Making One Plus One Equal Three
Finding a nationwide distribution network for its innovative medical imaging product was a daunting proposition for tiny, San Diego-based Digivision.
Founded seven years ago by a group of scientists at the UC San Diego, Digivision needed a way to reach potential customers in the vast U.S. health-care market. The company solved its distribution problem shortly after someone suggested that company executives contact Lared Group, a Century City consulting firm specializing in “strategic partnering.”
Strategic partnering means pairing companies, primarily small ones with bigger ones, to benefit both, according to Larraine Segil. Segil and her partner, management consultant Emilio Fontana, make business-to-business connections using information gathered by a network of colleagues based in Europe, Australia and the United Kingdom.
“We like to make one plus one equal three,” Fontana said.
To solve Digivision’s lack of distribution, Lared partnered it with Medrad, a Pittsburgh-based medical products firm with a national sales and service network. Both companies said it appears to be a good fit. They both sell products designed to enhance the effectiveness and safety of X-ray machines, but the products do not compete with each other. They are exploring ways to cooperate on new products.
“We felt we had quite a bit in common with Medrad,” said John Cambon, Digivision’s president. “For us, as a small, start-up company, it was difficult to put together a full-fledged distribution channel to the health care industry.”
Digivision, with annual sales of about $3 million, has sold about 400 machines ranging in price from $20,000 to $35,000. Medrad is Digivision’s primary distribution channel. “So far, it’s been a mutually beneficial agreement,” Cambon said. “We are now profitable because of this.”
Medrad President Thomas Witmer said he met Segil through an international networking group she created for executives of technical companies. He agreed to meet Cambon at her suggestion.
“Beyond that, we had a number of negotiations, we saw their product in San Diego and at trade shows,” Witmer said. “It’s a very good product, and we are putting a lot of money and effort behind it.”
Witmer said Digivision began shipping its machines to Medrad in March. Medrad, which is privately owned, expects sales to reach $50 million in 1989. Its goal is to sell 150 to 200 Digivision units this year.
Segil said the Digivision-Medrad relationship is a good example of a successful strategic partnership. About half of their business involves international partnerships that may be trickier due to cultural differences. For example, Segil said, European executives are much more formal and react poorly to unsolicited sales pitches as a way to make contact.
Once a business owner learns the proper business etiquette, foreign opportunities abound. Yet, Segil said, many small-business owners wrongly believe that they have to become a powerful multinational corporation before entering the foreign market. Just the opposite is true, she said. Any company with a strong, established product and good management has the potential for expanding its sales abroad.
And now is the perfect time to expand your company’s horizons, she said, especially in Europe--which is working toward economic unification in 1992. Segil said most small-business owners don’t realize that Europe’s 320 million people are all potential buyers of U.S. products.
“The worst thing to do is to wait and see what is going to happen,” said Segil, a South African who has owned several businesses ranging from a medical clinic to an aerospace company.
“When you deal on an international level, the existence of a product with a track record is most important,” Segil said. Before considering a company for a strategic partnership, the Lared Group spends a great deal of time determining if the firm has a tested product or service and competent management.
“The thing that triggers our attention is the executives’ ability to grasp the mangement challenges ahead,” said Segil.
Fontana said it is much easier to help an American firm tap into the European market than the other way around, because the United States is so large and has so many distribution channels to deal with.
He said Lared relies not only on personal business contacts and information collected by its international partners, but has also created a detailed computerized database. In exchange for its services, Lared receives a consulting fee and a percentage of the value of each deal it closes.
Hispanic Roundtable
“Hispana Leadership: In Step With the Future,” is the theme of the Third National Roundtable for Hispanic Business & Corporate Women. The session is scheduled for June 22-24 at the Biltmore in downtown Los Angeles.
The session includes a job fair, exhibits, a leadership awards banquet and various workshops on subjects of interest to Latinas in business. Registration fees range from $100 to $350 per person. For information and registration materials, write to the National Network of Hispanic Women, 1989 Roundtable, 611 Wilshire Blvd., Suite 400, Los Angeles 90017.
STRATEGIC PARTNERING
Lared Group advises business owners to ask themselves these questions to determine whether they might benefit from a strategic partner:
Do you have a tested product or service that is selling well?
Do customers in other countries have a need for your product?
Does your product have a track record of steady growth?
Is your management team ready to handle increased business?
Does your facility have space for new product lines or increased manufacturing?
Are your employees well trained and enthusiastic about meeting the challenges of new business?
Do you feel your horizons are limited and you need to find new markets for your products?
Is your company stable financially?
Can you afford to pay the consulting fees and travel expenses necessary to keep up a strategic partnership?
Do you have a vision of your company’s future?
