A strategic partnership is a mutually beneficial arrangement between two separate companies that do not directly compete with one another. Companies have long been engaging in strategic partnerships to enhance their offers and offset costs. The general idea is that two are better than one, and by combining resources, partner companies add advantages for both companies through the alliance.
In an ideal partnership, you benefit not only from adding value for your customers but lowering costs as well. Before diving into a partnership, size up the other party and carefully evaluate the benefits and risks of entering into the agreement. This type of strategic partnership agreement is most beneficial to small businesses with a limited selection of products and services to offer customers. Maybe you have a company that provides one service, say logo design.
You might do well to partner with a web developer that will always refer you when graphics are necessary, and vice versa. Referral agreements are probably the most basic and informal type of strategic alliance, but strategic marketing partnerships can be considerably more complex. An agreement like this one allows each company to focus on what it does best.
In this case, Zydus Cadila gets to focus on manufacturing medications while Abbott India hones in on marketing the drugs. Marketing partnerships are extremely common in the automotive industry, such as the Toyota IQ also being marketed as the Aston Martin Cygnet. The idea is that one company makes a product and another adds its own marketing spin to it in order to tap into a new market. A popular and extremely valuable type of alliance is the strategic supply chain partnership.
One of the most obvious places that you can see strategic supply chain partnerships in action is the film industry. A comparatively small production house will handle the filming and post-production, and a larger studio will handle financing, marketing, and distributing the film. Think of J. Other examples of supply chain partnerships come to us from the technology sector.
Intel makes processors for many computer manufacturers. Toyota makes engines for Lotus sports cars. Texas Instruments makes chips for everything you can think of. These companies are entered into strategic supply chain partnerships with other companies.
If you make a tangible product that you think could benefit from a strategic supply chain partnership, the decision to enter into an alliance comes down to cost. But if you can hand off manufacturing to a dedicated factory and maintain profitability without sacrificing quality, then, by all means, do it. Companies usually enter into supply chain partnerships to cut costs, streamline processes, or improve quality.
Unfortunately, as valuable as they can be, supply chain partnerships can also be among the hardest types of alliances to maintain. And, both sides get to offer a more streamlined service to our customers. Strategic integration partnerships can encompass agreements between hardware and software manufacturers or agreements between two software developers who partner to have their respective technologies work together in an integral and not always exclusive way.
By our definition, a Strategic Partnership is an agreement between two or more organizations that creates shared benefit and accepts shared risk of equal or similar value.
In fact, some of the most powerful partnerships we have helped to establish were built through non-monetary value creation. Past experiences establishing successful partnerships have shown that these relationships serve a specific purpose; they should only be considered under the right conditions for success.
Your organization requires a new competency or capability that, while important as an enabler to future success, will not become foundational to your business model in the future. Scenarios where maintaining independence of brand, processes and customer relationships is advantageous. Rather than jumping into partnership exploration, organizations should establish a decision-making framework.
This framework will help the leaders determine whether a new capability or approach is best delivered by building it internally, accessing it through an acquisition or vendor relationship, or partnering to deliver the value required.
These pillars should be leveraged when negotiating, implementing and managing strategic partnerships to ensure that your organization is aligned with best practices, while increasing your odds of success:.
This is a limiting strategy. Generally, the value companies require is best found in a non-traditional sector or partner.
Likewise, the value contribution is more frequently optimized by a partner whose business is quite different but who has complimentary capabilities. Negotiate to assess fit, not simply to structure the relationship In our experience, the number one reason that partnerships fail is a lack of alignment.
As the partnership is being negotiated there must be alignment to shared objectives. Most importantly, organizations must assess whether their values and cultures will be supportive of a dynamic relationship during implementation. Manage towards the partnership goal, not the contract Linked to the principle above, partnership implementation rarely goes exactly to plan.
Every successful partnership needs to adapt to these realities. Negotiate a rock-solid contract — and then set it aside in implementation! By clearly identifying what you want to achieve through the partnership, and choosing the appropriate strategy, you can stretch your innovation dollars, share in the costs of investments, better handle uncertainty, and access new resources, capabilities, and markets. The following steps will help you determine which type of strategic partnership will help you best meet your needs and deal with current levels of uncertainty as they impact returns on the business.
Skip to content Skip to main menu. Nano Tool: All companies need growth strategies that minimize risk while enhancing their competitive positions. A Window Strategy uses a partnership as a window onto new technologies or developments in your industry by providing access in real time to their progress. It's appropriate when there is a high level of uncertainty because it helps you stay in the flow of new ideas, explore multiple paths, and reduce uncertainty about possible alternatives.
It also lets you understand new ideas and technologies without over-investing, keeping you agile in a fast-changing marketplace. Successful Window Strategy partnerships are formed with companies that are making promising progress on one or more of your strategic objectives. Potential challenges include leakage of your firm's technologies and managing a shifting web of partnerships.
It's used when there is a moderate amount of uncertainty about which option s will ultimately succeed, because it lets you make a calculated bet without prematurely committing to just one option. For example, you can make moderate investments in companies with new technologies or services, with options to expand your involvement if the firm becomes a winner. The potential challenge of this strategy is that companies are often reluctant to shift quickly after investing.
A Positioning Strategy partnership is appropriate when there is a low level of uncertainty and you want to partner with another firm to create a best-in-class advantage. It can help you achieve scale- or scope-based advantages, optimize market segmentation, or acquire a new customer base. Successful Positioning Strategy partnerships are formed between firms with complementary capabilities who seek to create a combination with the best capabilities in the industry.
How Companies are Using It The Medicines for Malaria Venture MMV partners with dozens of pharmaceutical and biotech companies to manage a large and diverse portfolio of antimalarial drug projects.
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