Partnerships Don't Work – Or Do They?
by Bob Barker
Originally published March 23, 2010
If you manage a technology company, maybe you don’t expect to hear that from someone who builds business relationships for a living. Please stick with me as I explain.
The nicest thing about not planning is that failure comes as a complete surprise, rather than being preceded by a period of worry and depression.
– The late Sir John Harvey-Jones,
Former CEO of Imperial Chemical Industries
So Why Partner At All?Developing a partnership strategy is a critical concern for any company. Key to its formulation is an understanding of why partnerships make sense and under what circumstances they should be pursued. Understanding the context for developing a partnership strategy clarifies the decisions that need to be made.
So why partner at all?
“Whether it sells computers, clothing, or cars, your firm’s fate is increasingly linked to that of many other firms, all of which must collaborate effectively in order for each to thrive… more than ever before, success depends on managing assets your company doesn’t own.”
From The Keystone Advantage by Marco Iansiti and Roy Levien
By understanding the broader market in which you compete and by knowing how your company fits within that context, you’re much more likely to reach a successful conclusion – i.e., educate your customer and help them move to a buying decision. If you’ve analyzed the total market and have partnered and/or acquired to achieve a more complete set of offerings, you can be in a much stronger position to meet your customers' needs.
There are many reasons to partner. Here are a few that come to mind, in no particular order:
In evaluating potential partners, determine early on which drivers are important to your company, the partner, or both. Then compile a list of specific factors that may be important to the target partner. These will become critically important in later negotiations (we’ll talk about “elegant negotiables” another time).
When Should You Partner?If we know the answer to “Why partner?” then we need also to think about the “when to partner” question. To figure this out, consider three factors that determine your desire and ability to grow the business through partnering:
Here’s a diagram depicting these points, followed by a brief description of each potential combination:
High impact threat/opportunity, strong ability to respond ("Pursue Aggressively")
You can’t ignore a pressing need, and your company has all the resources needed to address it aggressively through product enhancements and new product creation.
Low impact threat/opportunity, strong ability to respond ("Quick Hits")
When you spot a weakness in a competitor’s ability to respond to such an issue, attack by leveraging your strength in this area.
Low impact threat/opportunity, weak ability to respond ("Prepare to Respond")
These are usually “who cares” issues, but be aware that sometimes they can grow into high impact ones, so keep an eye on them while you do little to address them.
High impact threat/opportunity, high ability to respond ("Create Partnerships")
If you can’t adequately respond to a pressing threat or opportunity, a partnership is the right answer. Of course, a partnership is often a precursor to an acquisition.
If I’m right and I’ve communicated clearly, you have a better understanding of why and when to form a business relationship. These are practical business concepts that will ensure your efforts are directed at the best opportunities to achieve the desired outcome for your business – a business that knows where it's going.
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