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You Need a Business Prenup: Exit Strategy

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Fast paced change means that nothing lasts. Not solutions or products, not business relations or partnerships, not requirements, not even competence. The ‘life cycle’ of just about everything is shorter than ever – and shrinking. Even businesses have shorter lifespan than they used to. There is a good reason for that: They fail to adjust.

I’ve been advising businesses on strategy and technology issues for more than 20 years and have rarely seen this reality being acted upon. Acknowledged, yes – mindset and action, no.

Business practices in general remain the same – contracts, projects, plans, leases, purchases, RFPs, budgets. Most of them look and work like they did 10 years ago. 

Many businesses hire purchasing specialists to ensure they ‘do the right thing’. It doesn’t help – because it doesn’t change or remove the root cause. They don’t seem to fathom that we’ve moved from a product economy to a service economy. In business (actually in general) we’re purchasing more services, less products. So we need to manage relations, not pricelists and delivery schedules. 

Most medium and large size businesses still have this team of experts managing RFPs created decennias ago and mostly out of touch with reality, actually destructive. Their goal is to minimize contention, eliminate surprises and unforeseen changes and do so by careful attention to details – most of which were out of date before the document was finished. The obvious result is ‘building for history’ rather than ‘building for the future’. Literally prohibiting innovation and assuming that ‘we’ – the customer – always know better than they – the vendor/partner/… The exact opposite of what we should strive for: Taking advantage of our partners competency, assuming they have more expertise in their field or discipline than we do. That’s why we’re talking to them in the first place, isn’t it?

Nowhere is this situation more obvious and more grave than with data. Acknowledged or not, data is the foundation of every business, from independent contractors to mega-corporations. But who owns the data? The business of course. But not so fast.

Real data ownership has been a problem since the beginning of the digital age more than 40 years ago. Businesses acquire digital solutions to manage and collect data, but forget to specify data ownership. ‘It’s so obvious we don’t even think about it’ is the general response. And it doesn’t pop up as a problem until the business need a change. New solutions, new uses, new business, new opportunities. Suddenly they discover that their data aren’t really theirs after all. The fine print in some old contract may specify procedures for extracting data from the system, but not the prices. So – even if the business owns its data, getting access to them in a new context is – well, hard – as in ‘expensive’ if not impossible. SAP, Microsoft, Oracle and thousands of smaller players in the field have held businesses’ data for ransom for decennia.

In the 80s, maybe 90s, it was assumed to be a necessary evil. So implicit it wasn’t even considered a problem. It was the normal, there was no alternative. Today we know better. We know that access restrictions imposed by ERP, CRM and other systems big or small, are purposely created, ‘ransomware’ more than anything else. Never necessary, created for the ‘protection’ of the vendor, not the customer. We also know that our data will be needed in many contexts outside of any specific system and that locking them in is bad for business. And finally we know that things change fast and that the systems, services, solutions we use today will be replaced tomorrow. Systems and tools come and go, the data stays – and represent the real value. Our value.

It’s obvious that the old ways, focus on systems, services, solutions and contracts instead of data, were wrong. That’s history. Now we know better. What do we do?

First of all we acknowledge reality. The value of data, the ownership of data and the fluidity of everything else. It’s a big change, but it’s also an easy change because all the elements are so obvious. 

The new mindset makes the next step obvious: Plan for dynamism. Short term contracts with options and exit strategies, clear ownerships, simple regimes for upscaling and downscaling, open interfaces etc. Making this change – think of it as a business prenup strategy – has an interesting effect in addition to the obvious ‘accommodating for change’: It keeps partners on their toes – all the time, not just when a contract is coming up for renewal.

Bottom line: Don’t enter unless you know how to get out. Fast if necessary.

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