When young or small companies, early-stage projects and startups bundle with large enterprises, the deal making process is full of complexity and hazards for both sides. The “small guy” is eager to close the deal with the “big guy” for many good reasons. However, the “big guy” just wants to get the job done and mitigate the risk of working with a small partner. This usually results in a financially very attractive deal for the “big guy”, while the “small guy” faces an operational stretch. One way of balancing this set-up better is good expectation management (from BOTH parties); that requires honesty and transparency. But different people interpret “honest and transparent” very differently, which turns this potential solution quickly into an abstract challenge. I want to share two personal stories; first, when I was on the side of the “bad guy” and, second, when the other “guy” was the “bad guy”.
One.
When I worked at a large manufacturer as project engineer, I ran a one-of-a-kind investment project of historic dimensions (at that time). Nothing about this project was “off the shelf”. Our partner was an experienced though approx. 200x smaller engineering company. We knew them, they knew us, just the scale and scope of this project were beyond anyone’s comfort zone. Regulatory circumstances forced us to update our product designs during the project. Our partner tried what they could to adapt in real time, but that was sheer impossible. We were a moving target while the plannable tasks were already significant. However, the project specifications were clear and in our favor; the junior project partner should have known better and had to deliver now. The project became a success for us after all. However, it is unlikely that this success was shown in our partner’s books too.
Two.
When I ran a boutique software company, our primary customers were large enterprises (several manufacturers, OEM). We provided a white label infrastructure for the graphical user interfaces (GUI) these manufacturers offered to their customers. The enterprises pitched themselves boldly, with reach and scale for us, offering upselling business and reputational gains. The contractual framework was typically built on those promises, but only with regard to our pricing (sounds familiar?). It has always been a stretch to meet the service level agreement (SLA), every single time. We faced 10x more data than communicated by the OEM (without compensation), vague specification updates, and sometimes even growth was lacking (cutting our margins). Whatever the circumstances were, we achieved the SLA, every single time. The projects were very successful, but the success was not in our books.
Quite striking about these two case studies is the relativity of perception, even in professional, contractually very well-defined projects. All four parties from both stories certainly believed themselves to be good guys all along. But successful expectation management (if intended in first place) is not just about honesty and transparency, it’s also about experience and empathy. Hence, it’s not surprising that the bad guys were the big guys in both stories, pushing the small guys to meet their (moving) targets and optimizing the project towards their own books. The imbalance of power roots deep in these kinds of partnerships, most of the time. Should big guys be more transparent with junior partners and manage expectations better, if possible? And is closing poorly balanced deals a good idea for small guys in first place?