A Framework for Strategic Partnering

Understanding When to Partner

No organisation can achieve excellence in all areas. Attempting to do this will result in trying to be all things to all people and nothing to anybody. Therefore, to achieve sustainable competitive advantage, every organisation needs to choose a few (2 to 4) areas that are important to its customers that it can focus on and achieve excellence in these areas.


So what happens to all the other areas? The figure below assists us to determine when partnering is appropriate and when it is not.


By mapping all the key processes that create value for customers in each product/service area, we can make a distinction between processes that are core or distinctive and processes that are non-core. Core processes that are unimportant to customers probably need to be re-engineered to minimise cost or increase customer value. Non-core processes that are unimportant to customers should be discontinued as they add cost to the business and no value to customers.


We distinguish between core and distinctive processes that are important to customers because they may be core (everyone must have them just to play the game) or they may be distinctive to us, providing us with some competitive differentiation. We need to maintain parity on the core capabilities and build excellence in areas that are distinctive.


Areas that are non-core but critical, such as the logistics of collecting milk from farms for milk production, need to be outsourced to organisations who can do these activities more efficiently and cheaper than you can. Once non-core but critical activities have been identified, we then seek to identify potential organisations to partner with that are cost-effective, reliable, financially stable and are aligned with our culture and philosophy.


Adding Value Through Strategic Partnering


  1. Strategic partnering can potentially add value for you in one or more of the following areas:
  2. Shorten time frames
  3. Create new or improved performance
  4. Lower costs and risks
  5. Provide more value-in-use
  6. Offer a stronger product line
  7. Increase product appeal
  8. Leverage complementary technology, knowledge or competence
  9. Shape or influence industry forces


Case Study: A Management Consultant and a Publisher/Distributor

A Management Consultant in Australia wanted to commercialise some of its proprietary intellectual property (IP) for distribution to large organisations, government and other consultants both domestically and abroad. Its business model was to provide bespoke business-to-business (B2B) turnkey solutions to individual clients with a high level of personal service. It did not possess the capabilities to package standard products for distribution into mass markets.


The Publisher/Distributor believed that the IP was leading edge and world class, provided synergy with its existing product range and could easily be repackaged in standardised form for distribution through its broad marketing channels. Both parties believed that there was significant potential synergy and leverage. The Strategic Partnership could add value in several ways. It could potentially:

  • Create new or improved performance
  • Lower costs and spread risks
  • Provide more value-in-use
  • Offer a stronger product line
  • Increase product appeal
  • Enhance both parties through complementary technology, knowledge or competence


Management Consultant

Publisher/Distributor

Products: Consulting in Strategy, Leadership, Change, Research
Products: Training in the use of Type related instruments
Current Customers: Medium to large organisations
Current Customers: HR, training staff, in-house and external consultants
Issue: Growth limited by time based nature of product

Issue: Limited product range in consulting

Distribution limited to Australia and New Zealand

Objectives:

  1. To package and distribute consulting products to a wider range of customers
  2. To position the practices as Consultants to Consultants
  3. To raise its profile domestically and internationally
Objective:
  1. To fast track the development of an extended range of products that are in line with current product range
  2. To enter and penetrate selected international markets


Choosing the right strategic partner is fundamental to a successful alliance

Four conditions are necessary to develop a successful alliance. Each, in and of itself is necessary but insufficient to sustain a strategic partnership. It requires the presence of all four necessary conditions for any chance of success. The four necessary conditions are:

  1. Having a shared Vision and common objectives
  2. Mutual commitment
  3. Willingness to share risk
  4. Willingness to build a a forgiving long-term interdependent relationship


A Framework for Strategic Partnering


Present/Future Internal/External Analysis

It is assumed that both parties to the partnership have done their homework and undertaken significant and rigorous analysis of both the external and internal operating environments. The parties will have concluded that the Strategic Partnership is necessary to strengthen their relative competitive positions and keep both parties relevant to their customers.


Building a Shared Vision

As a carefully constructed vision will unite, inspire and motivate both parties, it is one of the fundamental underpinnings necessary for a sustainable partnership that can withstand the storms of a dynamic environment over time. The joint vision statement must support and reinforce each party’s corporate vision yet be subservient to each.


The joint vision presents a dynamic picture of the future state of the partnership and venture, a description of what it will feel like, look like and be like in a numbers from now. It is a statement of destination. It will need to be developed collaboratively to ensure that it is ‘owned’ by all parties.


Critical Issues Management

When both parties are heavily dependent on the success of a partnership, the Critical Issues will be driven by each party’s needs and fears. Needs will be driven by the requirements and rules of the market place and financial targets. Needs motivate through inspiration and hope of potential gain. We want to move towards achieving our needs.


Fears will arise from the perception of vulnerability and will be driven by each party’s culture. Fears motivate us to move away from perceived pain or loss and are an example of motivation through desperation.


When the avoidance of fear is greater than the potential gains from satisfying the needs, then the strategic partnership is likely to dissolve in the near-term. When the potential upside (gain) exceeds the maximum downside (fear), the parties have a solid basis upon which to build a partnership.


In the above case study, the needs and fears of each party were articulated as follows:



The nature of the relationship between two parties involved in a Strategic Alliance should be determined by the nature of the INTERDEPENDENCE between the parties. The interdependence indicators of the parties in the case study were:


Having identified and agreed each party’s needs, fears and interdependence indicators, the parties should focus on the mutual needs to unlock the potential value of the partnership.




Identify and flesh out the joint critical issues that arise from mutual needs, fears and interdependencies. Prioritise the identified issues in terms of urgency and impact on the partnership. Starting with the high impact high urgency issues, develop objectives, strategies and action plans for each. For more information on this framework, purchase the Taking Action Module of the Strategic FIT Program supplied by thestrategyworkshop.com.


Building Win-Win Relationships

Both parties need to be flexible in their dealings with each other. To build mutual trust and commitment, both parties need to:

  1. Be specific about goals
  2. Clarify and resolve separate interests
  3. Respect each other’s independence
  4. Be willing to adjust
  5. Recognise common needs
  6. Define the boundaries

Protecting each Party’s Interests

There are 8 areas that the parties must work on to protect their interests and nurture the partnership.

  1. Protect key product features and values
  2. Retain control of key relationships
  3. Hold on to vital operating strengths
  4. Safeguard critical technology
  5. Preserve growth options
  6. Maintain a strong organisation
  7. Sustain financial strengths
  8. Plan for unreliable relationships


Conclusion

Notwithstanding the difficulties associated with cultivating Strategic Partnerships, if managed diligently and in accordance with the above framework, both parties will benefit long-term. They will each be able to better leverage their own distinctive competences to sustain competitive advantage, unlock many synergies from collaborating, better manage and mitigate joint risk and deliver better returns for the shareholders of both companies.


Learn how you can obtain the benefits of Strategic FIT for your company and/or your alliances

Be Sociable, Share!
 
 

Tags: , , , , , , , , ,

 

5 Responses to “A Framework for Strategic Partnering”

  1. ultrasound technician says:

    found your site on del.icio.us today and really liked it.. i bookmarked it and will be back to check it out some more later

  2. Wow this is a great resource.. I’m enjoying it.. good article

  3. m sadyeh says:

    Great article and great job, thanks

  4. talal says:

    Dear Sir,

    can i have the email addres for the one who wrote this article since i need his advice in some related points
    Regards,
    Talal

  5. Absolom Masendeke says:

    I really enjoyed the ideas on strategic partnering and i have an interest in getting more resources (literature, textbooks) etc with a bias for the development sector

Submit Your Comment




*