Strategic Partnerships to Unleash Growth, Innovation and Build Value in Your Business
Growth is a process.
It comes from winning a hundred tiny battles, not one quick growth hack. It’s a hypothesis-driven experimental framework to everything that you do, whether it’s reaching a new audience or testing a new idea. It requires finding creative, innovative and cost-effective strategies to achieve growth at every stage.
There are no silver bullets when it comes to growth, no one-size-fits-all hack to scale your business overnight.
In order to continue growing your company long-term, it is vital that you identify and seek the required knowledge and expertise outside of your own company. In today’s fast changing world, companies must often break into new market opportunities with limited knowledge or resources, advance innovative technologies quickly to take first- mover advantage, avoid becoming obsolete, reduce costs and capture synergies to compete in increasingly price sensitive markets and mitigate risks in uncertain economic times. Going it alone can be tough – but joining forces with a like-minded strategic partner can help attain objectives that would be otherwise unattainable.
Partnerships can be an effective tool to help improve revenue, expand market presence, deepen product capabilities, enhance value for existing customers and open opportunities for new customers.
Biotcech, Pharma and Medtech companies are especially attracted to forge partnerships, driven by rising R&D costs, increased bargaining power of supply chains, stronger regulatory constraints and the trend towards integrated care. These industries are the perfect example of an industry where companies need strategic alliances to grow: high research and development cost, high market-entry barriers, geographical specificities, need of large, highly-educated and well-implanted commercial teams to generate sales, etc.
Pharma companies have been forming strategic partnerships with other Pharmas or with small Biotech companies for many decades, in order to increase their R&D productivity, expand their geographical footprint and/or share commercialization costs. Pharmas also intensively partner with young Biotechs to broaden their early-stage portfolio and reduce risk of pipeline shortage through diversification. From Biotechs’ perspective, early-stage alliances enhance their market value and provide access to Pharma expertise and infrastructure, which significantly reduces risk.
Additionally, the emergence of several new concepts in healthcare such as integrated care, personalized medicine, remote monitoring, telemedicine, etc. that are bringing a fresh new paradigm in the management of healthcare. To transform these concepts into marketed solutions, Pharmas need to acquire new expertise out of their traditional competency area. Strategic Alliances’ activity between Biopharma companies and Medtech/ Tech companies (with knowledge on digital/ hardware and user experience) is instrumental to bring to market innovative end-to-end services.
Strategic partnerships can help identify new market segments, fill product capability gaps, open new sales channels, provide with capital and even create entirely new business models. When partners work to collaborate in a strategic and responsible manner, a multitude of alliances can thrive. And, when it works well, a strategic partnership can be just what a business needs to accelerate their progress.
Although strategic partnerships seem long to initiate and complex to manage, their benefits far outweigh the risk potential to justify their increasing use.
Knowing how to join forces with another business is a key factor in making any growing company successful. There are many contractual forms that strategic alliances can take on, such as:
Associations, coalitions and collective impact collaborations, which work together to accomplish a shared purpose over time
Joint ventures, including referral relationships, which are contractual undertakings between two or more businesses
Shared services and back office support
Merger, legally combining two organizations or creating legal subsidiaries
While strategic alliances are complex and do not all look alike, there are some general considerations to bear in mind before getting started:
Identifying the right strategic partner is exactly the same as finding a co-founder or key hire. You'll be working closely together, so it's important to have a good connection, and trust your gut. If your instincts tell you that it isn't a right fit, even when everything looks good, it's smart to be cautious.
Making sure all parties are on the same page by clearly defining the objectives greatly improves your chances of a good outcome. It also gives you benchmarks for measuring its success. Understand what you want to get out of a partnership, and what your partner's goals are to ensure everyone is aligned and has the same or complementary visions.
Be honest about your own weaknesses and gaps. Trying to do too much at once is something we all experience, and it can be hard to let go. This is especially true when you're passionate about your idea or product. But seeking partners who are experts in a particular area will free you up to focus on your core competencies.
Understand what makes your business unique. Having a clear grasp of your own unique strengths and the value you bring to a partnership will help negotiate better terms with a potential partner. It also helps to determine when you should work with a partner or do the work in house.
The building blocks of successful partnerships that the partners need to focus on when building business partnerships:
Strategy—gaining agreement on the partnership’s objectives
Culture and Communication—encouraging open and trust-based communication among all parties
Operations—establishing a new operating model and performance metrics (for instance, sales or quality-assurance metrics)
Governance and Decision Making—adherence to key decision processes, metrics regarding speed of decision making, stage gates, and time lines
Economics—defining how value will be created from the partnership
Adaptability—proactively planning how to “tend” the relationship over time, in the wake of industry and organizational shifts
In general, the areas most likely to be underemphasized and therefore requiring special attention are culture and communication and adaptability.
Successful partnerships don’t just happen. Every relationship comes with its own idiosyncrasies, after all, depending on industry, geography, previous experience, and strategy. Focusing on some of the following key priorities can help partnerships thrive and create more value:
1. Strong partners set a clear foundation for business relationships. Often times, in a rush to finalize the alliance, foundational discussions and aligning common goals get overlooked. This is especially true in strategic alliances within the same industry, where everyone assumes that because they are operating in the same sector they are already on the same page. However, skipping this step increases the stress placed on the partnership and reduces the odds of its success. For instance, the day-to-day operators end up receiving confusing guidance or conflicting priorities from the partners.
The individuals expected to lead day-to-day operations of the partnership, should be part of negotiations at the outset. This happens less often than it should because business and legal teams are typically involved in negotiating the terms of the deal—objectives, scope, and governance structure—while the operations piece often gets sorted out after the fact. It is important to find ways to balance the pressure for speed with the demands of planning a healthy partnership, especially allocating their time and resources in line with the potential for value and impact.
2. Successful partners nurture the relationship because even the ones that start off with a solid foundation can erode, given individual biases, common communication and collaboration issues. They keep everyone in the loop about major business development as well as connect socially to ensure plenty of time is spent building friendships and trust outside of business meetings. They find a way to bring different business cultures together by recognizing each other’s capabilities, motivations and by investing in the right tools and processes.
3. Lasting partnerships emphasize accountability within and across partner companies, and they use metrics to gauge success. Good governance is the linchpin for successful partnerships therefore it is critical that there is continuity of leadership and vision where senior executives from the partner companies oversee the entire partnership. At the very least, each partner assign one team member—someone who can keep operations leaders and alliance managers focused on priorities, advocate for resources when needed, and generally create an environment in which everyone can act with more confidence and coordination. Companies should assign end-to-end accountability for a partnership to a single team member with clear authority to make decisions, supported by team members who serve overlapping terms across the core phases of design and execution. This creates a balance of accountability and specialized authority throughout the process.
4. They are willing to change things up if needed. Partners must acknowledge that the scope of the relationship is likely to shift over time and expect that services will be shared, anticipate expansion, or encounter any geographic, regulatory, or structural complexities. Accepting the inevitable encourages partners to more carefully undertake contingency planning right at the outset with focus on the collaborative processes that anticipate changes and create mechanisms or agreements that enable companies to adapt with less dysfunction. Such mechanisms might include release clauses in service-level agreements, partner-performance management, go/no-go triggers, or dynamic value-sharing arrangements that can allow a partnership to maintain balance in spite of partners’ different or evolving priorities and risks.
An emphasis on clarity, proactive management, accountability, and agility can not only extend the life span of a partnership but also help companies build the capability to establish more of them—and, in the process, create outsize value and productivity in their organizations.
To increase the odds of success, there are three laws of business collaboration that ought to be followed; partnerships must create new value, both sides must work together well, and they must share returns fairly. These laws can be broken down into following steps to manage the lifecycle of a partnership:
1. Determine the Need: The impetus for any collaboration generally is benefit that the company will realize through an alliance or partnership. Understand how the company’s strategic plan or intended impact would be enhanced by collaboration. It is important to determine why you need a partner, how it will fit in your business strategy, what type of partnership makes sense including level of integration, the length of partnership required to achieve the impact and how many different partnerships are needed. Clarifying the goals and objectives upfront will help identify where the partnership can create new value and set the stage for all other decisions.
Some of the reasons for creating a partnership include:
Market/ Technology Access: another company has access to markets or patents or technologies that you don’t have and that you need.
Supply Chain Partnership: your business depends critically on the products of another company, or supplies critical components to another company, specializing in a different part of the value chain.
Horizontal Partnerships: share resources or extend market reach by collaborating with companies that offer the same products/services, perhaps in a different market segment or geography.
Second Sourcing Partnership: to help avoid depending too much on one partner and ensure more than one source of supply and protect your business from supply shortages or even get better prices from competing suppliers.
Number of partners needed is a consideration too depending on the complexity of the business. You may need a whole ecosystem of partners such as when your business has several divisions, each of which might benefit from a different partnership or when you need supplies from different sources or when you want to sell into different markets. Multiple partners are often desirable in the manufacturing industry where manufacturers tend to have partnership with suppliers for all major components.
For instance, it is not too far fetched to imagine effective pharmaceutical companies of the future focusing internally on their core competencies and being more of a hub at the centre of a network of collaborators and suppliers, which might include medicinal chemistry, clinical trial execution, manufacturing, sales and marketing. They will facilitate interactions across their network to stimulate the development of innovation ecosystems.
2. Select Partners: Choose partners wisely to set up the right conditions for the collaboration. Conduct a thorough market mapping and landscape analysis to identify companies that might make best potential partners. When selecting a strategic partner it is important that the criteria extend beyond just how you can help one another. The companies also need to be aligned in terms of their goals, resources and cultural compatibility. These are important considerations at the outset of a partnership as they’re key determinants of success.
Therefore, when making a list of potential partners, ask questions such as:
Would they like to collaborate with your company?
How will they benefit from the collaboration?
Are their goals aligned with yours?
Do they have a compatible culture?
Do they attract the type of clients you would like to attract?
Do they have a good reputation in the industry?
Then to assess the pros and cons of each partner, ask questions such as:
Does 1+1 = 3? How strongly do each partner’s capabilities complement those of the other’s? Is there synergy to add significant value to the other side?
Consider companies with complementary product and/or service offering and customer base with excellent industry and market reputation. For example, for innovative technology companies, perhaps a partnership with business services firm makes sense. While, if reducing cost is the goal to help cross sell, or break into different markets, then a strategic supplier is perhaps be more suitable.
Does 1+1 = 1? How well do you think both sides can work together? Can they act as one? Or are they likely to have conflicts that will get in the way of an effective collaboration? Are the goals of all partners aligned?
Does 1+1 = 1.3+1.7? How will all sides benefit? It’s important to face upfront that each must get enough out of the partnership to make the deal worth it. There are a number of considerations to iron out early in this regard, when setting the terms, such as intellectual capital (who owns what), customer databases, future gains in clients, revenue, profits, expenses, technology, infrastructure, resources, security and privacy.
3. Setting Terms: Set the terms of the deal, the nuts and bolts of the deal that will shape the way all sides will work together in the future. This is where sides will agree on who will do what, how decisions will be made, how resources will be shared and what each side will earn from the joint activities. It is essential to go through a deep due diligence and negotiation process to ensure there are no big surprises after an agreement is reached. Make certain that all stakeholders agree with and feel comfortable with all agreements.
A good partnership agreement at minimum should consider these three things:
The responsibility structure: It is critical to determine who will do what as well as what the two sides will not do, to set clear boundary for the partnership.
The decision governance structure: Define how joint decisions will be made to address issues and questions that come up during the course of the partnership. How will you raise these concerns?
Which executives or committees will participate?
Who will have a say in these decisions, or who might have the final say?
All sides will need to agree on these rules but also be flexible.
The compensation structure: Establish how each will get compensated for joint activities and what financial structure makes sense. For example, an equity joint venture where each party gets a share of the profits, or a merger where one side will get compensated with cash, or a licensing or royalties deal where both sides share revenues. Also, good to make contingencies for future situations such as one partner grows more than the other, or the market develops differently than predicted.
4. Partnership Implementation and Management: Taking into account organizational culture and structure, strengths, weaknesses, leadership, governance, systems, and back-office support, critically consider the practical challenges of implementing an alliance. Once an agreement has been reached, involve key staff from both sides to discuss what details need to be worked out for implementing the alliance such as establishing an open communication paradigm and tracking key progress indicators to ensure a healthy and successful collaboration.
Manage the partnership over its whole lifecycle: Signing a deal is only the beginning and now effort needs to be invested into managing the partnership, for the duration of its lifecycle.
Nurture the relationship: By ensuring key individuals work together and trust each other, coordinating the processes of the organizations, helping bridge any gaps and generally nurturing the health of the partnership.
Facilitate joint decisions: Partnership decisions are the heart and soul of collaboration since the contract does not typically cover everything that needs to happen and the gaps or questions that arise have to be proactively managed. A good partnership starts with some rules in place for how joint decisions will be made then gradually updates and evolves by adjusting the deal as required to address new challenges and to explore new opportunities. Keep communicating: Once you've found a great partner, established a good relationship and figured out your objectives, keep communication channels open. Maintain contact with frequent check-ins to talk through any problems. This will keep confidence levels high on both sides, and allow you to deal with any unexpected issues or changes swiftly.
Earning the share: Split dividends, that is, for the duration of the partnership, sides must keep eye on the benefits that their organization receives from the partnership, they earn their share as per the terms of the partnership agreement by keeping track of what is owed and make sure they get what they signed up for.
In the tech world, partnerships are often about getting to market fast, accessing talent and resources as an alternative to an aggressive hiring process.
Choosing the right partners can have a huge beneficial impact on your business and increase your revenue and overall growth. It’s possible to avoid most of the drawbacks by addressing a few key things up front when developing strategic partnerships.
Benefits of Strategic Partnerships
Working together helps you reach your individual goals quicker, expand the presence and reach of your respective brands as well as your customer base.
When collaborating with a partner outside your industry, you can create better quality of products or services that offer greater innovation and value to your customers giving you an edge over the competition.
Your strategic partner may even provide you with financial assistance, especially if yours is a startup company or small business.
Sure, a strategic partnership will drive success for both partners, and the odds of success increase further by avoiding some of the common pitfalls.
Drawbacks of Strategic Partnerships
Your teams could experience some friction among some of the team members, that could lead to unhappy employees.
Disagreement may arise from ownership claims by each partner for things such as new products and new patents, which could escalate to lawsuits and diminish your collective financial success.
Issues may arise with regards to sharing expenses or the way profit is split.
An unclear partnership agreement can also lead to discrepancies with regards to duration or termination of partnership.
To determine the best avenue for your business growth, there are a variety of partnerships that you can consider.
1. Distribution or Channel Partnership
A distribution or channel partnership is a complementary relationship that drives sales for both companies. Partnership with a distributor that already has an established audience can help promote your business for you. Distributors offer access to customers you might not otherwise be able to reach on your own or provide broader exposure through joint marketing events. Distributors do the heavy lifting to help your company increase sales, expand customer base, improve profits and often also improve customer service.
Find major influencers within your niche to distribute your product or service to their existing audience. The key is to find solutions that create something of value and benefit both parties.
2. Vendor Partnerships
Companies rely on vendors for their success. Some are strategic to their existence, and some to drive cost synergies. Developing more strategic partnerships with your existing vendors or new ones is beneficial for both partners. As companies evolve and market realities change, it is important to review these relationships and adjust to get maximum value for the businesses. For instance if you have multiple vendors performing the same or similar services, it might make sense to consolidate and choose a vendor who offers better service and value. Or if a vendor might be in a position to use your products/ services, it makes sense to foster this synergistic partnership for mutual benefit.
3. Promotional Partnership
Promotional partners are other businesses that can help promote what you sell. They send potential customers to your website to sign up and hopefully buy. Partner with businesses that can help you reach a larger audience. It’s expensive to try to advertise, promote, and sell your products or services on your own. Teaming up with another business or businesses is relatively simple and the end result is highly profitable moving forward. This is best accomplished with businesses that offer complementary services. It provides a source of referrals from partner businesses. Exposure is imperative for your business, but ensure that your partner is aligned with your business values and mission. A partner that can help convey your values and brand differentiators to the right audience is critical in making sure you’re not only getting exposure, but the right exposure.
4. Competency Gap Partnership
Instead of trying to do everything on your own, you could instead form strategic partnerships for any gaps in competency. Not every business owner will know how to drive sales, market their business, or manufacture their products. Trying to do everything yourself, especially when you don’t have the know-how can cost your business a tremendous amount of time and money.
Outsourcing tasks that your business doesn’t know how to do or cannot do efficiently will save you money in the long run. Moreover, your business will be strengthened when you can get an expert to help with your weaknesses. By covering competency gaps through establishing partnerships, your business will have the resources and time to advance other areas critical for growth and expansion. Having a partnership for a gap in competency not only ensures a better experience for your customers but also might offer a competitive advantage in the marketplace.
5. Solution Partnerships
Integrating your solution with the product of another company can create new market opportunities for both companies. Is a combined solution better for customers? Could this combined solution open opportunities to up sell or cross sell to another market or audience? Look for opportunities to extract maximum potential from solution partners. This is also a good time to look for advisors to get external market perspective and ensure you are solving a niche gap — and not just creating another mousetrap.
6. Social-Cause Partnership
Customers love to see businesses embrace social responsibility by giving back to their local communities. It is important to find a social cause that can engage your target audience. The nonprofit organization does not have to relate to your business’s day-to-day activities, but should align with your brand and values. Partnering with a local organization or nonprofit that fits with your core values can increase your exposure and have tremendous impact on your business growth. Associating your business with a social cause helps stand out from competitors, boost in visibility and brand recognition through social media engagement and enhance your reputation. This increased brand recognition can help the business attract new customers and can also increase donations and volunteer engagement with the organization. The results of partnering with nonprofits and cause partnerships can be hard to measure through traditional marketing metrics, but they are well worth the effort.
7. External Partnerships
When two companies come together to leverage joint capabilities, markets and customers, a truly strategic partnership can be developed. Could you combine capabilities with other companies, maybe even competitors, to create a market differential that would produce material financial results for both companies? Is there another company in the market that has a capability your product is missing? Could that same company be interested in the capabilities your company offers today?
Frequent, systematic assessments of partnerships & alliances can reveal hidden problems and opportunities to create more value. Partners in high-performing partnerships routinely perform a “partnership health check.” They review the goals and guiding frameworks for the partnership, conduct interviews with leaders, and measure performance against jointly defined health metrics. And they put all their business relationships through these paces, no matter how old, how new, or how geographically dispersed.
It is important to establish a clear set of health-check protocols from the outset of the relationship—during negotiations if possible, specifically, outline of the processes and tools and the metrics that will be used to assess the business relationship. The earlier this occurs, the more likely it is the partners will adhere to consistent, periodic reevaluations. Ideally, the health check should be conducted at predetermined times—typically annually.
However, partnerships are complex, and it isn’t the answer for every strategic goal. Successful companies have a pipeline of potential strategic partnerships where the company needs help to deliver on its strategy, while also being able to add value, that they rely on for building the capabilities and gaining insights required to realize their full potential for growth and enjoy an enduring competitive advantage.
Partnerships are built on trust. At the core of a successful collaboration is trust. It takes time to build trust. In the long history of humankind those who learned to collaborate and improvise most effectively have prevailed.
It is not the strongest that survives, nor the most intelligent that survives. It is the one that is the most adaptable to ch