It is no secret that partnerships are absolutely essential to any growing startup. Companies frequently seek partners that can help them access new markets and channels, share intellectual property or infrastructure, or decrease risk. The more complicated the corporate environment becomes when new technologies emerge and innovation cycles accelerate, for example, the more interactions via solid partnerships seem logical.
Partnerships can also be laced with issues if they are not harnessed correctly. According to a McKinsey poll, executives perceived the following problems as being the most vital; Partners’ differences in their fundamental objectives, poor communication methods, inadequate governance mechanisms, and partners’ failure to identify and implement the adjustments required for the relationship to flourish when the market or other conditions change.
The truth is that successful collaborations don’t just happen. Strong partners establish a solid basis for developing commercial ties. They place a premium on responsibility inside and among partner firms, and performance is measured by clear indicators mutually agreed upon previously. Let’s review in more detail.
Assess each other’s position and vision
Before you start having tactical discussions with potential partners, you will want to sell them on your brand’s story and goals. Inform them entirely about your operations and ambitions, and look for those that are enthusiastic about being a part of it. Consider who you want to establish your brand with because you’ll be working with them for months, if not years. In many ways, it can be compared to a romantic relationship. At the outset, you want to present yourself in the best way possible, as someone open and honest. However, we all come with baggage, so you can’t judge a potential business partner by just one interaction.
Trust, confidence and collaboration are the foundations of the most robust partnerships. Look for partners that are looking for more than just a transactional connection and will contribute relevant ideas and knowledge. They should be proactive in detecting issues and working with your team to solve them.
The only way to guarantee that everyone understands the partners’ goals (whether their primary focus is on improving operations or launching a new strategy) and share the same key performance indicators (KPIs) is for there to be transparency during discussions. According to BPI network, 45% of executives categorize their biggest challenge in strategic partnerships as keeping them active and mutually rewarding—you don’t want a situation where one side is benefiting far more than the other.
Points of contention will inevitably arise. Companies frequently differ on cash flows or decision powers. However, throughout the negotiating stage, successful partners communicate such preferred business practices, come to an agreement on objectives, and reset time tables and milestones.
It’s crucial to assess your options, don’t talk to one vendor one day and sign a deal the next. Have a dialogue with multiple providers in every vertical before deciding which one is best for your firm. It’s better to select a small number of partners and build close bonds with them rather than having many with flimsy bonds.
Maintaining the relationship
Again, like in a relationship, communication is crucial. If with each passing day you are communicating less and sharing fewer ideas, this should be setting off alarm bells about your business partner. Not keeping all parties informed can create huge problems further down the line. In fact, a major factor in the failure of joint venture partnerships, according to 38% of managers, is a lack of trust and internal communication.
Using my company as an example, if we were working closely with a boat club and were launching an event, but a key stakeholder was missing from the club’s side when details had already been agreed upon, this would represent a miscommunication error. Perhaps this individual would flag several issues when joining the discussions late. And so, because they hadn’t been included in earlier discussions, the partners wasted time designing an event for the joint venture that would not work for either of us.
It can even help to use metrics for alliance management. You and your business partner could select a group of people to track defined metrics and flag areas of concern ahead of time, so you can change tack. For example, with our manufacturer, we might notice that production was slowing down but not to a rate that was noticeable unless someone was analyzing the metrics over months.
As an extension of this idea, it’s essential to ask yourself what metrics you will use to define the overall goals of the partnership? You may go with some kind of process map to clearly outline expectations, time lines and performance measures. The metrics may relate to cash flow, sales revenue, ROI, or even more strategic and nonfinancial measures like market share and customer loyalty.
Be adaptable to change
As mentioned above, human beings can be messy—we all come with baggage, which extends to businesses. Organizations involved in a partnership must accept that dynamics will shift over time. For example, maybe new regulation is introduced or one of the partners relocates. Both parties must accept these eventualities, so planning from the outset is obviously ideal.
One should be willing to adjust the partnership based on changing circumstances. For instance, there could be a change in market demand for a particular product, requiring a shifting focus to a different product. Or new technology has emerged, requiring implementation of the technology to an existing product.
Whatever reasons you may have for jumping into a business partnership, following these steps will ensure that you make the best of it, no matter what circumstances befall you and your partners. We have to be realistic—partnerships fail in more than half of cases (just like marriages … where have we heard that comparison before?!). Frequent causes include having unreasonable expectations, failing to agree on goals, and lacking trust or communication. However, if you can be clear in your vision, overcommunicate with your partners and be willing to adapt whenever necessary, you are more likely to succeed.