Considerations for successful strategic partnerships
Have you ever noticed or read about companies such as Google, HP and Facebook and their ability to simply consumer smaller companies, seemingly for their technology or other resources? These acquisitions are often in the millions, if not billions of dollars. Oddly, in some cases, it doesn’t seem as though the parent company is much better off – which, unfortunately, is often the case.
The truth is, just like starting a business, most of the time when two companies merge, under whatever circumstances, neither company is better off as a result. Inc. Magazine reports in an article that a third of Google’s acquisitions have failed. Forbes reports about the failure of HP’s recent acquisition of Autonomy; one would think that a company of this size, achieving its status through acquisitions, would have expertise with the process, as Cisco Systems has demonstrated.
As a business leader, you probably realize that there are two ways to expand your capabilities in the marketplace – grow it at home or go fishing for it. While growing it at home will ensure that the product conforms to the way that your company operates, a company that is already delivering the solution may be appealing because they typically have expertise in delivery and a market that they are selling to.
A strategic partnership – in its true sense – allows your company and your strategic partner to benefit from a shared vision to deliver a product (service) to the marketplace that combines both of your expertise. It would be like a private school working with an internet broadcasting company to offer online home school. Both companies would benefit s a result of the partnership.
The challenge, it seems, finding the company to work with that will be a great partner for your company. It goes back to the saying, “just because it looks and quacks like a duck doesn’t mean it is a duck.” A company that appears, on the surface, to be a good strategic partner may not share your vision, which may result in a lopsided partnership that only benefits one company or the other. This can be the foundation for everything that goes wrong in the partnership.
Like in Mergers and Acquisitions (M&A), there are a number of factors which you will want to take into consideration as you are building the relationship:
- Share the vision – both companies need to have a shared vision for what the goals and outcomes of the partnership should be. Here is the thing – that means that all cards must be on the table, and you must be honest with one another. If communications fail, the partnership will fail. If vision isn’t united, walk away.
- Be realistic – there may be a great opportunity to work together, but as mentioned, there is a great chance that the relationship could fail. You need to determine how much you can afford to invest (read – are willing to lose) into the partnership. If you cannot commit enough for the partnership to work, walk away.
- Set your framework – Your framework, for all intents and purposes, your framework defines what you need to accomplish and under what parameters they can be accomplished. You are thinking strategically about your business; your new partnership needs to contribute to your company strategy. There will be all kinds of opportunities that will take your eye off the goal – which could potentially put you into a place where you are unfamiliar, which could ultimately lead to your failure.
- Be committed – Certainly – life and business continue, and you typically can’t get off the bus for a little while to work on the partnership. However, if you wish to accomplish something, you must move, intently, toward making it happen. At the same time, you need to get that from your partner. Keep in mind that different personalities have different “paces.” Answer for yourself “can I work with this person?”
- Exit strategy – know under what circumstances you will need to walk away. This might look like a revenue, profit, product delivery, market reach or any number of criteria. This goes back to understanding the risk. One activity that continues to make businesses impact personal lives is when business leaders don’t know when to retrench, take a step back, then move forward with a more strategic approach.
- Have an agreement – While the legal community would call it a CYA policy (Cover Your Assets) – which it may contain, having an understanding of roles and expectations written down provides accountability to each company to a) provide structure and b) to help to measure the success of the venture.
- Plan to learn – success or failure of the engagement will provide an opportunity to learn more about your competencies, refining your capabilities as a strategic partner and refining your ability to choose a great partner.
Strategic partnerships can be extremely beneficial to helping your company expand capabilities and increase market share. They shouldn’t ever be gone into haphazardly. As an extraordinary company, finding new ways to serve and reach your market is your primary goal and responsibility.
Aepiphanni Business Consulting: The Business Strategy People is an Atlanta, Georgia based Operations Management and Business Strategy Consulting Firm dedicated to serving the needs of small to medium sized business leaders. We help business leaders DESIGN | CREATE | BUILD extraordinary businesses. We support our clients with financial management, product and service production and delivery, outsourced services management, sales & marketing and business growth. We provide them with a number of flexible solutions to help them reach their goals.
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