"The future will belong to those companies that weave ecosystem relationships into the fabric of how they create value."
That quote lives on the top of Greg Sarafin's EY.com people page. As the Global Alliance and Ecosystem Leader for EY, Greg is "passionate about improving the pace and scale of value creation."
For the last 20 years, Greg's business roles have been tied primarily to revenue. He was promoted to the partner ecosystem function in 2018.
During those 6+ years, Greg oversaw a team with a 40% compound annual growth rate (CAGR), doubling every two years. This number represented 40% of the overall EY growth. In real dollars, $7B of the $17B growth was partner ecosystem (incremental) revenue.
Those are big numbers, obviously.
In this article, Greg shares insights into how his team achieved such eye-opening—and consistent—growth over such a short period using the power of strategic partnerships.
Creating a co-innovation and co-investment model is essential
Greg attributes the success of this growth to the mindset of partnerships as a co-innovation, co-investment model, creating new capabilities for customers who don't exist.
We're typically not just working with one partner. We leverage the power of multiple partnerships, bringing them together on a single platform to create capabilities by EY services and EY IP that a customer can't get elsewhere.
When it comes to these partnerships, Greg recommends a few things:
Do not partner with everybody.
Strategic partnerships can take on many different shapes. And for many companies, partnerships are industry-dependent.
Treat partnerships like a revenue management function (aka revenue governance)
"This clarity and governance are necessary to run that function well—to create customer value through co-innovation, co-investment, and more," says Greg.
But how do you effectively co-sell? Hint: Be careful how you incentivize.
Greg sees a few "hurdles" that need overcoming to ensure field sellers can effectively co-sell with partners.
Specifically, he calls out the following:
- Personality
- Bias
- Misaligned plans
- Sellers not "getting the memo" that the joint value proposition is part of the strategic initiatives at both companies
This last part is key.
"The incentives, the governance, and the communication are all a massive change management exercise," says Greg. "It's all about helping sellers see the value proposition." You will do better in the long and short term. For example, offer higher spiffs for those who sell strategically versus the old-school tactical approach.
The focus should be on long-term value. And because of that, it's essential to change how teams are compensated/incentivized.
As Charlie Munger—American businessman, investor, philanthropist, and vice chairman of Berkshire Hathaway—once said: "Show me the incentives, and I'll show you the outcomes."
But incentive-setting in a strategic partnership situation—one with co-selling, co-marketing, and so on—can go sideways quickly. Greg has a few tips to avoid that negative outcome:
- Ensure sellers get quota relief no matter where the final product ends up being built (with which partner).
- Do not measure sellers on deals and SKUs (again, prioritize long-term value instead).
- Set clear goals and educate the team from the C-suite down. For example, "Our strategy as a company is to generate X% of our revenue from partners and to pivot Y% of our revenue from selling transactions to subscription (repeatable revenue mechanisms) by this date."
- Declare up front (wide and far) who your strategic partners are and what your strategic solutions will be.
But if you want long-term success, do this...
Ask: What does our business look like in the future?
For a strategic partnership to be effective in the long run, you must look at your business and ask, "What will we look like in the future?"
For EY, Greg sees the company "helping clients orchestrate their business outcomes."
Looking at a client's need—say, risk management—through that lens requires the partnership to pivot. Instead of helping with tax compliance or optimization, EY will sell clients on the outcome of compliant tax filings optimized to reduce tax burden and improve cash flow.
Think about the value outcome of the future state versus where your business operates today.
When viewing this way, your company may realize that you need more time or capital to get there. This is where a strategic partner comes in. You must partner in a different way than you've historically partnered. In this case, it's no longer about co-branding or a joint venture.
It is, as Greg says, "strategic development of co-branded, co-innovated, co-developed, integrated, co-marketed, and co-sold value propositions that drive value outcomes for end clients."
Start small to get it right.
The key "partnership KPIs" to look for
Partnership relationships are costly in overhead, according to Greg.
"You put a lot more calories into a partnership than you do selling to them as a client, or they do selling to you as a client," he says. This requires your team to be efficient and to pick partners carefully.
At EY, Greg measures success in a few ways:
- The amount of investment his team is getting from its partners
In 2023, they will see "over $100 million of investment capital" from all partners to implement this co-innovation and co-development. And, as Greg points out, it takes 5x+ in revenue on average to get that investable capital.
- How much co-sell motion from partners
For EY, they have calculated that number. When they co-sell (and their partner is not co-selling with another partner), their win rate is 20 points higher. When there is another co-seller, that number is 20 points lower
The "swing rate" is 40%. That's some solid ROI.
Greg also suggests that all strategic partners are both clients and providers. When you meet with the team, the conversation centers around "the totality of the value the relationship creates." They don't meet with them separately as a client, separately as a vendor, and separately as a partner.
Get more of Greg's advice for developing strategic partnerships by listening to the episode, and don't forget to subscribe to get more revenue insights every week.