Building a Partner Big Idea - Part 1

The PBI is the magic in the box, this is the first in a three part series on building one

If you haven’t already - get the second edition of the MBP here.

The MBP centers on the Partner Big Idea (“PBI”) so it’s time to do a deep dive into how to approach building one. This is a big topic, so I’m breaking it into a three part series. Here’s how it’s going to flow:

Part 1 (this part): Opportunity + Methodology + Execution

Part 2: Economics + Two Line Model (“TLM”)

Part 3: Market Leadership Positioning (“MLP”) + value framework + setting up the right offer

I’m going to try to distill the development of a fictional startup M&A thesis down to its essence, so I’ll be making all kinds of simplifying assumptions and skipping over any number of details. What I want to transmit to you is the “feel” of how these things go, so that you have a head start in handling the situations that present themselves to you.

The scenario we’re going to develop is completely fictional. It’s all made up and any overlap with happenings in the real world is coincidental.

Purple boxes, mapping big ideas

The purple boxes framework has become quite popular!

The funny thing is that it’s not even in the MBP book itself - but is instead a construct that’s come to be on MBP.co (although I’m plotting a third edition of the book that brings it into the MBP proper).

As a reminder on the purple boxes framework:

The PBI landscape is framed by the major forces creating significant opportunities in the market. Inside of this frame is your startup (the red box) and the potential strategic partner (“PSP” - the blue boxes).

It’s very easy to focus these conversations on the red and blue boxes, they have shape, they are bright, they jump out at you.

However the gold is in all the white boxes. There’s only 7 shaded boxes, but there are 93 white ones!

The big idea is the area of the new strategy. It’s a blend of blue and red: purple. It’s a bold new initiative, with your startup at the center of it. 

It’s not about you today, it’s about what you unlock tomorrow

First off, remember the “P” in PBI is “partner.” This isn’t your big idea, this is their big idea (that you’re helping to shape and enhance). The entirety of your efforts today might be perfectly aligned with the PBI, or it might be that only elements of your startup fit into the PBI (in reality  it’s more often the latter). What matters is that there’s a large purple area, and that your startup (in whatever form it takes) is critical to unlocking it. Ultimately you want your value tied to the future value of the purple boxes, not the NPV of the red one.

Let’s build a PBI

BigResearch, a giant, diversified, research firm is starting to see how AI will transform its industry. They are evaluating a number of potential internal development initiatives, as well as exploring potential acquisitions. These are going to be big bets, so they are proceeding carefully. Through a mutual connection they are introduced to DocT3c.

DocT3c is developing advanced AI in the natural language processing (“NLP”) arena. They have a strong team that’s a blend of industry pros and leading academics. They’ve raised $25M and are excited about the opportunities in their field. They started DocT3c to press forward into innovative areas of interest, but they aren’t opposed to joining forces with another market player if that will enable them to maximize their impact and enable them to work on increasingly cool stuff.

DocT3c’s current offering is advanced document summarization and interpretation provided directly to end users. They chose to go after the real estate market as they felt it was ripe for this kind of automation and the cost to acquire customers was relatively low (when compared to other sectors they were considering).

This is what DocT3c’s website  looks like:

BigResearch tackles complex research projects for large enterprise customers.  This is what their website looks like:

BigResearch’s top markets are:

1. Legal

2. Healthcare

3. Government

4. Finance

5. Education

Real estate isn’t even in the top 10.

BigResearch’s has some significant concerns as it relates to AI initiatives (and the use of technology more generally in their services). They have to make sure nothing they do upsets their on-going business. They are OK moving carefully, even if it means moving a bit more slowly. Their primary concerns are:

1. Maintaining their premium brand and pricing

2. Ensuring quality and certainty

3. Maintaining process efficiency (there’s no room for retooling or down time)

Starting the conversation the right way

After a very pleasant introductory phone call with the head of strategy at BigResearch, DocT3c’s CEO realizes a few things about BigResearch: first: they have zero interest in the real estate market; second: they are nowhere close to being ready to deploy an advanced summarization and insight generation solution directly to their clients; and third: the stuff that BigResearch actually wants to do is super easy and would be absolute layup for the DocT3c team - in fact the guts of DocT3c’s platform already does important parts of what BigResearch is looking to do.

There’s a giant opportunity here. An opportunity to revolutionize an industry filled with dinosaurs. But how to approach this conversion? The CEO realizes that if he goes into their next meeting with a discussion of real estate, direct to consumer, subscription revenue, conversion rates, and all the things his investors love, he’s going to take things in the completely wrong direction.

He doesn’t know much about M&A, but he knows there has to be a way to solve this problem. Fortunately another founder friend of his recommends he read this under-the-radar book, Magic Box Paradigm. She says it’ll get him oriented the right way to create a powerful PBI, whatever that is.

M&A hadn’t been top of mind, but it also hadn’t been completely out of mind. This is a massive opportunity and way to put DocT3c’s team on a much larger stage. If it isn’t M&A, there’s also a chance that this could turn into a giant commercial contract, or even an investment. The juice is worth the squeeze to see if there’s something actionable with BigResearch. 

Market forces and PSP priorities

Job one is understanding the major market forces shaping BigResearch’s strategic thinking, and then inside of those market forces to get a better understanding of what they see as their current priorities. He sets up a call with the BigResearch execs. He knows they’ll expect to learn about him on the call, and won’t just open right up about themselves out of the gate. So he prepares a short presentation on the areas of focus for the DocT3c team, these are:

• Advanced AI for high volume source document parsing and categorization

• Deep technology for understanding language meaning and intent

• Multipoint cross-reference to ensure accuracy

• Models for applying priorities and business rules to document summarization and interpretation

As hoped, the BigResearch exec’s get excited by what they are hearing. And start to share their view of the world and what they see as their top priorities. The major market forces they see shaping the next generation of services are:

Technology: AI is unlocking almost magical new capabilities

Scale: there’s an explosion of new inputs and sources

Economy: many of their clients are victims of disruption themselves - bringing downward price pressure

Targeting: demand is changing and moving from large and broad projects to smaller highly targeted ones 

The PBI landscape looks like this:

In response to these market forces BigResearch articulates a set of key priorities:

1. Input processing and harmonization (in particular deduplication of sources)

2. Tools for increasing research analyst productivity

3. Quality assurance (in particular fact checking)

4. Next generation summarization and advanced insight creation

#4 is what DocT3c does today, but it’s clear that BigResearch isn’t ready to roll this kind of offering out to its clients. And in all honesty, DocT3c’s offering is still pretty early. The CEO knows they had to make numerous tweaks for it to work in the real estate market specifically, tweaks that in some ways made it actually less well suited to other markets more generally. The good news is that priories #1 and #3 are core elements of DocT3c’s platform, and priority #2 is so broad that there are any number of ways DocT3c could help BigResearch there.

Opportunity then Methodology then Execution then Economics

The foundation of the PBI is a shared view of the Opportunity. BigResearch wants to establish itself as the first tech-enabled, enterprise-focused, research firm. They want to infuse their services with AI to enhance productivity, quality, and scale. In doing so they believe they can expand the market while establishing themselves as the preeminent player in the arena. By extension they want to enhance their position in the capital markets by articulating a narrative featuring technical innovation and a high-value, long-range, offering strategy.

As the conversation between BigResearch and DocT3c develops BigReasearch’s priorities come into clearer focus - with the creation of tools to increase research productivity becoming the overarching objective, supported by input processing and harmonization, and ultimately quality assurance. Next generation summarization and advanced insight is very exciting to BigResearch, but they see that as a future capability, something to put on the long-range product roadmap.

The Opportunity is to establish BigResearch as the first tech-enabled, enterprise-focused, research firm. The elements of the strategy looks like:

This Opportunity thesis aligns with the market forces BigResearch has articulated. It also accounts for their primary concerns. It also aligns BigResearch’s current business model and with DocT3c’s core technology

It’s starting to look like the makings of a solid PBI.

Let’s translate this to our purple boxes framework and then dive into Methodology and Execution. Overlaying this all on to the purple boxes framework we we get something like (not a precise rendering - but a tool for thinking purposes):