Digital Twister: How To Map Shifting Internet Market Opportunities

Do you have a ticket for getting into the big-time marketing game played by major corporations across the growing scope of digital media? To get dealt in first you need a unique value proposition others will appreciate. But even with this ticket you won’t get far unless you can grab a good spot inside the game. So get ready to move fast once you’ve opened the digital door. Your goal is to find a market position in the digital landscape, then land on it, hold on to and extend your reach beyond it.

But before you take your first step, you've got to know where you're going. Do you have a plan? Do you know where your business stands in relation to others? Please don't break out your pie chart program. The days when we could divide market share into those nice neat slices – Over. In the digital world we need new ways to map market position. And the map I have in mind looks like a game of Twister — something like a universe set of interrelated circles (or pies, if you must).

Do this right and you'll have a real-world perspective for growing revenue online.

Here’s how to go about it.

You'll want to make a map composed of the major business sectors representing revenue opportunities in the digital economy.

Assign a circle to each of the following:

Music.
Information.
Shopping.
Advertising.
Video.
Audio.
Exchange.
Communications.
Transactions.
Other.

Now focus on the sector you are operating in. Find a point inside one of these categories. Aim. Land on the best niche you can reach inside one or more of these spots. Put your finger on your most lucrative prospect. Also keep in mind any other sectors you intend to play in and how they relate to your initial entry point.

In the digital arena, change is constant. To solidify the position you've landed on, you will need to reinforce it by identifying strategic alliances.

To become a player in any alliance, your company must bring value to the table and buy into a common approach built on a Positive-Sum strategy; one that leverages innovation and marketing to make money for all players.

Simply said: Your unique value plus alliances will help you hold to your position.

Have doubts? The distinction between small and large does not exist online. What distinguishes one company from another are resources — money, technology, marketing, supply, distribution and innovation. For major corporate players, the competition is between resource rich companies to establish footprints on the systems and platform level. Ironically, they all know, none of them can succeed or sustain their objectives without the formation of alliances, with other businesses and consumers. That leaves a lot of room for everybody else.

Do some research into what the following five major corporations are involved in and you’ll learn that they are constantly seeking partners who fit in with their aggregation strategy:

Yahoo!
Google.
IBM.
Microsoft.
Time Warner.

The digital media landscape includes the Internet, wireless, television, handhelds, movies, etc. It is a constantly shifing economy. Therefore, interdependence is an essential component for holding on to a spot. And everybody involved knows it. In this context the traditional one-against-one competition is slowly being replaced by a complex set of one-with-many relationships working in concert to provide superior one-to-one satisfaction.

In addition to platform-centered alliances, an alliance network may start with the partnering of two or more brands and technology providers. Get ready. I see a boom in this arena. Look to share a spot with another company and you'll find new growth opportunities. Here are some recent examples of such efforts:

– Nike running shoes with scanner chip that reports to an iPod.
– Time-shifting DVRs installed in digital cable set-top boxes.
– IBM, Intel, Warner Bros. Studios, Disney, Microsoft, Sony, Panasonic, and Toshiba have formed the Advanced Access Content System (AACS), an alliance to develop non-intrusive security standard to protect content copyright against piracy.

Alliances may also form naturally at a grass roots level based on unfulfilled needs or agendas. Social, cultural, spiritual, and political interests have spun off common-focus movements with large constituencies.

No matter who or what is driving it, allies feed off one another and, as such, must rely on one another to strengthen their individual position on the Digital Twister board. Once you’re well positioned, be careful not to lose your balance with your next move.

Finally, focus on extending your reach. Use your other hand or foot to aim at your next spot (I'm speaking symbolically, of course).

Your goal at this point is growth.

Publicly held, digitally capable enterprises have no choice but to deliver additional profits to shareholders. Their executives are constantly looking for partnering opportunities that extend their reach across the Digital Twister landscape. Privately owned companies can pick and choose their opportunities without that pressure. To grow your company, understand your potential partner’s objectives and leverage your position to extend your reach. Keep in mind that your long-term objectives should include the formation of your own alliance network. Otherwise, you risk loosing your balance as technology and audiences shift going forward.

Maybe Advertising Should Become A Team Sport

Imagine a league of advertisers playing a team sport I’d call AdBall. The competition will borrow its nomenclature from football, baseball, golf and other sports. Each team would field a lineup of outstanding creative and market savvy players – like a creative QB, copy pitchers, visual hitters, ad running backs and receivers. Team scores will be based on audience response to team objectives and handicaps.

Why am I suggesting this? To illustrate the need that in an interactive media world we need to look at advertising as an ongoing relationship between stakeholders and enthusiasts, rather than the traditional stimulus-response mechanism developed in the 20th Century. The old ways are dying slowly, but the new ways have yet to manifest the amazing potential for creating major advertising growth engines.

To get to that next stage we need to develop new advertising platforms built on the sports model with fans of players and their accomplishments. What do I mean? A great ad should have more viability than toilet paper. We need to think of ads as longer-term assets and their creation as the work of star creative and marketing teams. Knowing the names and skills of brand builders may be as important some day as the names of sports celebrities. Best of all, it is in the interest of advertisers to connect enthustiasts with brand personalities. It is simply a great way for building goodwill. And goodwill is a monitized asset that adds to the equity value of a business.

Advertising already has its fans. So why not provide advertisers with new vehicles for ad fans to express their involvement.

Joe of Brooklyn calls The FAN radio station in New York to complain about the bonehead move the Yankees manager made in yesterday’s game. Some day, his wife, Mary, may be complaining about the latest Victoria's Secret ad — calling for a trade to bring in another agency.

Interesting developments are taking shape that are changing what advertisers must consider. Here are some of the issues changing the media landscape:

– Serious money is flowing into Internet coffers. Internet advertising revenues in the United States in 2005 totaled $12.5 billion, according to an Interactive Advertising Bureau and PricewaterhouseCoopers report. In 2006, Google is expected to get nearly 25 percent and Yahoo! will pick up 20.7 percent of the $15.6 billion for all online advertising in the U.S., according to market research firm eMarketer projections. At the moment online ad spending amounts to only 5 percent of total media spending, but eMarketer says it will grow 24.4 percent this year, while all other ad media, including TV, radio, print, outdoor and direct mail will grow only 4.2 percent.

– Interactivity offers a variety of relationship marketing opportunities so why reduce it all to the simple notion of directing traffic to Websites. Digital advertising could offer advertisers so much more than banner ads and text links through a variety of delivery vehicles. Here come Video iPods, mobile iTV, IPTV and with them interactive ads woven into games, film and commercial programming.

– The role and power of the consumer over ad viewing is changing. The DVR puts time and choice selections in the hands of the television viewer. New research shows that while 75% of the 18-34 age group cannot name the four major broadcast networks, they remember more ads than programs. And, new technology is allowing creative amateurs and students to create great ads. There's already enough talent out there for an advertising minor league and a collegiate circuit.

In response ingenuity is percolating in the ad world as interactive delivery executives are beginning to search for out of the box solutions. How will they connect the dots?

TiVo Inc. is gearing its DVR to help TV viewers not only skip commercials but to search for them as well. Consumers will be able to search for ads that match their interests. TiVo viewers will see a directory of product categories on their television screens and use it to choose a commercial video. This means that commercials will serve not only to motivate, but to give the viewer access to a deeper well of information.

Today the online search platform accounts for 40 percent of the total online ad spending in the U.S., according to JupiterResearch. But that’s just the start of it. Google is now giving advertisers demographic data to help them communicate their messages with greater focus. Google's rivals are right behind. Yahoo! also provides demographic information, but on a limited basis. Microsoft is offering demographic targeting data and an adCenter to help businesses create ads and link them to its MSN search engine.

Advertisers are also experimenting with new ways to relate to consumers. Some have already launched self-branded TV channels on the Internet. For example, Land Rover, the British sport utility vehicle owned by Ford Motor, announced the first broadband TV channel created by a carmaker. They offer 24-hours of multimedia programming peppered with ads for the Land Rover brand.

But where I think its all heading can be found in the head of Bob Greenberg, the R/GA guru. He calls it a “post-mass media approach." It’s all about creating relationships. R/GA designed just such a site -- richerdeeperbroader.com –- for Verizon. Its mission: invite enthusiasts to laud the broadband world. Greenberg also has a software program that lets a bunch of agencies track collaborations on ad projects. Sounds like it could be used to play AdBall,doesn’t it?

Selecting Good Partners: The Seven Essential Types of Due Diligence

Six of ten alliances collapse at some point down the road, because one or more of the partners failed to do their due diligence.

Usually, strategic alliances do not involve the protection of a legal agreement. As a result one or more of the partners may be exposed to undue losses when things don't go well or to wrangles over revenue and ownership when a joint effort is successful.

A partner that you first saw as committed and enthusiastic, may appear to be a dreamer and unrealistic at a later stage. A partner supplier who participated in helping you develop a product or service could suddenly act like a supplier and come after you like you've never had an alliance to begin with. Before you engage a partner, learn the following:

1. Management Strength and Integrity – Who runs the company - senior officers and board of directors? Are these people dealing from strength or weakness? Do they deal with integrity or are they the kind to cut corners or look the other way? Do they have a litigation history?

2. Short-term Objectives and Long-term Goals – What is your prospective partner's corporate strategy? What is their partnering strategy? What will they gain by partnering with you? Are their objectives compatible with yours?

3. Performance Rating – Is their organization efficient? Is it flexible? Is it focused? Do they have other partners? How well have these alliances performed? How well have they performed in the past? Regarding: quality of goods or services, speed of delivery, pricing and management response to solving problems.

4. Capabilities and Innovations – What are their capabilities: past, present and future? How committed are they to investing in capabilities that would benefit your business? How creative are they? Are they unique and innovative?

5. Financial Considerations – What is their credit standing? Are they profitable - as measured by EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)? Are they growing? At what rate – as measured by CAGR (Compound Annual Growth Rate)?

6. Resources and Employees – Do they have the resources to deliver on their end of the partnership at the scale required? Do they have the staff or outsourcing to fulfill your orders? Are there unresolved issues with labor or former employees?

7. Risks and Compatibilities – Are your trade secrets safe with them? Is their company a fit with your company in regards to markets and cultures? Are they looking for an exit strategy? How would a change in management or ownership affect your alliance? Will they be sold in the near future or right after they close the deal with your company? Is your partner planning on bringing in new investors? How can you get out of a failing alliance? Who will own new intellectual property rights and patents produced by your partnering?

Before you make contact with the prospect partner conduct as much research as is available to you. A second, more comprehensive and mutual due diligence phase must be undertaken once both parties have agreed to embark on negotiations. You will want to personally visit your prospect partner’s offices or production facilities.

Ten Types of Business Partnerships You Can Create

Are you considering a partnership with a Web-based company? Why? Is it because they're promising that you'll make lots of money after you pay?

The Web-based "distribution partnership" model is often presented as a private label offering. For example, you decide to buy a license to operate a technology for a flat or time-based fee with the promise that you could profit from product or service sales to visitors of your private branded, pre-fab website. But, in nearly every case, you are responsible for finding, luring and selling prospective customers. Bottom line: this type of partnership may be nothing more than a purchase, a disguised network marketing scheme or a franchised property with few if any franchiser rights.

Unfortunately, you've bought into a deal that gives you no control over how many duplicate franchises are out there. In addition, it is a deal without recourse. The franchiser may not deliver all it promises. The lucrative market the franchiser touted may not be there or may take years, not months, to build. Unless you already have an existing customer base, the entire venture may be a pipedream. If you're an actual distributor or seller with a customer base you should be able to partner with legitimate companies who are picky about authorizing you into their "distributor partnership" network.

Before you engage in a real partnering effort, be sure your expectations are valid. Do you have good reasons to partner with other businesses? You should. Do you know enough about your partner? You should. Beware of the wrong deal or the wrong partner. But don't be scared off. Partnering may be a very lucrative path for revenue growth and innovation development.

Your partnership strategy should be your plan. It has to fit your business model, your business goals. It should be attainable. It should be undertaken with partners who add to your company's value and growth objectives.

Take a look at the ten reasons I provide below. There are many more variations on these themes...but if at least one or more of these alliance models make sense to you, start doing homework on partners potentially suited for your purpose.

Here are ten solid reasons for engaging in value-creating partnerships:

1. Customer Access – Two marketers exchanging access to compatible customers.
2. Sales Initiatives – Producer or marketer working in tandem with a sales force organization, retailer or Web store to increase sales.
3. Market Expansion – Partnership aimed at penetrating new or niche markets.
4. Unique Value Alliance – Marketer with strong customer base partners with innovative supplier adding unique value to the marketer’s offering and increased sales for the supplier.
5. Scale Building - Partnership formed to achieve economies of scale.
6. Innovation and Specialization – Public, education or private enterprises combine financial and knowledge resources to research and develop innovative or specialty products, services or solutions.
7. Supply Chain Stability – Marketers trade exclusivity with suppliers in exchange for investment in quality, cost reduction, and priority speed to market; The supplier is able to make long-term commitments at stable levels and pass on the benefits to the marketer.
8. Distributor Partnering – An alliance between manufacturers and distributors to provide access to new markets, domestic or foreign, or strengthen a position in existing markets.
9. Convergence and Fusion - Two or more manufacturers of component parts, technology, content or delivery providers pool their resources to produce a better product, service or solution.
10. Licensing Agreements – Alliances providing license to proprietary products, support services or technology.

Don’t be swayed by promises your partner may not be able to keep. Don’t be sucked into deals offering revenue you may never see. First, define your own partnering goals. Second, find a compatible ally. Before you start negotiating with anyone, conduct the appropriate due diligence to be sure they are actually capable of delivering up their end of the bargain.

Creating Unique Business Alliances: Six Insights To Help Transform Your Company’s Value

Recent news concerning IT industry strategic alliances increasingly trumpet the word “unique” as in ‘unique alliance’ or ‘unique partnership’. Usually these unique arrangements bring together a marketer (either a system integrator or a service provider) with a solid footprint in a niche market and a technology developer or manufacturer with an innovative or proprietary capability.

This type of alliance transfers to the marketer a unique technological edge. The marketer's objective in many such cases is to keep competitors at bay, grow market share or create enough performance value to justify a higher price. For the developer partner, aligning with the marketer provides a significantly extended market reach that simply translates into the sale of an increased number of units as well as a branding leap into greater market visibility.

This deal constitutes an excellent exchange of value for both partners. But as business alliances are not forever, the true assessment of the deal's value must be evaluated over time. In its early days Microsoft supplied DOS in a partnership with IBM's original desktop PC. In time Microsoft’s OS took over the PC market supplying all manufacturers. IBM was forced to back up out of the PC driveway, but it learned the power of partnering brilliantly transforming its business model into the world’s most prolific and successful IT services partnership network builder.

Of the many reasons for initiating a strategic alliance, the most highly-sought after type is one that creates a “unique value proposition” (UVP) — the three golden words so enticing to venture investors throughout the world.

How do you get UVP if you don't produce it?

A strategic alliance can transform nearly any traditional sales and distribution enterprise into a uniquely positioned provider -- all you need are customers! Have your considered this? Transform your company instantly into an unstoppable juggernaut simply by formulating a strategic alliance with one or more suppliers who may add a unique piece to your package, program or end-to-end offerings. Suddenly, your company acquires a UVP. More orders, greater equity value...before you know it, investors come sniffing around.

What are they looking for?

They want to know what you'll do for your next act.

Sure. That first alliance you just made was a successful move. It got attention. And it’s working. But, don't get too busy with that. Save some time for developing additional alliance ideas. You need to look at your company’s future in terms of a total, long-term strategic alliances road plan.

Use these six Partner M questions to develop your own alliance road map:

- What are my core competencies?
- What are my customer assets?
- How bad are the performance gaps as experienced by my customer/user?
- What are the innovative upgrades desired by my customer/user?
- How well are my competitors performing in areas where we are weak?
- Where do we perform better than our competitors?

Now answer this:
Can you locate and negotiate a deal with potential suppliers who can deliver to you a unique product or service that:
(a) your company cannot duplicate more profitably with its core competence;
(b) will be highly valued by your customers;
(c) will fix a problem or enable you to offer customers an optional upgrade;
(d) will strengthen an area where you had been weak; or,
(e) will help insure that you can continue to outperform our competitors?

If your answer is yes to any one or more of these options, then you have the basis for a strategy that would result in higher order volume, as well as a path to added value and increased brand equity.

How do you validate that assumption?

Calculate a scenario assuming the amount of revenue you could generate and profits you would achieve after you’ve found one such partner and have successfully negotiated an alliance. Be sure you have identified and adjusted your projection for any possible downside and cost of implementing the partnership. Next, forecast where you’ll be in three years without this alliance or a comparable strategy.

In addition you should assess the impact of your alliance on the competition with a sober determination of how they may react. Here is where the value of establishing a 'unique alliance' becomes so important. Paradoxically, your alliance's UVP shelf life must be viewed as both temporary and continuous. Any one alliance you enter is temporary. Your strategy must be continuous.

How temporary is your alliance? If any of your competitors can match your partnership with another and duplicate the contribution of your unique ally in fairly short order, your UVP will not last long. You may need to move faster to extend the your UVP shelf life and begin to plan your next UVP partnership. Within this scenario you would need to move faster on the alliance front or find yourself having to play deep catch up if your competitor takes the initiative before you do.

To develop a continuous UVP plan extend your alliance road map by duplicating your forecast calculations to include all potential alliances you foresee into the future. How far can you go using this strategy? If possible, don’t stop until you're able to imagine this process reaching a global scale or an exit strategy. Finally, your alliance plan must weigh alliance costs and risks against the benefits/costs/risks of alternative strategies.

Whether your enterprise takes the role of a marketer or a supplier, you should consider formulating a phased-in partnership plan containing a list of target partner prospects, financial validations, a timeline and undertake a marketing initiative aimed at shaping a receptive and synergistic relationship with partner executives and operational teams. Executing the plan is your next challenge. Don't hesitate to seek help in developing your plan and making it happen.

Dealing With Differences: The Power of Goodwill To Drive Business Alliances

Is the business handshake making a comeback? The answer is a resounding Yes! Amid a global partnering boom the adversarial approach has been relegated to the passenger position. Alliance seeking executives are doing the deals. The value of business goodwill is back in the driver’s seat.

Partnership-based economic goodwill is a worldwide phenomenon. It has even entered the realm of political dialogue. In the past few days, we heard this:

-- “I believe this is a unique time in our history, and I am convinced that great opportunity exists for a global alliance between Japan and the United States, an alliance that will extend beyond our security needs and provide for the prosperity of our citizens...Japan and the United States must do more to integrate our economies. Some will say that there is great risk in doing that; I say there is greater risk in facing a globalized world separately than together.” — U.S. Ambassador to Japan, J. Thomas Schieffer in a speech at the Research Institute of Japan.

-- During his four-day US visit last week, Chinese President Hu Jintao said to Microsoft’s Bill Gates: "You’re the friend of China and I’m the friend of Microsoft." The leaders announced a 1.2 billion dollar Microsoft software purchase by China-owned Lenovo. This week Microsoft announced a 900 million dollar investment in China’s infrastructure.

In a business climate focused on collaboration and reciprocation, competitors can no longer afford to view one another with distant suspicion and enmity. To survive in today’s worldwide growth and innovation game companies must seek alliances based on compatible differences. The first rule of this game is: “we work together, because working together is nearly always mutually advantageous.” Today, it’s not unusual to find one division of a company signing on to an alliance with a direct competitor of another of its divisions.

But within the framework of almost any proposed business alliance, forces will arise whose aim is to undermine the agreement. Invariably, partnership saboteurs are those individuals or groups who foresee the outcome as a losing proposition, personally and/or professionally. Whether their fears are real or imagined, the paradigm of business goodwill and its relationship to brand equity value dictates that their issues be addressed.

A goodwill-based business partnership program stands in sharp contrast to the breakdown in personal, political and social communications we observe all around us. The news media routinely portrays political and social issues with emphasis on incompatible differences. Accusations and acrimony, fears of power or powerlessness, jumping to conclusions and misrepresentation of motives run daily across the global news media. Social, cultural and lifestyle issues are under siege characterized by a focus on separation, frustration and inflexibility. Our ability to freely engage in personal dialogue is under assault by increasingly habitual inattentiveness, rage, envy and rudeness. Unfortunately, defensive views are often a rationale for offensive behavior.

An effective business alliance program must attract people into the proposed alliance’s goodwill framework or it is likely that they will fall back on less productive behaviors. Therefore, to achieve a successful transition in a merger, joint venture or other alliance types, company leaders should identify and address stakeholder resistance using goodwill much as they do in forging an alliance in the first place:

-- Before deciding who stays and who goes provide all involved with the resources they need to get on the “same page.” It is imperative to create an equal playing field before making hard decisions. Stakeholders who know that they were treated fairly will behave in accordance with the goodwill expressed.

-- Flush out potential saboteurs by initiating a dialogue that respects their views and openly recognizing that they may have something to lose. Creating an environment that is sensitive to all possibilities may blunt the need to strike back.

-- Convert potential saboteurs into supporters by acknowledging that their views are welcomed and may be critically important in preventing problems. Oftentimes, what you'll learn will prevent an alliance failure downstream.

How do you deal with people who espouse views that are incompatible with company goals?

Is it possible to enter into a respectful exchange of views with potentially hostile adversaries?

Why should you treat those who may seek to sabotage your intended efforts with the same respect we’d bestow on friends?

What is the best way to deal with differences at any time?

The choice is clear: build and apply goodwill on a daily basis. It is one of your most powerful strategies in preparing for, processing and succeeding in the formation of alliances. Fostering partnership within your company culture should be the foundation for doing so among your business allies.

How do you do it? Here are three practical methods to put goodwill to use in overcoming resistance:

First, acknowledge that it is OK for some of your stakeholders to hold non-negotiable views.

Expressing your goodwill is the most common and effective expression for initiating an exchange of views. It is the same as saying: “I respect you.” Decide whether it is worthwhile to you to reach out across the divide. Reach out to those who hold differing views with an expression of respect and goodwill. Goodwill is your best asset in articulating your needs and goals. Show you mean it by using it to process an exchange of views. Keep in mind that your business goodwill itself may be at stake. Avoiding this step may come to bite you later. Use it to protect it.

Second, expressing your business goodwill is a sign of strength.

Let me be clear. Approaching others with respect is not a sign of compromise or weakness. No matter how it may be characterized in a political framework, an initiative based on a willingness to extend the hand of friendship can never be leveraged to your detriment, nor can it be used to silence your views. It is simply a bridge used to create an interpersonal zone where the exchange of common interests can be presented for the benefit of all concerned. Finding common ground on the basis of mutual respect allows partnerships to begin to take shape — in business, as well as political, social and personal contexts.

Third, leverage your goodwill to shape partnership synergy.

On the other side of the goodwill bridge is mutual understanding, common ground, synergy, productivity and constructive relationships.

How do you get there?

A proactive commitment to goodwill is based on bringing together people with differing views for the sake of the common good – benefiting all stakeholders. The result is synergy — an outcome whose effect is greater than the sum of the separate parts used to achieve it.

Aretha Franklin sang R-E-S-P-E-C-T in 1967 — an anthem for respect and recognition between men and women. At the time her call was a plea. Today, it’s a requirement. Individually and collectively the path of mutual respect promotes goodwill. The result is constructive dialogue aimed at building on compatible differences and reducing incompatible ones.

China Inc. Powered By Strategic Alliances And Branding

The transformation of China into a global corporate partner is the underlying theme of this week’s U.S. visit by Chinese President Hu Jintao. China Inc. has been adopting the practice of strategic alliances and branding techniques in an effort to convert their business model from follower to leader, from contract manufacturer to innovator, from supplier to partner.

Sixty Chinese companies, 47 State owned and the rest privately owned, are set to become global players over the next decade, according to the IBM Institute for Business Value.

Spearheading China Inc.’s outbound initiatives to ally itself with U.S. corporations is its biggest computer manufacturer, the Lenovo Group, buyer of IBM’s personal computer business in 2004. Lenovo entered into a long-term deal with IBM, itself a global alliance network champion. The Lenovo Alliance, based at IBM’s headquarters in New York, taps into its partner’s branding and consulting capabilities. China Inc. also moved into the European market when Chinese TV maker TCL purchased French-based Thomson's television operations in 2004. Other recent China Inc. acquisitions include SAIC's 50.6 per cent stake in South Korea's Ssangyong, CNPC's 4.2 billion dollar purchase of PetroKazakhstan and Haier's unsuccessful bid for Maytag in 2005.

On his way to talks with President Bush, the Chinese leader stopped this week in Seattle to meet with Microsoft and Boeing. The occasion was used to bring attention to the latest Chinese partnership initiatives, particularly newsworthy on this side of the Pacific as they feature money coming back from China to U.S.-based corporations.

This is an important PR move designed to show cooperation in addressing the trade deficit between the two countries and to showcase China Inc.’s seriousness about respect for intellectual property rights.

In conjunction with the Chinese president’s meeting with Bill Gates, Lenovo announced that it intends to spend 1.2 billion dollars to buy and pre-install Microsoft software over the next 12 months. The two companies will jointly promote the use and benefits of authorized Microsoft software products in China, as well as in some 65 countries and regions around the world.

Today President Hu visits Boeing where China is ready to sign a deal to buy 80 jets worth approximately $4 billion.

Other strategic deals recently forged with China include:

– AOL/Time-Warner has partnered with China's number two media company. The broadband content arm of Shanghai Media Group (SMG) will provide material for a Chinese language version of AOL.com aimed at Chinese speakers in the United States. SMG Broadband will provide the actual material to U.S. firm MediaZone, which is a partner in the AOL Chinese language site.

– Coca-Cola and Lenovo will co-sponsor the 2008 Olympics in China.

– American Airlines has signed a strategic technology agreement with Lenovo, to provide Admirals Club members with access to Lenovo PCs.

Gaining resources is one side of the equation. Selling product as a direct marketer is quite another. China will follow "western ways" in meeting this challenge as well. As it increases its presence outside of its own market, China Inc. is quickly learning to go to market with new branding initiatives, such as:

– Lenovo changed its brand name in 2004 from its original moniker Legend. It took the "Le" from Legend, a nod to its heritage, and added "novo," the Latin word for "new," to reflect the spirit of innovation at the core of the company.

– Neusoft, China’s largest software and technology service exporter, also changed its brand image and logo last March, in an attempt to build brand recognition among foreign customers.

– Langchao Group, China’s top software appliance supplier, aims for 30 per cent of its sales to come from overseas markets by 2010. Yesterday the company changed both its name and its brand to Inspur, a combination of the words "inspire" and "spur."

China Inc. is using strategic alliances and branding in its forays into the global market. They also understand that successful branding means more than a new name. Operating on a world-class level requires good corporate governance and partnerships. A positive brand reputation is its goal as the 2008 Beijing Olympics looms on the horizon. China seeks to resolve doubts about its reputation on the economic stage.

China Inc. appears to be serious about IPR as its long-term interests require it to become a viable global business partner. The Microsoft deal aims to assuage concerns over intellectual property rights (IPR). Last week, U.S. Secretary of Commerce Carlos Gutierrez visited Beijing to set the stage for Hu's visit. Speaking at Chongqing University, he said counterfeit products were harming US companies and posing a threat to China's own long-term development.

In response Yan Xiaohong, deputy chief of the National Copyright Administration of China, said rewards of up to 300,000 yuan (US$37,000) are being offered for any tips leading to the exposure of underground DVD operations. He added, since 1996, China has broken up 223 illegal laser disc production lines, including six this year.

China Inc.’s concern is that its internal barriers would not stand in the way or slow down its growth plans on the global front.

China has already overtaken the United States as the world's largest exporter of a broad category of electronic goods including computers, mobile phones and digital cameras, according to the Paris-based Organization for Economic Cooperation and Development. Exports of Chinese information and communications technology goods rose by 46 percent Y2Y to $180 billion in 2004. U.S. exports amounted to $149 billion, 12 percent higher than the previous year. China's trade overbalance in tech products nearly tripled to $31 billion in 2004 from $12 billion in 2003. The country first became a net exporter of such goods just a year before that, recording a 2002 surplus of $3 billion.

China's booming trade surplus in PCs and laptops stood at $45.4 billion last year, the new data showed, and its overall trade in ICT goods has grown an average 38 percent per year since 1996. China also overtook Japan as the main exporter of such goods to the United States last year.

Generic Drugs Partner On Volume; Pharma Pressured Into Innovation Alliances

The growing demand for generic drugs is driving the need for more partnerships in the pharmaceutical business. As branded pharmaceutical patents expire generic drugs increase in volume driving demand for strategic alliances on two fronts:
1. Price driven generic drugmakers composed of smaller companies must stay competitive by consolidating volumes
2. Price pressures from senior patients are pushing the pharmaceutical industry to quicken innovation needed to capture new patents and health solutions for other age groups.

Sigma Global Corporation, a generic drugmaker specializing in chronic conditions, today announced a strategic distribution deal with TOP RX, INC., a pharmceuticals distributor for more than 59 manufacturers of FDA-approved generic drugs. According to Sigma CEO Craig Presnell, "This relationship will allow Sigma Global Corp. to service large healthcare organizations efficiently and cost-effectively." Sigma's market is primarily composed of senior patients.

More than 53 percent of prescriptions in the U.S. are filled with bioequivalent generic drugs, according to the Pharmaceutical Research and Manufacturers of America. An unprecedented number of top-selling drugs are scheduled to go off patent within five years, a potential savings of $23 billion to seniors and the Medicare system, Mark Merritt, president of the Pharmaceutical Care Management Association, (PCMA) told the Washington Post. Commonly used by older people 14 drugs are due to go off patent by 2010, including the cholesterol drugs Zocor and Pravachol, the antidepressant Zoloft and the prostate medication Proscar. The report projects a saving of $13 billion for Medicare if generic competitors reach the market as scheduled.

Pharmaceuticals continue to fight the trend by misespousing the notion that branded products are superior in quality. Some patients and physicians hesitate to prescribe generic medications because of quality concerns. The FDA, however, is responsible for monitoring the bioequivalency of generics. In theory the only differences between the brand-name product and the generics are the price and the name.

Manufacturered by smaller pharmaceutical companies who do not invest in R&D on new drugs allows for the reduced cost of generic medicines. The large pharmaceutical companies shoulder the cost of research and development and the cost of bringing a new drug to market. They cite these high costs as the primary reason for higher prices and the need to recover "innovator" brand costs before the patent expires. Generic manufacturers are able to charge significantly less.

In reaction, pharmaeuticals are focusing on mergers, acquisitions or co-marketing deals to stay ahead of the generic scheme. The result is a boom in new funding for life sciences research by smaller companies. In-house research on diseases is no longer the only target area for these companies. Health, wellness and beautifying products...including drinks and foods...are now part of the complementary medical portfolio pharma investors are exploring. The hot, hot area for partnerships are small biotechnology and nanotechnology companies. These companies are producing new drugs, treatments and wellness formulations for a variety of ages and lifestyles. In most cases, small innovators do not have the sales or marketing capability. The large pharmaceutical companies or their venture surrogates are on the prowl for value by funding early stage developmental synergies. They seek to revamp their traditional pipelines with volumes that work around the generic stream.

Hello. I plan to use this blog to talk about business alliances and partnerships.