Case One: Eggs in a basket
Background:
One of our partners, a healthcare service provider, had the rare opportunity to be the exclusive partner of three of the top 10 health providers in the US, and the largest healthcare provider in the target country. The deal was extravagant, as the other parties were willing to commit tens of millions into this partnership. Our partner responded to this goodwill by devoting all its effort into this project, and after about a year of preparation, they launched. However, sales were not coming through because we did not have the sign-off of the individual clinicians on the ground level. We had an exclusive share to a large market with a significant barrier to entry, and yet we were not able to capitalize on it.
LGB is hands-off, but when our partners need help, we will try to support them. We expect nothing in return, because walking shoulder to shoulder, from start to finish, is a value that we committed to.
Interaction:
General:
Fortunately, our straightforward nature allows us to get to the heart of problems quickly. We also establish open dialogues by following our principle to never rebuke mistakes, and to reward recognition of errors and growth.
To all our partners, we offer regular light checkups, optional specific checkups - for when our partners recognize a problem and only need us to give them a push, and consultations - for when our partners request a more direct intervention. In this case, the situation called for a consultation.
This Case:
It is important to recognize the uncertainty that our partners face. One cannot disrupt a market where everything is clearly mapped out. This is a business of making mistakes and learning from them. So we approached every project with this understanding. Additionally, we believe our partners are their own harshest critics, so that in our interactions, the carrot is much more fruitful than the stick.
There are infinite reasons why something turns out poorly, so we want to avoid lingering on counter-factuals and mistakes. We identified three main strategic pain points:
partnership relied on a pure revenue share model;
partnership was with a government subsidized company;
partnership had no negotiation power because little effort has been invested in alternatives.
Once we identified the major weaknesses, we focused on solution and prevention.
Value Creation:
We were there mostly to offer emotional support and hold up a mirror to help them see more clearly. Our partner knew it had made an enormous error, and once the problems were enumerated, the solution was clear. We concluded the consultation by reaffirming our commitment and realigning our incentives by offering negotiation options for tranche financing at milestones.
Result:
There are two major lessons from this consultation: one, that publicly subsidized companies do not share the same P/L incentives as private companies, and if you choose to work with them, avoiding committing to a purely revenue share model; two, that relying on a single partner turns an ally into a gatekeeper at every step of the partnership, regardless of how attractive the deal is. These seem obvious to some, and sometimes, huge problems really are simple, but reality is often nuanced and uncertain.
Our partner has since reiterated itself, shedding its shell. They started over from step one, but this time, with a properly laid foundation.
Our partner is working more closely together with us and considering a proposal that would double our existing stake.
