share exactly the same philosophy.
Totally get it. Are they UK based?
Which is one thing that we did not have with that failing partnership.
Right.
Is that focus I did not see. And that was actually one of the rubs with the parent company is this company does not have a philosophy of doing anything specialized for customers.
Oh. So take it as it is, go with it or not. And this other one's willing to tailor and adapt to the customer, which I think makes a lot of sense in your world, because highly specialized applications. Right.
And they're becoming more so. I think originally when I first came to the company 26 years ago, the industry was very much about standard product and you bought what was in the catalog. But I think in this generation now, I think we're very well poised for how automation is going. And just culturally, the engineers that we deal with, because the reality is we're dealing with now with engineers that have grown up with the ability to modify their surroundings to the way they like it. Right. They're on their cell phone, they can modify everything to be custom to them. And so that original philosophy of my dad of saying, well, when you build a machine, it isn't necessarily four feet long, it might be four feet, two and a half inches long with different hole spacings. And you now have engineers that have grown up in an environment they've been able to tailor to their needs very much. We live in a one off customization world. And so now, culturally, we don't have to change as a company. The way we've done our production, the way we've served us our customers has always been aligned in that. And I think that poisons us really well for growth going forward.
You know what's interesting to me about this is a total site. But didn't you work for Nordstrom once?
I worked for Emporium Capwell, which was a division of Carter Holly Hale, which split in half with a bankruptcy, but they still exist. And the main store people would know would be Neiman Marcus.
I was thinking about that customer service mindset of being willing to adapt and tailor for people. And, you know, I don't just have to get that suit off the rack. You'll fix the sleeves and the.
Oh, yeah. And Nordstrom really did bring the pants to play in the retail environment and really change the landscape of retail with that type of philosophy. I agree.
So I hear the culture being a fit there, the view that even the history of the company being a nice match for each other in that world and the other one really isn't. Was there anything different about that second success that worked? Was that a different. You talked about having two that worked.
Yeah. So the second one is, and I think this is an overlooked partner with a lot of people is going out to your supply chain as a manufacturer. And a lot of times we don't think of a supply chain being a strategic partner. And we maybe even see it as a risk to be somewhat transparent with supply chain partners as to what your goals are as a company. But we have a partnership with our supplier that produces our bearings, which is the core of our products. Right. They move based upon the bearings and they're our newer supplier. We've had different suppliers through the years. This is our current supplier. And by building trust between the two companies and going out to them and saying, here's who we are as a company. And once again, they became our supplier of choice because once again, they had very similar philosophies to us. And it was one reason why we switched to them. They were about doing custom design, they small run, they were high, high quality, high touch, high service, all those things that my company is known for. So we had once again that alignment in the actual cultures of the company. And as we worked with them and gained trust with each other, we then said, we have ideas of where we want to go with product line and we shared it with them. And they have certain core competencies that they bring to the designs and so do we. But because of our partnership, we work together on these designs, but they gave us the IP because of our partnerships and that's very strategic. So the product that we have designed with them, once again, they gave me scale. I didn't have to have the engineers, I didn't have to do the prototyping, I didn't have to do that. They did that for me with our engineering and design input and then they gave us the IP and I own the patents. And that once again, that's very strategic, it's very economical. But it was because of the trust and the partnership we built together that they saw the value to work with us, to do this for us and give us the ownership of the intellectual property.
Yeah, well, I hear again, an alignment of culture which you can find not just in the values that people write, but the values we see in action, the things that infuses and goes across it and sometimes can be teased out from the history and the customer base and the brand promise and the way that they do. Not every company has well articulated, understood, real values. So sometimes it's aspirational. Generic words on the wall, right? I always like to joke about that. The famous failed energy company Enron had integrity as one of its values. And most of our definitions of integrity don't include anything that could be seen at Enron. But if we looked in reality, they might have had a value that would have been expressed. Something like winning is everything true? Or integrity means leaving nothing in your customer's wallet. Right. So I don't know what the thing is, but many companies put something aspirational in their values and that isn't really a way that we use values to determine who to hire and how to operate. It's fine to have aspirational things, but those become initiatives and if they are cultural in nature or values oriented, they're multi year initiatives to actually try to bring something to being that isn't in your company. And you always have to start with yourself first. So I watch one.
Yeah, and you bring up a good point. Because in all honesty, the relationship started off a little bit rocky between us and the supplier. They had some hurdles taking on our business. But to your point, it was how they showed up with those issues that showed what their true values as a company was. And actually through the bumps in the road between the two companies is actually what inherently built that deep level of trust between the true and two partners and allowed us to have that level of partnership and trust with each other.
Yeah, I get that. I can hear that. And I think that, that we have a partner, so we have great partnership and support from my bank, from a wealth manager, from a payroll company, all things that are complementary to our business. But in the cases of the ones where we work and we socialize, speak together, we speak the same language. It's because there's a connection to some of those values. In the case of. So we do a lot of things at Reed Smith, the law firm and they host us and partner with us and so on. And they love fast growing companies. They're innovative and entrepreneurial, they're invested, they're giving and those things match up really well with our values as a company. And so it's, it ends up being a really nice partnership to work with and bring our next scaling up Workshop will be there. We host multi team private sessions in their offices. We also have hosted some small company and CEO meetings in their offices. So. But it's because they're, you know, they're really open and interested in, in fast growing companies that, you know, a lot of times people are just too busy. Especially your large law firms. Right.
Exactly.
Well, so I think we hear alignment of things and a willingness to share information and to partner and to find the common interests. We hear clear division of sandbox, whether it's a supplier or a possible competitor and delineation of information against a background of common values. A similar way of looking at the world as being ways to pick a partner. And in your case, it sounds like these partners have really allowed you to extend and grow your business in areas that you might not have been able to do or do profitably.
Absolutely, absolutely. We would not be where we are as a company without these partnerships.
That's really great. So we've heard an example of a bad one where the cultures in every respect were totally different. Both the company culture and the parent company country of origin culture both had impacts and where you're dealing with people in groups that don't necessarily have the authority to do the things that we can do and just how painful that is. And I think many companies, especially small growing companies, are interested in attempting strategic partnerships to try to extend or grow in some way as a strategy to get beyond their current capabilities. So I think this will be really of interest to folks. I think many of our listeners will want to go see more about what you do even if it's not directly connected. And they should go look at Bishop Wise cover group. It's bwc.com we'll put that link in the show notes as well so they can find information about you and your company and your world.
Great. Thank you very much.
Yeah, awesome. Thanks for being on the show with us today. Let me remind folks a couple of things in our world to share that are useful. So we have a few times a year we'll have a public scaling up workshop and we have one coming up. Before you know it, look at our website scalingupbusiness.com under workshops and register. Now if you're hearing the show just after it's recorded, we've got one coming right up and we'll have a couple others in the year, so that'll be that. And then also on the website is a free, free download with a guide with an overview of scaling up so you can learn the basics of scaling up and get started scaling up your company so it has all their how to run your own planning and strategy meeting along with so an agenda and the work points and all those kinds of things, prep work for your team to do to begin doing it on your own without even hiring a coach and a handful of worksheets that you can use to to help run that day and get started scaling up in your business. Of course, our video tutorials and the video versions of the podcast are@YouTube.com Bill Gallagher and you'll find the audio podcasts at wherever you get your podcast. So subscribe on itunes or wherever else you go for that. And I think that's about it. That's plenty of stuff. Thanks again for listening. Scaling Up Business Podcast. We'll see you next time.
