Tips & Guides — 19 May 2022
Guide to Strategic Partnerships
Business, and in particular, ecommerce, is becoming increasingly competitive. In fact, it’s estimated that ecommerce sales in the US will grow by 16.1% in 2022, reaching $1.06 trillion. While that figure may be growing significantly every year, so are the number of businesses wanting a slice of the action, with anywhere from 12-24 million ecommerce sites competing.
The reality of this situation means that every business is constantly looking for new ways to improve performance and results. New automation and tools, innovative ideas, new systems, and processes; anything that can give a business an advantage over its competitors is explored and tried. Many businesses have turned to relationship marketing as a solution, so why not try to form other types of partnership?
You could view this competitiveness as similar to international relations, especially in regards to countries seeking out trading partners with mutual interests. The business version of this would be seen as strategic partners, but just what is a strategic partnership? What benefits does it offer and how do you seek out your ideal strategic partner?
A strategic partnership occurs when two (or more) businesses join “forces” to share resources and information to improve upon the service either of them offered individually. In most cases, the businesses concerned are not direct competitors though they may provide complementary products or services as well as their own core competencies. Partnering with other brands, as is done in referral marketing, is something that can enhance your business.
By working together, they can work towards a common goal and can share both the risks and resulting rewards that come from any joint business strategy. They aim to enhance what they previously offered and to create added value for all partners as well as better service to the customer base of each company. Good strategic alliances will often involve bringing together attributes that the other partner does not possess.
You may think that strategic partnerships are something that would mainly be beneficial to a small business or a startup. In fact, the reality is that they can work for any size of company right up to enterprise level. When two (or more) organizations recognize that working together could offer mutual benefits, then they may choose to form a strategic partnership.
As with other strategies such as partnership marketing, strategic partnerships offer companies the opportunity to expand their current customer base and to add new customers as well as access to new markets. It means they can do this without substantially increasing risk and marketing budgets or putting a lot of time into such endeavors.
Strategic partnerships are also often very attractive to customers because they can access extra products or services without having to go to different places. They may find products that, for example, were previously not marketed on social media.
There are several good examples of major strategic partnerships:
As you can see, one of the major benefits of these business relationships is to increase brand awareness and to cement particular associations in the minds of potential customers. While strategic partners may not offer similar products or services, they will often have similar demographic audiences and have similar goals.
As you would expect, there are different types of strategic business partnerships, and which one best suits you will depend on a number of factors. Knowing the differences between them can help you choose and formulate a partnership plan to move forward.
If you’re a startup or a smaller business, then this type of partnership may be of most benefit to you, though it can benefit larger businesses too. On a smaller scale, let’s say for example you’ve launched a business offering SEO optimization and content writing services. Partnering with a business offering website design and development offers potential for referrals for both companies.
By strategically combining services in their marketing, both businesses can expand their reach, avoid marketing mistakes, and will refer businesses to each other on an ongoing basis.
However, that’s the simplest form of partnership and, as you move up the corporate pyramid, these relationships can become more complicated and need more work. Organizations often ask “What is a business process?” and “How important is it to us?” More importantly, “Can it be improved through partnership?”
A good example of high-level strategic marketing partnering is the Toyota iQ, an ultra-compact city car that was rebadged and marketed as the Aston Martin Cygnet in Europe (marketed as the Scion iQ in North America). While both these brands produce cars, Aston Martin normally targets the luxury market so Toyota saw this as beneficial.
This shows a commonality found in strategic partnering strategies; one producing the product and the other marketing the product in its own way. While this form of alliance is very common among car manufacturers, it is something that can be applied to almost any product, especially if your organization wants to penetrate markets in other countries or regions.
This is a form of alliance that has become increasingly popular in the digital era. With the often complex needs of many businesses, business owners find that being able to integrate Product A with Product B can be a great way of attracting extra customers to both products.
For example, your business may sell Zoom phone alternatives and you identify a partner who offers an efficient CRM (customer relationship management) system that’s their own intellectual property. By partnering with them, you enhance your product and can potentially increase the sales for both parties as well as offer a product that gives a better service to your customers.
You’re therefore improving what you both offer as well as providing a more streamlined service or product to your customer base and this can help attract new customers. This sort of partnership is often seen as collaborations between hardware and software providers but can also occur between companies offering both. It should also be noted that an integration partnership does not have to be an exclusive one.
Supply chains and logistics can often be complicated and costly which is why partnerships are so common in this area. Supply chains, and resulting partnerships, can take a number of different forms:
The common theme in these different types of supply chain partnerships is cost.
By outsourcing certain parts of the production process to a strategic partner, the principal company can see significant savings on manufacturing costs while the secondary partner gains business, usually on a long-term business, so this is a win-win situation for all parties.
Of course, you can’t sacrifice quality to save money, and maintaining – or even improving – quality will always be a major factor in any partnering decision. Such partnerships can also help streamline the production process but companies have to be aware of any conflicts when it comes to policy vs procedure.
At the end of the day, finances are the bedrock any business is built on. The most common type of strategic financial partnership is when a company outsources its accounting workforce to a specialist firm. There are two main advantages to this type of alliance. The first being that is an area the accounting firm specializes in so they’ll likely have a wider range of skill sets and experience than you will have in-house.
The second advantage, though closely linked to the first, is that they will be able to focus more closely on all financial aspects of your business. Being outside your organization allows them to have clearer sight, especially if the business is experiencing any issues. This type of partnership can be among the most crucial relationships you can establish.
Working with experienced and dedicated professionals who only deal with finances can often mean that you have more efficient management of your cash flow. Outsourced accounts teams are also able to forecast whether there will be any financial hurdles to overcome in both the short and long term. These partners can oversee not only your cash flow but also other factors such as benefit plans and stock programs.
Technology plays an important role in how we do business at every level. From automated production processes to platforms that allow for easy transfer of data, could you really function efficiently without new technologies? Yet some businesses may struggle to maintain the level of IT efficiency needed, or they simply can’t afford the budget for the services required.
This is where a strategic technology partnership can be of enormous benefit. It can cover any sort of tech knowledge or services you need, from simple computer repair and maintenance services to partnering with a company that offers cloud-based storage to keep all your files and info securely.
Many entrepreneurs want to focus money and other resources on the core aspects of their business. This can leave a massive hole in their technical ability and provision, something that could have a negative effect on the overall business. As with financial strategic partnerships, you’re partnering with experts in the area you need, a relationship that offers mutual benefits to you both.
As well as those practical types of strategic partnerships, some organizations may enter into legal partnerships for a number of reasons. These are distinguishable from the other types of partnership as there will most likely be a legally-binding agreement that sets out what the terms of the partnership entail for both parties. These sorts of partnerships are usually one of the following main types:
As the name suggests, this sort of partnership happens when one company acquires a certain amount of equity in another. This not only provides an amount of capital for the company surrendering equity but can also give the purchasing company some control in a business that may be relevant and important to them. This is similar to the mergers and acquisitions process.
Many of the strategic partnerships discussed could be described as non-equity alliances. With this type of partnership, a formal contract will be drawn up that agrees on a mutual exchange of things such as manpower, assets, and resources. An example of this could be a company agreeing to allocate a portion of their production line to their partner.
This is a very common type of legal partnership and happens when two (or more) companies decide to form a separate entity and to create new products. The equity split on any new company can vary from a 50-50 split to one parent company owning the majority of shares in the new venture. Joint ventures can offer lots of advantages including pooling resources, ideas, and finances to launch new products or services.
As with any sort of business arrangement, a strategic partnership needs to be discussed, negotiated, and agreed upon. Ensure that any agreement is mutually beneficial and will meet the goals of each individual party. Some agreements, such as the content writing company and web developer partnership given as an example earlier, may be very simple. Others, however, may be complex depending on the needs of each partner.
The first step towards any partnership is identifying potential partners who you see as a good fit and who bring something you need to the table. Once you’ve identified a potential partner, you can approach them and pitch your proposal to them. Once you have gone through any negotiation process, your agreement should include some or all of these points:
Of course, some partnerships may include far more complexity, but these factors are the basic things that should be included in most agreements. It’s recommended to have a formal agreement in print to prevent disagreements later. Depending on the nature of the partnership, you may want to include things like quality control of products or SLAs (service level agreements) for technical work.
If you start looking at businesses around you, you may be surprised at how many work with some form of a successful partnership. But just because it works for others, it may not work for you. The first thing to do is to look closely at your existing business model and systems and processes. Are there areas of your business that are “lacking” due to constraints on resources and budget?
If the answer is “no,” then you may, for now at least, perform well in an insular model. If the answer is “yes,” however, then you may want to look for partnership opportunities. As well as current constraints, you should also look at areas where you can reduce costs or increase your bottom line by partnering with another company. Seek out opportunities!
Another factor that leads to strategic partnerships is risk mitigation. Are there ways, such as choosing a partner with their own manufacturing facilities, that both reduce costs and risks for your own business? It’s also worth remembering that you are not limited to one partner. For example, you may choose strategic financial and technology partners to improve your own business.
Strategic business models can offer major benefits to all stakeholders. Finding and working with the ideal strategic partner may be enough to give you that competitive advantage you’ve been looking for.
While most of the strategic partnerships you’ll see involve major brands, they can be equally beneficial to small businesses and startups. It’s all about finding that potential partner, or partners, who can provide benefits to where you’re either lacking or falling behind. Identifying partners where there are mutual advantages could be a major step forward for your business.
Written by
Alister Esam is the CEO and Founder of Process Bliss, a work management software that is reinventing how businesses execute day to day tasks. He’s an expert in strategic planning, business process management, and business process optimization. With more than 15 years of experience in helping businesses run at peak efficiency, Alister has dedicated his career to make work easier, and more motivating for managers and employees alike.
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