Corporate Strategic Advisor Bob Barker shares how the value of partnering has grown.
Restarting the economy following the financial damage inflicted by the COVID-19 crisis is no small challenge. Small and medium enterprises (SMEs) in particular face existential risk if they can’t regain previous levels of revenue and profit in a short period of time. Three basic avenues to growth exist:
Partnering is a powerful growth driver often overlooked and underutilized by small and medium businesses (SMBs). A 2018 partnership announced by giants Amazon, Berkshire Hathaway, and JPMorgan Chase entailed pooling resources and working together to remove waste and improve patient experience in the healthcare industry. It eventually resulted in a joint venture named Haven.
The rate of partnering activities is rapidly accelerating. “Forty-nine percent of executives said they were planning a new strategic alliance or JV in the next year to help drive corporate growth and/or profitability. That percentage was more than planned new M&A activity (42 percent), outsourcing (21 percent), or a business sale or market exit (16 percent). That was then—the pandemic could overwhelm all of those issues.” (from “The Increasing Need for Strategic Alliances,” Kate Vitasek, Forbes, 3/28/20)
If large organizations with massive resources believe partnering helps accomplish strategic objectives, why aren’t smaller businesses following suit more often to garner the resources they need to accelerate growth? Common misperceptions may be the cause of their reluctance.
I created a partnering methodology called "Self-Fueling Partnerships" (SFP) based upon decades of building successful relationships that generated huge incremental revenue. In one example, a networking company and a server company realized they had a 40% overlap in their customer base, i.e. 40% of the networking software company’s largest offering ran on the other company’s servers, and 40% of the server company’s largest deployments ran the networking software. By jointly investing $10 million in a fund enabling field offices to sponsor joint marketing events, the partnership generated incremental revenue of $65 million in its first year that was directly attributable to the partnership.
Many ways to partner exist, and every partnership is unique. Here are a few examples:
Product Distribution: A company with a large customer base agrees to promote and sell a new product from another company to its base and split the revenue.
Geography: Market each other’s products and services in different geographic regions.
Development: Combine investment in developing new products.
Joint Sales: Sell each other’s complementary products and services.
Joint Solution: Combine resources to form a third entity that produces and sells new products and services.
Preparing to Partner
A clear understanding of your company’s Strengths, Weaknesses, Opportunities, and Threats (SWOT) is the foundation for analyzing whether to pursue a partnership. Defining your company’s market position clearly and knowing its strengths and weaknesses is mandatory to define a successful partnership. A SWOT assessment can clarify your internal and external positives and negatives.
The completed SWOT analysis identifies challenges that partnering can best address. The chart below depicts the four permutations of opportunities/threats and strengths/weaknesses and the proper actions to take in each case. The y axis depicts the relative impact of opportunities and threats identified during the analysis, while the x axis represents the relative strength of the organization’s ability to respond.
Consider the upper right quadrant. If you’re faced with a high-impact threat or opportunity and your ability to execute is strong, that's your “sweet spot” so respond aggressively. In the upper left, the company’s ability to respond is weak, so responding quickly will require partnering or acquiring. Markets constantly change, so it can be critical to recognize when to partner for quick growth rather than waiting for organic growth to materialize at some unknown future date. Resist the temptation to wait until the company is better equipped to respond. Creating a successful, self-fueling partnership requires clear answers to “what’s in it for me” for both parties (expert Kate Vitasek at the University of Tennessee calls it “What’s in it for We”!). The most challenging step is learning the true motivations of potential partners. We instinctively understand our own needs, but to build a successful alliance, identifying a potential partner’s key objectives is absolutely critical.
After deciding to partner, significantly increase your odds of success by following proven processes that have worked effectively for many years. The diagram below provides an overview of the Self-Fueling Partnership Methodology:
Supported by other highly talented partnering experts, I'm launching a partnering website in the near future called Partnering Source. Our purpose is simple: equip a new generation of business leaders with an intuitive understanding of how to leverage growth-generating resources from partners. We strongly encourage CEOs to add partnering as a vital weapon to attack the market and fulfill their business goals.
Bob Barker is a corporate strategic advisor and a partnering expert. The founder of Partnering Source, he acts as a strategic advisor to innovative companies. He has written extensively for numerous business publications, including Westlaw Journal, Directorship (National Association of Corporate Directors), TexasCEO Magazine (The American CEO), Advisen's Front Page News, and Information Management, and he has been quoted in The Wall Street Journal and Forbes.
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