Harley Finkelstein's Agile Business Development :
What is it, and how can it be applied to maximize returns?

The conventional culture of business development - of deal making - expects a mercenary approach whereby every deal must be squeezed hard enough to extract the very last drop of juice, and conversations about reciprocity and the value of business relationships tend to elicit skepticism and the implication that one has gone soft and is shirking.

Yet, interestingly, almost everyone in business grasps the value of a good relationship with partners - that repeat business lowers the cost of sale considerably, and that such relationships necessarily are based on reciprocity and collaboration.

Rather than imposing the militaristic, binary paradigm popularized apparently forever, where success necessarily is defined on the basis of winners and losers, Harley Finkelstein instead proposes that a better outcome is winners... and, well, more winners.

I started following Harley Finkelstein more closely after his employer, e-commerce software company Shopify, scooped up one hundred million dollars in investment from some of the toughest venture capitalist firms out there.

This, after already securing initial funding for something like thirty million dollars to build-out what was essentially a commodity SaaS product, whose competitive advantage, so they said, was merely that it was "cool" and "beautiful".

Agile Business Development

Now, no one does that. No one. Yet Shopify's management team convinced some of the most cynical and conservative investors to part with record amounts of money, presumably because Shopify had over-delivered so consistently.

Eager to account for this success, I was delighted to find notes from a talk that Finkelstein, had delivered on what he termed Agile Business Development, a riff obviously on Agile Software Development, the method that, a decade earlier, had dragged engineering types from their supposed industrial revolution practices, to at least the turn of this century.

Agile software development is a group of software development methods based on iterative and incremental development, where requirements and solutions evolve through collaboration between self-organizing, cross-functional teams

These methods were captured by practitioners in what they termed the Manifesto for Agile Software Development

Purist Dave Thomas, who believes that the Agility movement, sadly, has now been co-opted by reactionaries and counter-revolutionaries, distils the concept down to its essential process:

  • Find out where you are
  • Take a small step towards your goal
  • Adjust your understanding based on what you learned
  • Repeat
  • Finkelstein's epiphany is that this process of Agility, if applied when developing a business deal, will net more favorable results... in the immediate and the long term.

    This is a refreshingly sophisticated view of business and business relationships. It privileges a collaborative business relationship - and the future opportunities that the relationship represents - over an exclusive focus on benefit maximization for any one particular deal.

    The conventional adversarial, winner-takes-all approach, necessarily means that at the start, communications are very narrow and focused exclusively on achieving your own, fixed goal, and that your strategy and tactics are dependent on a set of fixed assumptions about the objectives, strengths and weaknesses of your "adversary".

    The Agility concept however, recognizes that this brute-force method does not in fact maximize benefit, because of the opportunity cost. Simply put, when going into a negotiation, you don't know what you don't know, so taking an approach that is adversarial and that therefore imposes limitations on the free exchange of information, is unlikely to result in the best of all possible outcomes.

    This makes perfect sense intuitively... and empirically also, as demonstrated through Shopify's enormous success.

    But what about implementation? Iteratively refining software is one thing, but business development exists within an often fixed time frame, and in a dynamic and ever-changing environment. How many iterations are enough? What level of refinement is sufficient?

    Fortunately, Finkelstein proposes practical methods and rules that can usefully govern the application of this concept, to avoid the process devolving into a time-consuming and fruitless circlejerk - exactly the dysfunction it is designed to replace!

    Done is Better than Perfect

    Fundamentally, the problem that Agile Business Development (agile BD) solves is what Finkelstein terms as "deal lethargy". With conventional business development deals take a long time, are extremely static, and more times than not don't actually go anywhere. Agile BD is a way and a set of principles to move forward and get past that deal lethargy.

    Its guiding principle is that done is better than perfect - a done deal is better than having to endure the costs in time, effort and money of a protracted negotiation tolerated in order to squeeze the last bit of juice from it.

    Finkelstein proposes nine tactics that can be deployed to make BD truly Agile:

    Tactic # 1: Be Candid About Your Objectives

    How can I best communicate to them that I want to avoid wasting their time? What can I do that allows me to be as productive and effective in this meeting as possible?

    Be extremely clear prior to your communication about what you want to achieve. What is it, given your existing knowledge, you think can be gained through engagement with the prospective partner, and what, specifically, do you want to achieve during the particular meeting or phone call?

    Then communicate that to the prospect clearly and in simple terms. Be candid - here's my objective; what's yours?

    The clear benefit is that this approach enables both you and the prospect to be as productive and efficient as possible, with the least time and effort wasted. It changes what could be a game of cat and mouse, or a monologue with no perceivable ending, into a dialogue between two agents exploring how they can be of immediate mutual benefit.

    Tactic # 2: Discover and Leverage a Centerpiece

    A centerpiece is something that you have at the center of the table and everyone sits around it and it's pretty and makes everyone feel good. It's usually flowers or what have you. I think there's something about finding a centerpiece between two individuals or two companies that really makes sense.

    With the objective of developing an immediate rapport with the prospect through the knowledge of shared experience, discover a real and substantive commonality between them and yourself, your product or company.

    For example, if you know of a specific problem they have or your both share, you can offer up a genuine solution. By avoiding the merely abstract, you enable a common effort to achieve a tangible objective in an immediate time-frame.

    Finkelstein makes a distinction between a corporate centerpiece, as described above, and one that is personal.

    Leveraging the personal centerpiece is a matter of discovering what you have in common with the prospect on a more personal basis. Are you both involved in the same activities - sports, fishing, motorcycling, competitive BBQ? Did you perhaps attend the same university?

    The more challenging the deal is, the deeper the research should be on the prospect and their company. Read their LinkedIn entry, their blogs and Whitepapers they have authored. Discover whether you have clients or partners in common and how that is working out for them.

    While unlikely to alone make or break a deal, or useful to over-emphasize, this can allow you to quickly get to first base and in a more collegial manner.

    Tactic # 3: Start with a Proof of Concept

    Shoot a bullet, see how it goes. If it landed beautifully and exactly where you want it, only then do you shoot a bazooka.

    When exposing your objectives to a new prospect, start off small. Before committing to something substantial, you both need to know just how beneficial, diligent and capable each other are, so shooting for the moon the first time round is unlikely to rapidly achieve a deal.

    For example, keep the initial proposal of a modest albeit mutually beneficial scale. Once you have achieved that proof of concept - have demonstrated that you can help each other earn revenue, and can relate well on a professional and personal level - barriers to exploring and achieving successively larger deals will be easily surmounted.

    Tactic # 4: Choose Your Moment Carefully

    The worst thing you can do is [try to] force somebody into a business development deal. If they're forced into it, they're not going to give it their all.

    When pitching a business proposal, the chances for success increase the more it aligns with the prospect's current needs.

    Do the research, discover what their existing and upcoming business agenda looks like, and shape your proposal to better align with what is currently top-of-mind for them.

    For example, if you perceive a useful synergy between your companies' based on a product they will be launching in six months, now is probably not the best time for your proposal, since they are still in development mode, and there are still too many unknowns for them to actually close any type of related partnership deal. Better to wait five to seven months, until they are actually looking for precisely the type of deal that you have in mind.

    Tactic # 5: Be Greedy

    Short-term greed is a really bad thing... but long-term greed can be really helpful and can be something that's very motivating.

    Developing long-term, symbiotic relationships with partners, like customers, is much more profitable than depending solely on developing new partnerships to enhance revenue. Just as a customer for life is the holy grail of sales and marketing, because the cost of sale approaches zero, so too is a partner for life.

    Being greedy is about regularly searching for ways that you can engage with a partner to your mutual benefit, and in developing the circumstances and relationships so that they are acting in a similar fashion.

    Tactic # 6: Be Truly Agile - Tickle, Sizzle and Pivot

    Sometimes, when approaching a deal things don't really become obvious right away. Asking for the Objective up front really does help mitigate some of that but you still need to be agile and open minded to different possibilities than were intended.

    Finkelstein describes three methods that enable you to capture the interest of your prospect initially, explore the extent to which your mutual objectives align, structure the agreement itself, and pivot, as needed, towards new opportunities that may suddenly arise in the course of the engagement.

    1. The Tickle
    2. The Executive Tickle ascertains whether there is in fact sufficient interest in your idea at the executive level, so a deal can be made more easily and quickly.

      We always try to get some executive at the company sort of interested or tickled by some idea. It's often very casual and very basic - "here's an idea we had. We think it's pretty cool... if you're interested, hit us up". Often that turns into a follow-up email from the executive, cc'ing the head of BD or cc'ing somebody saying, "hey, can you look into this?"

      You're trying to achieve two things with the tickle. You're trying to convey some sort of level of interest on your part to do something with the company, but you also want to get some sort of executive buy in. The other piece to it is you don't necessarily want to put all your eggs in that one email basket, because, again, that is sort of the antithesis of the agile maneuver. You want to make it specific to the point that they don't think that you're just cold calling them or you're simply just throwing something out there and hoping something works. You want it to be specific enough that they say, "yeah, that makes sense," but ambiguous or general enough that they can say, "well, maybe this is what he's thinking, which is actually even more interesting."

      Importantly, however, communications need to be brief and straight-forward:

      Five lines is sufficient. I don't really want to read an email that is longer than five lines. If we have to get into the specifics - rev shares, non-competes, etc- that can happen on a phone conversation or a Skype call or even just in a bullet point.

      Nine times out of ten, if it takes someone three pages to tickle my interest, it's not a deal for us. So we're very careful to combine being specific without being overly static because, again, you do want the dynamism of the deal to flow.

      Often, what people do is list a very drawn out plan for us of how we could work together, which they think is helping, but really what it's doing is instead adding extra complexity at point where I don't even really know who they are.

      Or what they do is spill out every single potential opportunity they can think of, hoping that one of them is going to grab my interest. All that is going to achieve is having their email sent to someone within the company who's going to fish through what they should have delivered in the first place - a single grain of exciting potential.

    3. The Sizzle
    4. This is where we get into the nitty-gritty. We talk about the deal, what it's going to look like, what the terms are, what are the advantages for us and the advantages for the partner. This usually takes the most amount of time.

      The Sizzle is where you want to get your contentious issues out of the way. This way, by the time you've finished that Sizzle, it's all hugs and rainbows.

      It's critical however to keep the terms of the deal simple, because unnecessarily complicated deals take too long and tend to obfuscate the objective.

      If you don't understand right away exactly what they're talking about, something's wrong. This isn't rocket science for the most part, but rather a matter of, "Here's the deal. Here's my objective. Here's your objective. Here's what I'm willing to invest. Here's what you're willing to invest. Does it make sense or not?"

      All too often these BD deals get blown out of proportion, and our success in terms of business development has always been centered around the idea of simplicity is best. If the partner has inflexible internal procedures that prevent simplicity, then pivot to another arrangement.

      For example, if given a term sheet with 50 different terms on it, you could respond "I'm comfortable with the first three, which I think are the only important ones, so I'll agree to those three. In terms of the other 47 terms, why don't we table this for a discussion in six months from now?"

      I find that once I say to them, "Okay. Well, instead of having 50 terms, I'm going to propose four terms. The three first terms are the most important and the fourth term will be a necessary conversation or renegotiation in six months time", then the worst case scenario is, if the deal blows up and doesn't work out for either party, at that six month period you're able to renegotiate.

    5. The Pivot
    6. Typically, just before we finalize, we pivot and close. The reason the pivot is really necessary right before close is, if you look at a decision diagram and this is what I want, this is what they want, there is a point in the middle where our interests do align. That last pivot just before close is a very effective way to figure out what that middle piece is and eventually sign some sort of deal.

      Often, I don't actually realize what the sweet spot of the deal is until very later on in the negotiation process. Sometimes it takes that long to figure out just what their competitive advantage is.

      Because of this, I think that an ability to pivot and shift your interests and objectives as the opportunities become more fully apparent, is extremely important.

    Tactic # 7: Enable Friendly Rejection

    Give new leads an opportunity to say "no thanks" without making it awkward or uncomfortable for them. This may lead to a deal at a later date.

    An initial pitch may elicit a negative response, or sometimes even worse, no response at all. This may be because your idea just didn't resonate with the prospect. Or it may simply be because the timing wasn't right for them.

    By giving prospects a way out, a way of rejecting your offer that doesn't make them feel uncomfortable or feel like they are losing face, tends to at least elicit a response, even if it's a no, not right now.

    Something as simple as, for example "I'd love to steal 5 minutes of your time. However, I know that you are super, super busy, so I would not be offended if you can't meet with me", is also more likely to elicit a positive response when you follow up in future.

    Final Note

    Agile BD provides a useful template for the practice of Business Development.

    It's degree of practicality is however dependant I think, on one's own demeanor and the degree of leverage your company has.

    Finkelstein describes himself as aggressive, and his employer, Shopify, has considerable market heft to leverage when making deals. It is these circumstances that underly the success of his own Agile BD approach.

    But what of a startup company? Is an aggressive demeanor useful, particular when the company has yet to make much money - for itself, partners or customers?

    Finkelstein recognizes this anecdotally, proposing that for young companies a degree of humility is manadatory when desiring a partnership with a larger, more established player. Fact is, doing deals with startups is a bit of a gamble for them, so whether or not it occurs hinges on the personal rapport of the individual deal-makers. Professionalism, pragmatism and humility are therefore a far better approach to take, in order to be successful in persuading a larger player to take the chance.

    The key then, like most methodologies, is to adapt Agile BD to one's own particular circumstances, using Finkelstein's experiences as a guide, but essentially being agile in one's own implementation.

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