Partnerships have become more important than ever in the high-risk, uncertain environment that we’re all operating in today. Even so, the failure rate of partnerships is 60% or higher. So, why don’t most partnerships work? Our experience tells us that the answer lies in the lack of discipline. Too often, a partnership makes conceptual sense, but the parties don’t have the necessary frameworks to systematically consider, explore, structure and manage these relationships.
Before tackling how to set your partnership strategy up for success, let’s fully define we mean when we say “Strategic Partnership”.
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. While monetary exchange is often included in the structure of a partnership agreement, it’s not a requirement. In fact, some of the most powerful partnerships we have helped to establish were built through non-monetary value creation.
With 68% of executives stating that they see partnership ecosystems as the only way to survive in today’s market, it would be easy to consider strategic partnerships as imperative for every organization.
At Level5 Strategy, we say not so fast.
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.
You’re pursuing a high-risk strategy and/or entering uncertain market conditions.
Your brand doesn’t have permission to play in the areas you’re pursuing and you require another brand’s equity to endorse this evolution or transformation.
You’re seeking to broaden your reach and engage with new audiences.
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.
Once you have determined that a strategic partnership approach is ideal for meeting your organization’s goals and requirements, leaders should consider Level5’s four pillars for strategic partnership success. 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:
1. Articulate both sides of the value equation before seeking a partner
Outlining and quantifying the value that your organization is seeking, and the value that your organization can contribute to a partnership, will guide both the ideal structure of the arrangement and the preferred type of partner you’re seeking (size, industry, capabilities, etc).
2. Take the blinders off
Organizations often enter into agreements with partners that they’re familiar with. 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.
3. 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.
4. Manage towards the partnership goal, not the contract
Linked to the principle above, partnership implementation rarely goes exactly to plan. With the variable of independent stakeholders, it’s inevitable that new learnings will surface and that they’ll need to be applied during deployment. Every successful partnership needs to adapt to these realities. Negotiate a rock-solid contract – and then set it aside in implementation! Managing a partnership based on defined objectives requires the creation of a shared scorecard, regular touchpoints to review the progress against the scorecard and flexibility to adapt your organization’s contribution to the relationship based on a constant feedback loop.
Strategic Partnerships can be powerful levers to drive tremendous growth. Take for example the partnership between Uber and Spotify. Uber users can sync their Spotify account and control the music they listen to during rides. This partnership has not only created a great customer experience, it has also opened access to the partners’ respective audiences, leveraging a unique value proposition to drive new customer acquisition. Success through strategic partnerships is achieved when organizations tackle the appropriate business objective with partners that have aligned values and complementary capabilities and assets. This is why the work required to establish the right frameworks and models can offer tremendous upside.