The Power of Collaboration: Unlocking Business Success through Strategic Partnerships
Strategic partnerships involve business owners or managers from two or more companies working together to help each other succeed and gain a competitive advantage. This type of business partnership is generally synergistic, which means that what each strategic partner brings to the table turns into something greater than all the parts once combined.
Strategic Partnerships in Business Strategy
Strategically forming a partnership can be an effective way for both businesses to advance their objectives. Whatever their industry, each individual can contribute a lot:
- Various technologies that can assist companies with lowering labor costs and reducing the time that projects take to complete
- Information about the industry to help entrepreneurs discover new markets and begin building a customer base
- Raw materials that another company in the partnership can use to make a new product
- Knowledge about marketing to a subset of customers
While it makes sense that companies in similar or complementary industries might form strategic alliances to grow and diversify, it is naturally counterintuitive for two competing entities to try to help each other out. In general, businesses that form strategic partnerships are typically not direct competitors and equally share the benefits and risks of the alliance.
An example of the types of businesses that might form a strategic alliance are a large retailer and a clothing designer. In this partnership, the retailer gains customers who are fans of the clothing designer, and the clothing designer enjoys higher sales as a result of their products being sold in a large store with lots of traffic.
Besides gaining new customers and earning more profit, there are many other benefits of strategic partnerships:
- More satisfaction among existing customers as a result of exposing them to a new product or better service
- Greater brand awareness for each company involved in the partnership, especially if one or both companies are smaller
- Expansion of trust among customers and potential stakeholders
Business owners involved in partnerships build trust by showing that they can get along well with other owners and are not afraid to take the initiative to learn, develop new products and grow.
The Importance of Partnerships to Business Objectives
Nearly all successful partnerships start with a set of objectives and a plan for how to meet those objectives. Making a list of objectives and goals before setting out to look for potential partners can be helpful for managers needing to narrow down their list of prospective partners.
Sometimes a company wants to provide a product or service but does not have the resources to do so, and this is where a strategic partnership can come in handy. For example, a company that makes running apparel wants its customers to use an app to track their runs but has no technical knowledge to develop such an app. That company can team up with an existing app developer that already has a large user base of runners.
Choosing the Right Type of Partnership To Meet Goals
Depending on their company’s goals and business model, executives can opt for several varieties of strategic partnerships. For example, there are:
- Financial partnerships that assist companies with all things to do with accounting and auditing
- Supply chain partnerships, pairing companies that are good at manufacturing individual parts to create a final product in the end
- Marketing partnerships, where both parties in the alliance benefit from each other’s differing customer bases
Not all companies need all types of partnerships, so executives should carefully consider each one to decide what is best for their business.
Identifying Potential Strategic Partners
Once a strategy is in place, it is time for the entrepreneur to identify prospective partners. Ideally, a company should seek to form a business partnership with a company that takes a similar approach in its business dealings, is well respected within its industry, has a good reputation among the public and is not a direct competitor to the company seeking the alliance.
Partnering with a well-respected business that has a good reputation is important because any bad publicity received by the partnered company is likely to also reflect badly on any companies that are associated with it. This is a particularly critical factor for small businesses and startups to consider since they might not be very well known yet among the public otherwise.
Look for Shared Goals and Values
The most successful business relationships occur between companies that share some common goals and values. One way to identify the goals and values of a company is by reading its mission statement or the “About Us” section of its webpage. Common goals and values that a business owner might check for include:
- Honesty and transparency among its employees and stakeholders
- Inquisitiveness about the industry it is in, its competitors and the world around it
- Resiliency after things such as a product failure or an economic downturn affecting its industry
- Growth and adaptation to the market and changing customer needs
- Sustainability throughout its supply chain and a sense of responsibility to the Earth and its inhabitants
When businesses have differing values, it does not mean that one entity is better than the other. However, a joint venture between two companies that have similar core values may result in better communication and more successful collaboration between those entities.
Dive into Networks and Platforms
Perusing social media platforms is a great way for business owners to learn about the goals and values of a company as well as to discover partnership opportunities that they may have never considered before. Websites such as LinkedIn allow users to search for businesses in certain industries as well as contact and connect with the people who lead those companies. Online forums that cater to certain industries and types of businesses, such as nonprofits, can also be helpful for building connections and finding potential partners.
Building Trust and Alignment
When a business owner narrows down their list of prospective business partners, chances are that those who make the cut are already deemed to be generally trustworthy. However, successful partnerships require great amounts of trust as well as being on the same page when it comes to things such as establishing goals. While people can naturally establish trust with each other over a long period of time, there are a few ways to build trust more quickly at the beginning of the partnership agreement.
Setting Mutually Beneficial Terms and Conditions
Because both entities in the partnership depend on one another for continued success, any decisions made should have the potential to benefit both companies. Conflict and the breakdown of trust can occur if the managers at one company begin to believe that the managers at the other are taking advantage of them or reaping more benefits.
Agreeing on Long-Term Goals
Even when businesses share common goals at the beginning of a partnership, it is important to have a strategy to ensure that those goals remain the same throughout the alliance and allow for a contingency plan if goals happen to change. It is also important to ensure that the culture of the two partner businesses remains aligned. Occurrences that can change the culture of a company include:
- Major growth, whether from hiring new employees or through a merger or acquisition
- A change in the CEO or other members of upper management
- A shift in the values of the industry overall ⠀ Communication is key to the continued alignment and trust of business partners.
Collaboration Framework and Governance
It is helpful to have clearly defined roles and responsibilities in a partnership to ensure that each member feels as though they have a voice and nobody feels as if another member is stepping on their toes. Ideally, the role that each member takes on will play to their individual strengths. For example, the CFO of a company might take on the role of treasurer within the partnership.
Once members establish roles, they should agree on a structure that clearly shows who reports to whom and whom a member should contact if they have a particular issue. It is necessary to have established ways for members to communicate with each other, whether in person, online or by phone, and it should be clear which channel each member prefers to use.
Leveraging Each Other's Strengths
Leveraging the strengths of each member in a partnership is how to obtain maximum benefit from the alliance. There are many ways to measure the competencies of each member, such as by completing assessments or interviews. In addition to looking at members, it is important to also look at what each company does best and where its placement is in its industry.
Joint Value Propositions
A joint value proposition involves playing into each company’s strengths to bring customers a unique product or service that is better than either company could create on its own. For example, a clothing designer and a retailer can collaborate to create a new clothing line that resonates with that retailer’s customer base.
To submit and arrange a joint value proposition, the executives of the partnered companies must have a way to share knowledge between themselves. Creating and maintaining a culture of knowledge sharing is a key way for two companies to ensure a steady flow of information between employees.
Holding regular meetings with employees from both companies is another good method to encourage knowledge sharing. As well, setting up an online system where employees can exchange information asynchronously can greatly help with keeping everyone up to speed.
Co-Creating and Innovating
One of the main reasons to establish a partnership is to combine the skills and knowledge of two companies’ employees, along with the resources of both companies, to produce a stellar product or service and assist with business development. As with knowledge sharing, encouraging co-creation and innovation begins with establishing a culture that promotes thinking outside of the box and playing to each other’s strengths.
Managing Risks and Challenges
Despite the many benefits of having a strategic partner to assist with business development, there are still some risks to watch out for:
- Partners from one business taking advantage of the others
- Partners stealing intellectual property from a company
- One party making decisions without the full consent of the other
- One business going under and bringing the reputation of the other down with it
While it is unfortunate when these things happen, there are ways for managers to prevent events like these from impacting their business relationships.
For instance, it is helpful to have a contingency plan in case any fraudulent activity occurs. This can include steps such as backing up data, quickly changing employee passwords and having a public statement ready in case of any negative publicity. Openly keeping track of important communications between partnership members, such as by taking minutes at meetings, is also an important step toward mitigating many risks.
Measuring Partnership Success
Openly keeping a record of partnership success can build trust between members and assist stakeholders with making business decisions. Key performance indicators to track include things like profit margin, growth and customer satisfaction.
Effective managers analyze these performance indicators and listen to feedback from others regarding ways to improve KPIs. Regardless of how often a company measures its KPIs, it is beneficial to continuously look for ways to improve the alliance in general.
Forming and Maintaining Successful Partnerships
To form and maintain a successful partnership, managers and business owners should abide by certain processes and best practices. Being aware of the benefits and risks, playing to each other’s strengths and researching the different types of partnerships beforehand are some of the many ways that those in the C-suite can continue to grow their business.
Tracking Strategic Partnerships
In the dynamic landscape of strategic partnerships, where alignment, trust, and mutual benefit form the cornerstone of successful collaborations, Spider Impact is the perfect tool for tracking and managing the essential data that underpin these alliances. By leveraging Spider Impact, companies can meticulously monitor their strategic partnership goals, performance indicators, and the overall health of the collaboration. This platform facilitates real-time visibility into joint ventures, enabling partners to swiftly identify areas of success and address challenges before they escalate.
With features designed for goal setting, progress tracking, and reporting, Spider Impact empowers businesses to not only sustain but also enhance the value derived from strategic partnerships. It ensures that both parties are consistently aligned with the shared objectives and values, driving towards mutual growth and innovation. In essence, Spider Impact acts as a bridge, connecting the dots between strategic intent and actionable insights, thereby fostering a culture of transparency, accountability, and continuous improvement in the realm of strategic partnerships.
To learn more about Spider Impact or request a demo, sign up for a demo or take a test drive of the software. Our team is ready to assist you in discovering how Spider Impact can transform your organization and strategic partnerships.
Experience Spider Impact for Free
Schedule a live demo or claim your free 30-day trial. We’re standing by to either show off Spider Impact or turn your data into a prototype for free.