“Alone we can do so little; together we can do so much. – Helen Keller. While Keller wasn’t talking business, his wisdom applies. No company can source, build, market, sell and distribute independently. Even a company as large as Amazon relies on a partnership with UPS for shipping – for now, at least! And small businesses need even more partnerships to become and stay innovative and competitive.
What makes a partnership “strategic”?
There are a myriad of methods to define a strategic partnership. But there are key high-level principles: The partnership should bring benefits to both parties. It must be crucial or key to success. And that must be important for the highest levels of leadership.
If a company buys products from another, it is not strategic, regardless of its size: it is a relationship with a seller or a supplier. These can also be business critical, but will be maintained, managed and reported in very different ways. For example: when a bank hires a company to administer payroll, it is a supplier relationship. It needs to be well managed, but the organization probably isn’t looking for collaboration and innovation. But when a bank partners with a firm that specializes in cybersecurity, it’s more likely a strategic partnership, in which the two firms work together to solve unique challenges and potentially create products together to address risks. fraud and bank security, reduce losses and increase profitability. .
What makes a strategic partnership successful?
- Trust – To build a successful partnership, trust must be established between the two parties. Start by being transparent about your business and what you need and want in the relationship. Many organizations are reluctant to share their goals and ambitions, seeing them as their strategic “secret sauce”. But it’s nearly impossible to create a win-win relationship if neither party knows their partner’s definition of success. If necessary, non-disclosure agreements (NDAs) can mitigate risk and encourage open sharing of information.
- Co-create – Depending on the objective of your strategic partnership, you can co-create products, marketing plans, strategies, etc. But regardless of the details, you need to collaborate on your common goals. It starts with joint planning and strategy sessions so you’re both on the same page and looking for ways to develop, grow and innovate together. In some cases, this means establishing revenue sharing agreements to define who gets whose share, and/or requiring NDAs. Co-creation processes allow you to take full advantage of your partners.
For example: A company creating information products and possessing a certain type of data can partner with another company offering a set of complementary data. Together, they can combine their data to co-create a richer, more informative, and more profitable product. A revenue sharing agreement ensures that they both derive value from the combined product.
- Give and receive – If you have established trust and aligned your goals, you should now know your partner’s priorities relative to yours. Give what is most important to the partner so that you can negotiate more for your business on what is crucial for you. You don’t have to “win” all negotiations – only those that provide you with what you need.
Note that it is often easy to focus only on finances. Don’t fall into this trap – encourage open conversations to uncover opportunities for finesse or compromise. Example: Two Fortune 100 financial services companies recently signed a multi-million dollar, multi-year deal. But as they negotiated, they found that not all elements were equally important to them. Each company valued topics such as reputation and media coverage, testing new innovations, and speed to market differently, creating opportunities to negotiate more than just financial terms.
- No finger pointing – When there is a heightened sense of urgency or a new challenge arises, or someone just makes a mistake and things go wrong, resist the urge to point fingers. You can undermine the trust you built in point 1 by pointing fingers at your partner with blame or reacting defensively if they point fingers at you. Establish a method of communication that allows for open and frank discussions about what went wrong and how to avoid repeating mistakes. In an open conversation, you may be able to negotiate a “mea culpa” that sweetens the relationship – or could even benefit your organization in the long run if your partner feels they’ve been treated fairly.
One more key step – Engagement of the best leaders
While some of these ideas may seem basic, it’s surprising how many organizations ignore them at their peril. In fact, Harvard Business Review states that 60-70% of strategic partnerships fail. Although there are multiple reasons, senior management commitment is one of the most critical success factors.
Here are some factors that lead to full support:
- Centralized steering – The management of strategic partnerships must be centralized to remain neutral. Setting up business unit-specific partnerships or partnership teams makes the above four principles difficult, if not impossible. Your organization can undermine its ability to “give and take” by offering slightly different, or even competing, requirements in different areas. Likewise, if you’re managing the relationship, insist that communications with partners be centralized between you and your team. Otherwise, others can blur communication, trust, or even goals.
- Management support – To successfully build and leverage a strategic partnership, you need support from the highest levels of leadership. And expect to be accountable to them! They must be aligned with the above principles and endorse the strategy.
- Dashboard – To ensure transparency and support, align with stakeholders and management on your definition of success. Create a dashboard to update them constantly, taking them with you on the strategic partnership journey.
- Monitor continuously – Partnerships evolve over time. Some, initially considered strategic, may turn out not to be, or vice versa. And a supplier can evolve into a higher-level strategic partner. Continually remind yourself and your leaders what a strategic partnership looks like for your organization. And challenge your assumptions about who is and isn’t included.
It’s worth it
Although strategic partnerships are not for the faint of heart, they are worth it. Strike this: if organizations want to develop, grow and prosper, they must be continued. Done well, the journey leads to greater success for all parties.
Written by Cristobel von Walstrom.
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