Forming a strategic partnership might be exactly what you need to grow your business and expand your operations. Many successful brands have joined forces with other businesses to help each other succeed and deliver superior customer service. Think of Spotify and Uber, Apple and IBM, Alexander Wang and H&M and others. However, strategic partnerships come with their challenges. You not only have to choose the right partner but also cultivate and grow your relationship.
A strategic partner is an individual or organization with whom you collaborate and share resources. This kind of relationship is a win-win for both parties and can help you take your business to the next level.
What Is a Strategic Partnership?
When two companies agree to work together and share physical and/or intellectual resources, they form a strategic partnership. Their relationship is usually formalized by a business contract. This type of agreement aims to help both parties accomplish their goals.
Depending on your needs, you can team up with a strategic marketing partner, a strategic financial partner or a strategic supplier. If you plan to integrate new technologies into your operations, you may benefit from a strategic technology partnership. These can be people who create custom software, design office networks or provide the latest artificial intelligence solutions.
Business owners can also form strategic channel alliances. Under this type of agreement, a company's products and services are distributed through the marketing channels of another organization. Equinix and Datapipe, for example, entered a channel-alliance partnership years ago. Back then, Equinix was growing at a fast pace, while Datapipe needed to expand its operations and reach a wider audience. Together, they provide traditional and cloud solutions worldwide. The two organizations promote each other's services, conduct joint thought leadership and work closely to maintain a consistent business strategy.
However, you don't have to be an industry giant to reap the benefits of strategic channel alliances. Small businesses, for instance, may use agent/broker channels to market their products. A company that produces and sells energy drinks can distribute its products through a marketing channel for bottled water or sports supplements. This type of partnership can open new avenues for business growth, increase your market share and take your customer service to a whole new level.
Examples of Strategic Partnerships
Successful organizations from all around the world have formed partnerships with technology-focused companies, suppliers, resellers and even nonprofits. An example is the strategic partnership between Apple and IBM, which started four years ago.
Apple brings the latest mobile technology to the table, while IBM provides big data and analytics. IBM's Watson technology blends seamlessly with Apple's Core ML. Surprisingly, the two industry giants were fierce competitors three decades ago.
The strategic relationship between Google and Luxottica is making waves in the tech industry. At first sight, the two companies have nothing in common. Luxottica is a leading manufacturer and distributor of luxury eyewear, while Google has emerged as the world's most popular technology company. Despite their differences, they formed a partnership to develop sunglasses using Google Glass technology.
This type of agreement is common in the fashion industry too. In 2014, H&M joined forces with designer Alexander Wang to create a limited, high-end fashion brand. The partnership resulted in increased sales for H&M and more customers and brand exposure for Wang.
Another successful partnership is the one between Uber and Spotify. Thanks to it, customers with premium Spotify accounts are able to enjoy their favorite music while taking a ride in Uber cars. This allows Uber to personalize the customer experience, and it increases Spotify's revenue. It's a win-win for both parties.
The Benefits of Strategic Partnerships
Strategic partnerships can deliver major benefits to startups and established companies alike. This kind of relationship allows organizations to access new markets and technologies, reduce their expenses and mitigate risks. For example, an SEO agency can team up with a cybersecurity company. Together, they can provide customers with a wider range of services while helping them prevent data breaches, spoofing, phishing and other types of cyberattacks.
Over 85 percent of companies say that partnerships are essential to business growth. More than 57 percent enter this type of agreement to acquire customers. Approximately 44 percent of business owners seek alliances for new ideas and insights. They also see them as a way to develop more innovative products.
As a business owner, you can build strategic relationships with vendors, manufacturers, banks and other service providers. This will help you secure better deals and improve your services. In the long run, you may surpass your competitors and grow your customer base. Furthermore, a successful partnership can help your business reach new markets. For instance, you can join forces with a shipping company to get lower rates on international deliveries. This will allow you to serve customers from all around the world and strengthen your brand.
If you're a web designer, you can partner with a digital marketing agency or a web hosting provider to market each other's services and expand your offering. If one of your clients needs copywriting services, you can recommend the marketing agency with whom you work. They will return the favor when one of their customers asks for web design services.
A strategic relationship may also increase brand awareness and customer trust. By partnering with established companies, you'll find it easier to grow your clientele and gain exposure. More people will find out about your business and purchase your products or services. This leads to higher revenue and better return on investment.
Risks and Pitfalls
According to the Business Performance Innovation Network, 43 percent of business partnerships have high failure rates. Another 45 percent are unable to maintain a long-term, successful relationship. A whopping 67 percent of companies that agree to work together lack a formal partnering strategy. Like everything else, strategic partnerships are not perfect. If the two parties have competing agendas or fail to communicate properly, their relationship is doomed to fail. Many times, one party or another lacks transparency or says "yes" just to get the deal.
Business owners often don't have a clear understanding of how a strategic relationship works. This type of agreement should be a win-win for both parties. If you're unable or unwilling to help your partner, your relationship won't work. Before entering an agreement, make sure you know what's expected from you.
Forming a partnership is just the first step. After the initial agreement has been signed, both companies must do their part to grow the relationship. They need to align on win-win outcomes, set strategic objectives and have a plan in place. Treat your business partner the same way you'd treat your customers. Show respect and integrity, fulfill your promises and be clear about your values.
Most importantly, choose the right partner for your business. Search for a company whose strategies are consistent with yours. Consider the resources and investments that will be required to make your relationship work. Establish clear goals from the start and think about the types of companies that can help you achieve those objectives. At the same time, determine how the partnership will benefit the other party.
Develop a strategy to make the relationship work. Put everything in writing. This will help prevent any disagreements on intellectual property sharing, revenue sharing, customer ownership and more. Your agreement should state who is responsible for what, how each party will be compensated and how you are going to help each other. Discuss your objectives and strategies, assess the markets served and define key metrics to measure your progress and success rate.