Partner Instead of Compete
Scale specialist expertise through incumbents that already own distribution
- Difficulty
- Advanced
- Time to result
- ~months to results
- Steps
- 6
- Confidence
- 97%
Instead of competing head-on with incumbents that possess vastly greater capital, distribution, and customer reach, isolate the narrow capability where a specialist is demonstrably superior. Approach incumbents with a complementary proposition: they retain their broad customer relationship while the specialist handles the difficult niche. The specialist contributes expertise, proprietary data, and focused service; the incumbent supplies trusted distribution and customer volume. Begin with an anchor partner, prove that the arrangement improves economics or customer outcomes, and then repeat it across the industry. Scale comes from becoming the preferred specialist behind multiple large providers, not from recreating every part of their businesses. The defensibility depends on continually deepening the expertise and data that make partnership more attractive than internal replication.
Origin
After launching Hagerty's club model, McKeel Hagerty recognized that most collector cars remained insured by giant general insurers. Rather than challenge those firms directly, Hagerty offered to handle the small specialty category better. Allstate became an early anchor partner, followed by partnerships across much of the insurance industry.
Core principles
- 01Do one narrow job markedly better than generalists
- 02Treat incumbent scale as distribution rather than only competition
- 03Bring expertise, customer knowledge, and data the partner lacks
- 04Make the partnership improve the incumbent's existing customer relationship
- 05Prove value with one major partner before expanding across the market
How to run it
- 1
Choose one narrow advantage
Specify the small domain where your knowledge, data, or execution clearly exceeds that of broad incumbents. Keep the claim concrete enough to test.
Pro tip A capability that looks minor to an incumbent can still represent a large market for a specialist.
Watch out Do not pitch broad superiority against a company with far greater resources.
- 2
Map incumbent incentives
Identify incumbents that already serve your target customers and determine where the niche creates cost, risk, or weak service for them. Frame your offer around improving their existing business.
Pro tip Look for categories incumbents must support but do not consider strategically central.
Watch out A proposal that threatens the partner's primary customer ownership will face resistance.
- 3
Package complementary assets
Demonstrate the expertise, customer understanding, operational capability, and proprietary data you provide. Explain why partnering is faster or safer than building internally.
Pro tip Use a difficult classification or valuation example to make the expertise gap tangible.
Watch out Claims of specialization without evidence will not overcome the perceived risk of using a small vendor.
- 4
Land an anchor partner
Offer a bounded program that lets one major incumbent test the proposition. Define customer, economic, and operational outcomes before launch.
Pro tip A credible introduction to a senior decision-maker can accelerate a category-level partnership.
Watch out Do not accept a pilot whose scope is too small to demonstrate meaningful value.
- 5
Prove and replicate
Measure performance, deepen the successful program, and use the evidence to approach comparable companies. Standardize the underlying capability while accommodating partner-specific integration.
Pro tip Long-term growth with the first partner is stronger proof than a one-time launch announcement.
Watch out Avoid excessive customization that turns every new partnership into a separate business.
- 6
Deepen the specialist moat
Use aggregated activity to improve your data, pricing, technology, and customer knowledge. Make the specialist capability increasingly difficult for any one incumbent to reproduce.
Pro tip Cross-partner learning can strengthen the neutral specialist while respecting data boundaries.
Watch out Never compromise partner confidentiality to manufacture a data advantage.
In the wild
Hagerty proposed handling collector vehicles for insurers that already covered customers' homes and daily automobiles. It contributed specialized underwriting, vehicle knowledge, and valuation data while partners retained their broad relationships. An early Allstate program continued growing, and the approach expanded across major insurers.
→ Hagerty accessed incumbent distribution at scale while becoming the category specialist rather than another general insurer.
A small fintech with superior verification for one unusual asset class could integrate with banks instead of launching a full competing bank. The banks would retain accounts and distribution while the fintech performed the specialized checks through a standardized service.
→ The specialist reaches institutional volume without rebuilding regulated banking infrastructure.
Common mistakes
Competing across the whole stack
Trying to duplicate an incumbent's distribution, capital, and broad product set wastes the specialist's limited resources.
Offering no defensible advantage
A partnership will not last if the incumbent can reproduce the specialist's contribution cheaply and quickly.
Ignoring the partner's customer model
The offer should enhance the incumbent's relationship rather than force it to surrender strategically important ownership.
Is it for you?
Best for
It is best for specialists that possess expertise, data, technology, or service quality large distributors lack in one narrow domain.
Not ideal for
It is not ideal when incumbents can easily replicate the capability or when the specialist cannot maintain a neutral role across partners.
From the transcript
“what if we just partnered with these companies rather than competing against them,”
“I think I can make you better at this one tiny little thing if you just give us a chance.”
“if you're small, it's impossible to compete against a huge company. But if you partner with them, it changes the game.”
From the episode
Insuring Rare and Collectible Cars and Boats with McKeel Hagerty