Assets / Operations
Why Strategic Partnerships Are the Key to Future Business Success
In a world in which the Internet in particular has allowed much wider connection to be made between people and organizations, talk about finding partnerships or alliances has increased dramatically. Some of these are loose, short-lived and transactional to meet an immediate need perhaps. Others, however, are more structured, longer lasting and involve two or more parties working together again and again for their mutual gain or profit. This latter category, or what are often called strategic partnerships, or strategic alliances, are the focus of this article and we’ll explore briefly how they are best sought out, set up and maintained.
If two individuals form a partnership (such as in a law or accounting firm, for example, where it is common) any partnership is typically established in a very formal way with a written agreement in which the “rules of engagement” are clearly specified. This is a relatively straightforward arrangement to organize because:
- The partners essentially perform the same kind of work (e.g. a type of professional service is rendered)
- The input and outputs of expected work are clear (e.g. maximum billable hours for the services offered)
- The market is large and accessible (and typically has lots of competition)
Sadly, perhaps, none of the above may apply in a larger commercial enterprise and particularly one in which many products or services are offered. This is typically because:
- Different kinds of work inhibit the capacity to readily find a partner (their mix of work is not the same)
- Inputs to and outputs from any possible partnership are often difficult to define and complex to assess
- The market for particular products/services is variable in size and often only partly accessible
In other words, the larger the business or the more different kind of products or services it provides, the more complicated becomes the capacity to find any kind of market partnership/alliance, let alone a so-called strategic one. It may therefore be tempting not to even try. However, despite the difficulties and complexity, partnerships still offer significant benefits, if they can be found. These include chances to:
- Grow/dominate particular market segments/niches
- Reach new/more diverse customers
- Improve the sales pipeline/conversion
- Make the supply chain more effective
- Improve asset utilization/efficiency
- Leverage new technology
- Find new synergies between people
- Share knowledge
- Improve cash flow
- Leverage capital
Just to mention a few.
With such an impressive list of benefits, instead of operating in isolation, every organization can start to think about strategic partnerships in positive ways and to do this by taking one of two approaches (depending on the many local factors that will prevail for each business)
- They can look for strategic partners in specific areas. For example, a business may look for strategic partners in marketing, in distribution, in technology or even in a whole supply chain. In this approach, it is recognized that the partner company has a skill or competency which is stronger in a given area. The strategic nature of the alliance here is therefore to give scope or leverage in the more competent realm to one of the partners and reciprocally give that partner entity market reach they do not currently have.
- They can look at both competitors as potential partners and at other organizations which operate in similar but adjunct spaces in the market. In this approach, it is recognized that the partner company will be able to mirror many of the functional approaches made but will increase the breadth or depth of product or service offerings to customers or extend the geographic reach of the alliance entity, for example.
Whichever of the two approaches above is taken, partnerships are not easy to establish, as mutual distrust and suspicion about potential alliance motives are high at the early stages of discussion. A careful and long term attitude therefore needs to be adopted and the following steps ideally taken in the order in which these are presented.
- Bring together as many of the key stakeholders of both firms as possible to meet on a face to face basis at the earliest possible stage. This will allow overall ambitions to be shared and possible advantages and disadvantages tabled at the outset (and put fully into the open).
- Work towards a very clear description of the overall goal/objective of the alliance or partnership (in strategic terms and in tangible sub-steps) including the fiscal goals and expected returns expected (in whatever time frame is appropriate in the circumstances).
- Clearly establish measures of success for the strategic partnership. This needs to be done for both parties in the relationship and ways to both track these metrics and report on them need to be put in place so that they can be discussed (and adjustments made as necessary).
- Carefully determine what context knowledge needs to be shared and with whom on both sides of the partnership so that people properly understand what information needs to be transferred and then shared on an ongoing basis going forwards. This is particularly important around commercial objectives for the strategic alliance.
- Find or appoint partnership “stewards” in both partner organizations who can both steer the efforts to work together and quickly get the right people together to resolve difficulties (large and small) as they arise.
- Look for early partnership “victories” which help to show people in both organizations the value of the alliance. Even small “wins” can be used to promote the partnering benefits and get teams to start to work together more fully and seamlessly.