How to Form Strategic Partnerships

Seventy-nine participants from 50 companies attended an IMD discovery event focused on the challenges associated with the operation of strategic partnerships. Strategic partnerships inevitably involve challenges that must be solved effectively to ensure the longevity and success of the alliance, such as. B, isolating proprietary knowledge, processing multiple knowledge streams, creating adaptive governance, and leveraging global virtual teams. If these challenges are not addressed, the partnership is most likely to fail, which, as empirical research shows, occurs in more than half of the cases. Overall, joint ventures are the least popular form of partnership; They are the most difficult to handle and have an average lifespan of about seven years. According to McKinsey2, many joint ventures fail because they spend more time on steps where less value is at stake (50% of the time spent negotiating terms that represent only 10% of the value at risk) and less time on steps that have more value on risk (only 20% of the time spent on the business model and structure). this corresponds to approximately 40% of the total value of the risk). Sometimes partnerships require structural upheaval – and not just as a last resort. For example, it may be less important to rethink the structure of a partnership in which both parties focus on the joint commercialization of complementary products than in a partnership focused on the joint development of a number of new technologies. However, there are some basic rules for considering changes in the structure of the partnership. There are several strategic partnership structures – from non-equity alliances, mainly in the form of non-traditional contracts (such as joint R&D, long-term procurement, joint distribution/services) to equity-based partnerships in the form of minority stakes and joint ventures.

Sometimes partnerships need structural transformation – and not just as a last resort. It seems obvious that partner companies would try to find common ground from the outset – especially in large joint ventures where each party has a great financial interest, or in partnerships where there are extreme differences in cultures, communication and expectations. Of course, everyone comes with different strengths and weaknesses, but the best partnerships work because the vision and values are shared as well as passion and enthusiasm. They can lead the partnership through all the stumbling blocks in the negotiations. Remember that the best partnerships work best when the strengths of each party strengthen the bond to achieve increased and shared success. 3. Negotiate to assess relevance, not just to structure the relationship In our experience, the main reason for partnership failure is a lack of alignment. While the partnership is being negotiated, the focus must be on common objectives.

Most importantly, companies need to assess whether their values and cultures support a dynamic relationship during implementation. The following steps will help you determine what type of strategic partnership will help you best meet your needs and deal with the current uncertainty that affects the company`s return on investment. In a strategic partnership, the partners remain independent; share the benefits, risks and control of joint actions; and make ongoing contributions in strategic areas. Most of the time, they are established when companies need to acquire new skills in their existing business. Strategic partnerships can take the form of minority stakes, joint ventures or non-traditional contracts (such as joint research and development, long-term procurement, distribution and joint services). Create a written vision and principles to guide everything you do together. While you`re not starting a business, it`s helpful to write it down and use it as the basis for how you`re going to interact and collaborate. Think of it as a temporary culture that exists for the partnership period.

Determine which types of partnerships best align with your strategic goals, increase your success in managing uncertainty, reduce risk, and drive growth. Here are some tips to help you approach and manage partnerships in a win-win situation. Pauline Martin-Brooks, the Australian “Queen of Partnership” and internationally bestselling co-author of Millionaire Mentors, has made millions of dollars in revenue for the companies she has worked for through what she calls joint ventures. Pauline`s very first partnership lasted six months and brought in 732 leads in an hour! After years of managing hundreds of successful partnerships, Pauline has developed a systematic process of identifying, attracting and conquering strategic partnerships to grow businesses. Do you want to learn how? These findings are consistent with empirical research that identifies three main reasons for the failure of the strategic partnership: In addition, partners need to define the “success” of their operational teams: what indicators will they use to determine whether they have achieved their goals and how will they pursue them? Some companies have created responsibility matrices; others used detailed process maps or project phase gates to clarify critical expectations, timelines, and performance metrics. When partnerships are formed for the first time, it is usually the business development teams that are responsible for building the deal file and identifying the value that can be created for both parties. As the partnership evolves, operational teams must take on this task, but they need ongoing guidance from the leaders of partner organizations. But in the rush to reach the agreement, discussions about common goals are often overlooked. This is especially true for strategic alliances within an industry, where everyone assumes that because they are in the same industry, they are already on the same page. By skipping this step, companies increase the stress and excitement that is applied to the partnership and reduce the chances of success. For example, day-to-day operators end up receiving confusing advice or conflicting priorities from partner organizations. Here`s their 10-step process for developing strategic partnerships that will help you grow your business in less time and, most importantly, with less money.

While a strategic partnership can increase the value of your brand, remember to evaluate your own value and make sure it is recognized in the relationship. Defining value in advance is important to maintain equality and illustrate why someone should work with you. Strategic partnerships are often established to address the competitive dangers of counterfeiting and substitution, but while the risk of imitation should be addressed in the area of value channels, the response to substitution in strategies should be at the level of the business model. In general, companies that choose strategic partnerships should make changes at the strategy level, including organizational structure, processes and, most importantly, engagement at all levels. Companies should clearly define the areas in which partnerships should be established based on their overall strategy and objectives. According to a 2014 survey by PWC CEOs, more than 80 percent of U.S. CEOs are currently looking for strategic partnerships or intend to do so in the near future.1 Yet only about 65 percent of those seeking new strategic alliances have been successful in the past three years. 7. Write things down. Large partnerships require a great deal of protection.

Seal all agreements in writing to avoid disorderly separations in the future. This is one of the most difficult conversations, but by far the most important. Bringing together different corporate cultures can be challenging given the different communication styles and expectations of partners. The good news is that there are a number of tools – including financial models, KPIs, playbooks and portfolio reviews – that companies can use to fill in the gaps. And not all of these interventions depend on technology. Some companies simply standardize the format of partnership meetings and calendars so teams know what to expect. .