Sid Banerjee | Crain's Washington D.C.

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

Sid Banerjee

Background:  

Reston, Va.-based Clarabridge helps hundreds of the world’s leading brands improve the customer experience by putting customer feedback to work. Companies worldwide rely on Clarabridge software to power their customer experience management programs and monitor customer feedback trends, correlation, and root cause analysis.

The Mistake:

As we grew, we ended up realizing that we were not only competing with other vendors, but we were competing with our own partners.

When we started the company 11 years ago, we were looking to create as much traction as we could in the marketplace by getting companies to be resellers and to be sales agents for Clarabridge. We went on a fairly aggressive recruiting push to try to drive a number of companies to basically act as sales agents.

We’re essentially a customer experience analytics platform, and most of the companies who use Clarabridge are big banks, retailers and telecommunications companies that want to make sense of all the conversations that happen when a customer does business with a company.

To drive growth in the business, we approached companies that we could partner with, such as call center and market research companies, and various institutions that sold surveys and different types of technology to do customer feedback analysis. We signed up many of these companies with what we called a naked resell—they could sell the entire product to their customers if they wanted to. At that point we were tiny and had fewer than 10 salespeople around the world.

We learned that if you have a good product and you’re in a good market, you should invest in your growth, and we did. In the first several years of going to market, back in 2008 to 2011, we hired a lot of our own salespeople and we grew the company very fast. We realized that we were uniquely situated to articulate why people should buy our stuff better than our partners could.

This is when the mistake came to light.

We would go to customers and realize that we were being asked to price the product at a lower price than we were comfortable with. When we asked why, the prospect would say, “Your partner is offering the software at a lower cost.” It was very uncomfortable because we realized we were in a race to the bottom because our partners were trying to price us into a bidding war with our own software.

If a partnership doesn’t actually achieve win-win-win it’s not a good partnership.

The Lesson:

We had to quickly unwind that dynamic, because it was unhealthy for us and for our partners. It wasn’t a win-win partnership. It became very clear to us that we created an economic model that didn’t encourage our partners and us to collaborate very well together.

The key value of a good partnership should be what I call win-win-win. You win as a company because you’re able to drive growth and success with your own business. Your partner wins because they get to work together with you and drive their own success and vision of how they want to be. And the customer wins because you’re collaborative, you’re working toward a common cause, and you’re driving a solution that creates efficiency and value for them. If a partnership doesn’t actually achieve win-win-win it’s not a good partnership.

When we started changing the dynamics of our partnerships they started to become much more productive. But when you try to change partnership relationships, not everybody wants to change those relationships. We did have to go through a process and identify partners that were willing to be more collaborative with us, and those relationships are still very active.

There were other partners who had a more focused desire to go to market with something that was more directly competitive, and we had to basically agree that we weren’t best suited to be partners. We allowed those partnerships to expire, and in some cases terminated those relationships.

When you develop a partnership, make sure your partnership is truly driving economic value to you and your partner, and that it doesn’t set you up for competition. Don’t underestimate your unique ability to sell and define a market. If you’re a visionary company in a high-growth space you don’t necessarily need partners to be successful selling you, what you really want them to do is to be enablers of your vision.

Sid Banerjee is on Twitter at @sidbanerjee and Clarabridge is at @Clarabridge.

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