The Power and Principles of Partnership
Partnership is the most powerful way to meet the needs of our time. It is the most under-appreciated and under-rated way of doing business. It is a key tool in driving sustainability into and through the world’s largest corporations—giving global scale to planet-saving innovation, while creating entirely new categories of value and revenue.
We came to this view the hard way. We started out like most everyone else: we believed we had to build businesses where we ran everything ourselves. Matt co-founded Swell Energy. It was not just a residential energy storage company. It was a direct sales company, a software company, a financing company, and more. It managed sales, installation, software development, and long-term procurement contracts with massive utilities. For all he was doing, he wasn’t able to accomplish nearly as much as he wanted.
Kevin supported the development of a number of careers and businesses. He was adding fuel to each and building a diversified portfolio. He built a live events company, grew the touring careers of Skrillex and Mumford & Sons, and created the Summit Series’ Vanguard Program, all while scaling GivePower into a leading provider of water and energy in the developing world. He was working with some of the world’s most talented people, yet he felt there was more opportunity to scale his efforts.
Together we wanted to create a new kind of company—something that could create broadly shared benefits at far greater scale. We knew the old way would not work. To make the contribution we realized we had to stop going around established entities and start going through them. Enough of trying to be radicals—it was time to become radical pragmatists.
We needed a new model.
We were inspired by our friend Leerom Segal, who built Klick Health into one of the world’s leading marketing firms by helping biotech companies bring their products to market. Klick was not simply a service provider but an active partner, sharing in the upside of the products they helped launch.
We were also excited by The Kessler Group, which invented affiliate marketing for the credit card industry. Every co-branded credit card you have ever owned—with airlines, universities, wholesalers—owes its existence to Kessler. Like Klick, they structured their deals to be aligned with their partners’ long-term success.
Most powerful of all was the example of our friend Hayes Barnard in building GoodLeap. Hayes’ journey reminded us uncannily of our own. He had previously built SolarCity and sold it to
Tesla, where he then worked to vertically integrate the solar energy business. He found that strategy to be expensive and limiting. As he contemplated his next venture, he read a book called Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne, which argues that you can scale exponentially when you figure out how to make your competitors your biggest partners. That gave Hayes an idea that was the inverse of vertical integration: a marketplace that would connect engineers, contractors, financing providers, and homeowners. The best engineers would have profitable distribution channels for their sustainable products. Contractors would have access to the best products, a large customer base, and a simple point of sale. Financial institutions—banks, insurance companies, sovereign wealth funds, credit unions—could all participate in financing clean energy at rates of return comparable to their traditional products. And homeowners would find it much easier to adopt clean solutions that lowered their carbon footprint and saved them money. The model worked. GoodLeap has now served over one million homeowners, partnered with 3,400 businesses, and financed $58 billion in clean energy solutions that have saved customers $27 billion in utility bills. Not only does everyone in the marketplace win; the broader world benefits too, as climate-friendly solutions scale more broadly and quickly.
Klick, Kessler, and GoodLeap all had the same thing in common: they all created innovative partnerships that drove virtuous cycles of mutual benefit.
We wondered how we could do the same by harnessing our own talents while leveraging all we had learned over a decade in sustainability. Finally we had an epiphany. What if we could help growing sustainable businesses reach massive scale by getting their innovations into the world’s largest companies? After all, each has what the other lacks and needs. Emerging businesses have successful commercialized innovations that can create significant new revenue and cost-savings for a large corporation. Large corporations have the infrastructure and reach for emerging businesses to scale their innovations globally. When the model is applied specifically to innovations that enhance sustainability, the partnerships are triple-win, as the world benefits from having the most sustainable innovations scaled most broadly.
How had no one thought of this before?
Perhaps because the model bucks the conventional mindset in which emerging businesses and large corporations view each other as potentially mortal rivals. That paranoia has arguably been deepened and perpetuated by such business theories as disruptive innovation, developed by Clayton Christensen. In Christensen’s model, large incumbents, forced to focus on their existing business lines to maintain revenue, struggle to innovate and are therefore under constant threat of being unseated by more nimble up-and-comers. Growth-stage businesses fear the larger companies will preemptively copy their innovations while banking on their greater resources to deter or fend off intellectual property litigation. The picture is vaguely Oedipal, framing the marketplace as a kill-or-be-killed savannah.
Immersed in this mindset, companies tend to favor mergers and acquisitions as a kind of game-theoretical detente.
The trouble is that M&A comes at high risk and high cost. Beyond the significant transaction costs, there are the subsequent costs of fully integrating management and operations teams, sales and distribution channels, company cultures, and more. Theoretically, the potential efficiencies will outweigh such costs—but both companies have to risk a great deal in order to test that proposition. Large corporations can lose vast amounts of time and money, while emerging businesses can see their innovations shelved altogether.
We saw a better way.
In our model, partners date long before ever contemplating anything like marriage. Large corporations can commission a pilot of an emerging business’s innovations—far easier to implement successfully, at far lower cost, and with much lower risk. The process also produces valuable learning: not only do processes get worked out and improved, but at least as importantly, individuals and teams get to know each other and build trust. Expanding from the pilot then becomes that much easier.
As we put the finishing touches on our plan, we knew we would insist on both a retainer and success-based compensation, to align our long-term incentives with our clients and to make clear that we were not just service providers but partners. We called ourselves Emergent Strategic Partners, to capture partnership’s power to produce more than the sum of its parts.
The model worked.
We built a partnership between a sustainable home improvement finance company and a large national contractor—increasing the contractor’s sales by 20%, while bringing in $100 million in new revenue for the finance company.
We built a partnership between a sustainable home improvement finance company and a large national contractor—increasing the contractor’s sales by 20%, while bringing in $100 million in new revenue for the finance company.
We built a partnership between a rapidly growing IT provider and a Fortune 50 retailer—solving a costly problem for the retailer, while getting the provider their largest enterprise customer to date.
We built a partnership between a fin-tech company and a Fortune 500 restaurant group—giving the restaurant group new financial wellness tools for their 100,000+ employees, who will become new customers for the fin-tech company.
We built a partnership between an identity verification business and one of the largest entertainment companies—saving the entertainment company millions from industry-wide fraud, while earning the identity verification business a whole new vertical.
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As we saw our model succeed again and again, we began to wonder whether partnership is in fact truer to the essence of capitalism than a kill-or-be-killed mindset.
We went back to Adam Smith and found that he has been widely misunderstood. Many speak with reverence of the “invisible hand,” his theory that when individuals pursue their own self-interest, their aggregated efforts lead to collective flourishing. This treasured notion is used to justify a zero-sum worldview and the strategy of conquest it gives rise to. Yet Smith conducted his analysis within a much broader economic and philosophical framework. In The Theory of Moral Sentiments, he identifies the importance of what he calls “sympathy”: the quality or disposition of thinking about what others in the market need. Without sympathy, the craftsman would make things no one would buy. There is simply no such thing as “pure” self-interest: for any individual to advance himself, he must programmatically consider and appeal to the interests of others. Prosperity arises only when people’s needs and desires meet. Smith understood that no one stands alone—that in fact we are completely interdependent.
The disastrous consequences of a zero-sum mindset are now plain. Climate change and biodiversity loss are perhaps the most obvious examples. We are seeing that there is no “natural” world that stands separate and apart from human life. We are inextricably interconnected with our environment: as we do unto it, we do unto ourselves. In his book Wholeness and the Implicate Order, the physicist David Bohm sought to integrate the insights of quantum physics and the contemplative mystical traditions. Both reveal that there is no objective reality that exists independent of us as observers. On the deepest level, life is relationship. We are completely bound up with one another and everything around us. The ecological crisis shows us what happens when we fail to understand this essential fact. By contrast, when we cooperate with the world as it really is, we participate in its inherent creativity and thereby generate abundance.
History’s most successful businesses bear this out. In his book The Outsiders, William Thorndike identified the companies that delivered the highest long-term value per share. Examining what they all had in common, he found that they were all effectively run as partnerships. A tiny head office hired exceptional managers, gave them the freedom to generate free cash flow as they saw fit, and then allocated that capital for the highest returns. Within this partnership model, each side understood its role and focused on doing it well. Both trusted the other to do the same and strove to remain worthy of the other’s trust.
As we digested these findings, we realized that partnership is not simply a strategy. It is arguably the very essence and engine of capitalism itself. That is why it is so consistently effective.
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As we found success with a growing number of partners, we began to see common patterns in what produced the greatest value. From these we developed our Three Principles for Partnership.
1. Partner only with those who share our vision and values
Partnership works only if everyone shares a foundational belief in the value of partnership itself. Only then will they be ready, willing, and able to do the hard work of making it successful.
Partners also need to share a common purpose, a sense of mission that is greater than any individual partner’s immediate self-interest. That creates the motivation, the creativity, and the energy that gives partnership life and legs. Our purpose is to meet the needs of the time by scaling the most sustainable innovations as broadly and as quickly as possible. We believe in principled entrepreneurship, striving continuously to create virtuous cycles of mutual benefit.
Our partners also need to share our values. We believe in continuous transformation: of ourselves, of one another, of the market, and indeed of the broader world. We are committed to self-actualization, as we work to discover, develop, and apply our talents and gifts for the greatest possible benefit. And we place immense value on humility, openness, and candor.
We look at hundreds of candidates before choosing to partner with a single one.
2. Be everyone’s preferred partner
In The Science of Success, Charles Koch defines a preferred partner as “someone who prefers working with you rather than their alternatives, because you do a superior job of providing what they value.” That includes not only our clients—emerging businesses whose innovations enhance sustainability—but also the large corporate customers we work to connect them with. We must constantly anticipate our partners’ needs, exceed their expectations, and add immense value. Becoming a preferred partner allows us to work with people over the long term and to generate increasingly virtuous cycles of collaboration and shared prosperity.
3. Trust is everything
All partnership rests on trust. Its value is literally incalculable. As Koch remarks, “Trust enables people to accomplish things that would otherwise be impossible.” Our job—first, last, and always—is to earn, build, and maintain trust.
Trust is hard to build and easy to lose. It therefore requires radical integrity: doing exactly what we say we will do, fully owning our mistakes when we fall short, and working tirelessly to set them right. We have also developed what we call our “requirements of citizenship”—standards to which we hold ourselves, as much in our internal work with one another as our external work with our clients.
These include extraordinary attention to detail, unusually high responsiveness, and transparent and direct communication.
Every new partnership starts with a great deal of listening. We take exceptional care in getting to know all our partners, which allows us to develop a profound understanding of their goals and challenges. Only then can we see how to convene them around unique opportunities that grow revenue, reach, and returns for all.
We draw inspiration from the Trust Equation outlined in The Trusted Advisor. We work to maintain unimpeachable credibility by cultivating mastery of our craft and of our partners’ markets. We expect ourselves to be completely reliable. We create the safety needed for our partners to share freely about their concerns. And we ensure that our partners know we are focused on their interests above our own, which we achieve in part by aligning our compensation with their success.
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Going it alone is the outdated and disproven model of the last century. A quarter of the way into this one, our inextricable interconnectedness—with one another and with the environment—is clearer than ever. Just as we must develop new technologies to meet the challenges and opportunities of our time, so must our ways of doing business evolve. Partnership is true to who and what we really are. It is not always easy, but it is not so difficult either, for we have been laboring under the false star of our separateness. The world is not a pitiless jungle. It is a place of infinite creative potential whose power and force are unleashed when we meet the moment together.
