In the far future, I have three guiding principles to what I will not do in building the next company. One of the three principles is try not to partner anyone as much as possible, whether the partner is a start-up or a large multi-national company. In a simple business perspective, the principle underlies one central theme: distribution.
“If you control your distribution, you control your image.”
– Bernard Arnault, President, LVMH
Distribution in a business has many meanings to different people. For some people, it means strategic partnerships between two parties and one of them leverage on the other to get more customers or traction. To others, it means the different channels where your product can be distributed. From any start-up to large multi-national company, acquiring distribution is pivotal to its success, because if you are in a business whose revenues are totally dependent on volume, the more distribution you have, the better it gets.
From what I have learned in my last experience, trying to forge strategic partnerships with too many big and small companies can scale but also destroy a company. Here’s a dilemma for start-ups. How do you grow fast and scale? The natural thinking is that because you are small, go and be a parasite and leech on a larger organism and leveraging on the organism’s strength to feed and protect yourself. It’s a Darwinian survival instinct. That school of thought will work if the ethos of an ecosystem in the region is centered on collaboration and win-win thinking. The unfortunate problem is that if you are locked in an ecosystem (and it’s likely in Asia) which either of the pre-requisites do not exist, even you have distribution with no revenues, you are toasted. To get the partnership with larger companies, your problem is that they are dragging your feet and wasting your time and resources such that you run short of holding power and implode in your own.
Of course, there are companies who succeed based on leverage on partnerships to build distribution. Most well-known among them is Microsoft, who distribute the Windows operating system through partnerships with original equipment manufacturers (OEMs). Another example is Admob, building a big mobile advertising network by being dependent on third party developers. I realize why I can never be a fan of Microsoft because I can never get the end to end integration or any form of control over user experience and always have to rely on some pieces that render the structure imperfect.
I remained true to why I liked companies like Apple and Amazon and used their products much more than Microsoft. The distinction is the end to end control and reduce the dependencies as much as possible. It’s in my last experience that I prefer to have end to end control to everything such that whatever product that is built so that we can ensure the best customer experience. In that vein, one of the mistakes which I believe that I should take responsibility for is not to agree with my team that we should build our own mobile app in all platforms. If we had built and controlled our own distribution at the same time which we distribute our API out to 3rd parties, we would not have collapsed. I took responsibility in agreeing to a logic that 3rd party developers or larger partnerships can build scale quicker (which is correct on paper but failed on practice).
If we have that control in the first place, we don’t need to depend on partnerships to bring in customers. For the next time, we want to approach our customers direct. I prefer to base the company’s success to how many customers I touch each day. It reduces your company to one objective: build something that people want and generate scale and revenue from there even if it takes more resources and slower time to build. That philosophy is vital to Apple’s success which came out from Walter Isaacson’s book “Steve Jobs” is what I truly want to build a future company upon. That philosophy on end to end control naturally extends to my perspective towards distribution.
To me: If you control your distribution, you control your brand.