“Alone we can do so little; together we can do so much.” – Helen Keller. While Keller wasn’t talking about business, her wisdom applies. No single company can source, build, market, sell, and distribute all independently. Even a company as large as Amazon relies on a partnership with UPS for shipping – for now, at least! And smaller companies need even more partnerships to become and remain innovative and competitive.
What Makes a Partnership “Strategic”?
There are myriad methods to define a strategic partnership. But there are some high-level essential principles: The partnership must bring benefits to both parties. It must be crucial or key to success. And it must be important to the highest levels of leadership.
If one company buys products from another, that’s not strategic no matter the size – it’s a vendor or supplier relationship. Those can also be crucial for the business, but will be maintained, managed, and reported very differently. To illustrate: When a bank engages a firm to administer payroll, that’s a supplier relationship. It must be managed well, but the organization most likely isn’t looking for collaboration and innovation. But when a bank partners with a company specializing in cybersecurity, it’s more likely to be a strategic partnership, in which the two companies collaborate to solve unique challenges and potentially create products together to address the bank’s fraud and security risks, reducing losses and driving profitability.
What Makes a Strategic Partnership Successful?
- Trust – To build a successful partnership, trust has to be established between the two parties. Begin by being transparent about your company and what you need and want in the relationship. Many organizations are averse to sharing their goals and ambitions, viewing them as their strategic “secret sauce.” But it’s near-impossible to create a win-win relationship if neither side knows their partner’s definition of success. If needed, non-disclosure agreements (NDAs) can mitigate risk and encourage open sharing of information.
- Co-Create – Depending on the purpose of your strategic partnership, you may be co-creating products, marketing plans, strategies, or the like. But regardless of the specifics, you need to collaborate on your shared goals. This starts with joint planning and strategic sessions so you’re on the same page and both looking for ways to expand, grow, and innovate together. In some cases, this means establishing revenue-sharing agreements to define whose share is whose, and / or requiring NDAs. Co-creation processes allow you to fully leverage your partners.
For example: A company building information products and possessing a certain type of data can partner with another company offering a complementary data set. Together, they can combine their data to co-create a richer, more informative and profitable product. A revenue-sharing agreement ensures they both derive value from the combined product.
- Give & Take – If you’ve established trust and aligned your objectives, you should now know your partner’s priorities vs. yours. Give on what’s more important to the partner so you can negotiate more for your company on what’s crucial to you. You don’t have to “win” every negotiation – just the ones that provide you with what you need.
Note that it’s often easy to focus solely on financials. Don’t fall into that trap – encourage open conversations to uncover opportunities to finesse or compromise. Example: Two Fortune 100 financial services companies recently signed a multimillion-dollar, multi-year agreement. But as they negotiated, they found that not all elements were of equal importance to them. Each firm valued topics such as reputation & media coverage, testing new innovations, and speed to market differently, creating opportunities to negotiate more than just financial terms.
- No Finger-Pointing – When there’s an increased sense of urgency or a new challenge arises, or if someone simply makes a mistake and things go awry, resist the urge to point fingers. You can undermine the trust you built in #1 by pointing at your partner with blame or reacting defensively if they point at you. Establish a method of communication that allows open, frank discussions about what went wrong and how to avoid repeat mistakes. In an open conversation, it’s possible you can negotiate a “mea culpa” that smooths relations – or could even benefit your organization in the long run if your partner feels they were treated fairly.
One More Key Step – Top Leadership Engagement
While some of these ideas may seem basic, it’s surprising how many organizations ignore them to their peril. In fact, Harvard Business Review states 60 to 70 percent of strategic partnerships fail. While there are multiple reasons, top leadership engagement is one of the most critical success factors.
Here are some enablers to gaining full support:
- Centralized Leadership – Strategic partnership management needs to be centralized to remain neutral. Setting up business-unit-specific partnerships or partnership teams makes the four principles above challenging, if not impossible. Your organization may undermine its ability to “Give & Take” by offering slightly different or even competing requirements from different areas. Likewise, if you are managing the relationship, require that partner communications be centralized through you and your team. Otherwise, others can muddy the communication, trust, or even goals.
- Management Support – To be successful in building and leveraging a strategic partnership, you need support from the highest levels of leadership. And expect to be accountable to them! They need to be aligned with the principles above and approve of the strategy.
- Dashboard – To ensure transparency and support, align with stakeholders and management on your definition of success. Create a dashboard to continually update them, taking them along with you on the strategic partnership journey.
- Continuously Monitor – Partnerships evolve over time. Some that are initially thought to be strategic may prove not to be, or vice versa. And a supplier may evolve into a higher-level strategic partner. Continuously 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.
Worth the Effort
While strategic partnerships aren’t for the faint of heart, they are well worth the pursuit. Strike that: If organizations want to expand, grow and thrive, they must be pursued. Done well, the journey leads to greater success for all parties.
Written by Cristobel von Walstrom.
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