Successful Partnerships

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strategic-partnerships

Companies can no longer “go it alone”–vertical integration and direct control over distribution channels, once winning strategies, now must be replaced with a partnership and joint value creation focus.

Strategic Alliances and Marketing Partnerships: Gaining Competitive Advantage through Collaboration and Partnering by Richard Gibbs and Andrew Humphries

 

Strategic Alliances and Marketing Partnerships seeks to answer two key questions: Why are some partnerships more effective than others? and How can I predict the likely outcome of the partnership and take steps to improve its performance?  Gibbs and Humphries present eight partnership archetypes along with relationship management recommendations. For each type of partner, they provide techniques for identifying and resolving roadblocks and issues. Not surprisingly, the book essentially advocates moving from an entrenched, command and control, transactional mindset to an open, trusting, and highly committed stance towards partners. Jointly crafting objectives and performance measures are key tools for success along with openness to understanding the other company’s business and goals.

Companies may choose partnership strategies in order to acquire skills and capabilities they lack or to gain prestige through a relationship with a market leader. Other motivations include competitive threat neutralization and joint value creation (especially when neither firm could create the value on their own).

The focus on relationship strategies is an outgrowth of outsourcing and supply chain management. Evaluating core vs. context capabilities can help identify which activities to consider for acquiring outside the current enterprise boundaries. This way, unique relationship become part of a firm’s core assets and differentiation. However, traditional siloed management approaches and insular performance measurement techniques will not create new value from partnerships. A collaborative mindset with a focus on joint value creation is required for effective alliances and business relationships.

Questions to ask about partnership strategies include:

  • What industry changes have impacted your firm’s business model in the last 5 to 10 years?
  • To what extent are your competitors today the same as five years ago?
  • How has your firm’s business model changed in the last five to ten years? How will it change in the next five to ten?
  • What percentage of your firm’s total revenue can be attributed to working with upstream and downstream partners?
  • How adversarial are your negotiations with supply chain partners?
  • To what extent do your IT systems interface directly with partners?

Gibbs+Humphries partnership types

The core of this book is a set of eight partnership types which are ranked by partnership quality, collaborative innovation, and value creation:

Partnerships
Partner Type Partnership Quality Collaborative Innovation Value Creation
Evangelists High High High
Stable Pragmatists High Medium High
Evolving Pessimists Med-Low Medium Med-Low
Captive Sharks Med-Low Medium High
No Can Dos Low Med-Low Low
Rebellious Teenagers Medium Medium Medium
Cherry Pickers High Medium Med-Low
Deserters Low Low Low

Evaluating partnerships

Gibbs and Humphries grade partnerships on three criteria: partnership quality, collaborative innovation, and value creation

Collaborative Innovation

Collaborative innovation moves beyond product, quality, and price metrics. Collaborative innovation includes ability to respond to new opportunities through cooperation, adaptability, and good communication. Partnership effectiveness indicates effectiveness through metrics such as customer satisfaction. Partnering effectiveness measures include: repeat business, market share, new market entry, and joint process re-engineering initiatives. The conditions that describe the effectiveness of the relationship and enable the partnership to be innovative and respond to opportunities are:

Adaptability – ability of the partnership to adapt to changing conditions

Innovation – extent to which the partnership encourages innovation and high performance

Communication – Quality, relevance, timeliness and openness of communication

Cooperation – Extent to which the partners cooperate effectively

Partnership Quality

Measures of partnership quality are: level of commitment, investment, joint reliance, knowledge sharing social bonding, and trust. Service and support factors are important but higher order outcomes and goals will create more value. Reference-ability is a good indicator of partnership quality–if your partner is willing to provide a positive reference to a key customer or buyer. Commitment to the partnership over the long term, open communication, trust, and shared objectives and goals are other measures of high quality business relationships. Reference-ability is a key measure for collaboration–joint public relations activities, presentations at conferences, joint customer visits, and reductions in competitive relationships. Key qualities of the relationship exchange including communication and trust are:

Commitment – The motivation to invest in the maintenance and development of the partnership and the extent to which investments are made in the partnership by all parties

Trust – The extent to which a partner is believed to be trustworthy, reliable and credible and the degree to which the partnership is operationalized in terms of mutual interests and benefits

Value Creation

Value creation covers all aspects of relationship-building, sustainment, and development including operations, performance management, and problem solving.  Value creation for the business can be measured through cost decreases or margin increases that are directly attributable to the partnership. Value significance can be measured through sales numbers, margins, and extensions of current offerings. The efficiency of the partnership to create and capture the potential value that the partnership offers is based on:

Conflict Management – The ability of the partnership to manage inherent conflicts and the degree to which the partnership creates an environment for creative issue or problem resolution

Synergy – The extent to which the partners share common aims and objectives

Value Creation – The strength of the underlying economic proposition of the partnership and the capacity of the partnership to constantly improve its competitive position through process improvements and cost initiatives

Process Efficiency – ensuring a focus on continuous process improvement of the partnership outputs/deliverables

When evaluating partners, ask these questions to find new approaches for improving the relationship::

How would your current and most recent partners describe your partnering maturity?

List five investments that your firm has made in your partnerships that have/have not yielded the desired outcomes.

What factors have determined whether these investments were ‘successful’ or not?

List five things that your partnerships have taught you in the last five years.

What changes to your processes have come about as a consequence of learning from your partnerships?

What measures do you use to evaluate the quality of your partnering?

Do you current KPIs give you the information and confidence to manage these partnerships effectively?

Would they give you enough time to act if a relationship were going wrong?

Obstacles and Drivers

One chapter of the book is devoted to discussing positive and negative relationship spirals–cycles which reinforce and grow the relationship or which cause it to disintegrate and fail. Many companies hold back due to fear of losing hard dollar investments in partnerships that appear opaque. A high level of risk can be assigned to partnerships because priorities and leadership may change, adding to the lack of control over outcomes and deliverables. Likewise, assets may be stranded if the relationship is not successful.

Relationship types
Poor Performing Partnerships High Performing Partnerships
Poor relationship management Proactive relationship management
Lack of commitment Joint objectives
Adversarial practices No blame culture
Fear of dependency Joint planning and open communication
Inadequate joint performance measurement High visibility performance measures

Strategic Alliances and Marketing Partnerships: Gaining Competitive Advantage through Collaboration and Partnering

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