New alliance strategy for technology companies: Success Sharing

By Kent Romanoff,TFI Environment Strategic Business Advisor

Most of you are probably familiar with the term Profit Sharing, and a few may even have heard of Gain Sharing, but there is something new on the horizon you should know about — Success Sharing. Like so many other things, TFI Environment is at the forefront of this new approach. But more about that later. First let’s explore what Success Sharing is, and how it works.

Every year, the struggle to conduct business in the increasingly complex world of international commerce intensifies for high-tech companies. The labyrinth of confusing and often conflicting laws, regulations, and tax schemes–coupled with an atmosphere of financial instability and political uncertainly–have settled like a thick fog on today’s companies, making it hard to chart a clear course and increasing the risk of a nasty collision that might sink the business.

In response, more and more companies are getting back to basics, shedding business units that do not contribute directly to their core operations. They are focusing on what they do best, and forming alliances and partnerships with experts in other companies who can provide much needed support in specialty areas.

This alliance strategy presents its own special challenges. When you depend on another business to provide operation-critical products and services, the risk of failure is intensified by the inherent lack of control. How can you be sure your partner will deliver? How can you be sure where they are prioritizing your needs relative to those of their other partners? The answer lies in your ability to align your interests. This is where Success Sharing comes in.

Simply put, Success Sharing is a financial arrangement whereby the business that has been engaged to provide a mission-critical product or service shares the risk of failure (and the benefits of success) with the company that is purchasing these services. Unlike traditional fee-for-service arrangements, Success Sharing ensures that both partners have skin in the game.

Check out the four-step Success Sharing process and three key issues to watch for.>

TFI Environment is in active discussions right now with clients considering Success Sharing partnerships. For businesses interested in reducing their environmental footprint while simultaneously increasing their profit and reducing their cost, this is an excellent approach. Especially in the current economic climate where they may not have a lot of up front cash to spend on the effort.

What do you think about dividing costs, spreading risks, and sharing success when it comes to cost savings in operations, supply-chain, and waste-reduction / green strategies?

Posted by Kent Romanoff, November 6th, 2008