Strategic Partnerships: What they really are?
Discussing the essence of Strategic Partnerships, beyond the Buzzwords and focusing on Genuine Collaboration
I have been developing partnerships and alliances for over 20 years, many of them extremely successful. Something that has been bothering me for some time lately is how widespread the term “Strategic Partnerships” has become these days, so I decided to give my point of view on what makes a collaboration between two or more companies truly strategic.
Strategic Partnerships used to mean something special and unique, a “combination" between two or more organizations to achieve something that the parties wouldn’t be able to accomplish alone and that would set them apart from the rest of their market in the long term. They would usually take the form of minority equity investments, joint ventures or non-traditional contracts, such as joint R&D, intellectual property sharing and shared distribution/services, among other arrangements.
However, the term is being regularly diluted in my view, undermining its original value. This happens as it is becoming widely used, in a way where it is basically a different way of naming any out of the ordinary partnership or alliance, those that are special to at least one of the entities involved, not necessarily to all of them. Seems that the use of the word “Strategic" in many cases means just “more important than the regular ones”.
How can we define that a partnership is strategic?
Partnership experts use different criteria to define them. There is, for instance, the work by Ben Gomes-Casseres about the three laws of business combinations, that describes them according to the following criteria:
They must have the potential to create joint value, must be governed to realize this value, and must share value in a way that provides a reward to each party’s investment.
Each one of those laws is usually illustrated in the following way:
Create joint value means that 1+1 should give 3 as a result, meaning that the results should be additional value
That they are governed is described as if adding 1 to 1 should be 1, meaning that the partnership should be managed as if it’s one entity, and not two different organizations working together
The third law is about how you distribute the result of 3 in a way that is rewarding to both parties (i.e., 1+1 = 1.4 + 1.6)
My argument against this criteria - and many others - is that they could be used to describe also the majority of regular partnerships.
We all understand that strategic refers to something that’s widely important. If that’s the case, it should be something that:
Supports our strategic goals, enabling us to achieve our company’s strategy and,
It’s more important than the rest of the things we do, or at least than the other partnerships we have.
Most of what today is called a “Strategic Partnership” doesn’t fulfil those basic concepts, and as I said before, it’s mostly to describe something above the ordinary.
True Strategic Partnerships
A partnership is a promise, a commitment that the goals of two (or more) entities will be as important as the goals of one of them. This means, at least in my view, that a partnership can only be considered strategic when the goals of all parties are the objectives of the partnership itself, and when the sum is not just three but considerably more.
A truly strategic partnership should deliver outstanding results: 1+1 = 10
If the above is the case, we can’t consider a partnership strategic when it’s only very important for one of the parties. However, in the current technology world, you’ll see many vendors having “Strategic Partners” that are nothing else than their most important channel partners, those that are considered “special" or receive “unique benefits”.
In my opinion, a partnership is strategic only when it fulfils two very specific criteria:
The partnership enables both organizations to fulfil their individual purposes or to reach a place they couldn’t get to by themselves
The partners choose each other, instead of one of the parties considering the partnership strategic and the other one taking it as just another one
The first of the above attributes of a strategic partnership means that the parties will be able to fulfil a relevant portion of their strategic goals through that alliance. If you can reach those strategic goals without the partnership, what is the point of calling it strategic? Let’s call them something else so the expectations are clear for everybody involved and we don’t dilute the value of the term.
The second criteria establishes that this is not something that can be the result of one party recruiting the other one, but it’s the result of a process where all the involved organizations end up understanding that they will be better working together than apart.
I have been on both sides of the aisle on the misalignment of what strategic really mean. Of course, it sounds nice to be called by such a term, to be the “strategic partner” of someone you consider as such yourself.
However, when there’s not such alignment, one party might invest more time and resources than it would be advisable, consider it truly strategic for them, and then, the results can be catastrophic.
Being part of a strategic partnership means to be open with your partner about what is your strategy, and that they transparently share theirs with you, to understand clearly what goals each party wants to achieve, and make sure they are compatible. Moreover, all sides must be honest and straightforward with each other, and eager to work together towards their, now, common goals.
To find a simple analogy: a strategic partnership is like a marriage… and you can’t have more than one husband or wife (at least not in most cultures).
Does the vendor you work with have many strategic channel partners or technology alliances in your same sector and geography? Does your strategic channel partner sell other solutions (even competitive ones) that are more important to them than yours?
If the answer is yes, then the partnership is definitely not strategic, it’s just a way for one of the parties to achieve their goals. And that’s fine… just call it something else.
Developing Strategic Partnerships
If you want to call any relatively important partnership “strategic”, that’s your choice, but understand, as I said before, that will decrease the value of the term and, at the end, of this type of alliances.
Nobody wants someone to come up with “next-gen strategic partnerships” to show theirs are really above the standard, diluted “only strategic" ones, right?
Some of your “strategic partners” know already they don’t mean that much to you. Or, maybe, you already know that you are the one on the short side of the stick.
As I don’t make this article just a critique, I want to end this article with how I believe anyone can build successful Strategic Partnerships. First, let’s review the key steps:
Make sure you have clear strategic goals already defined.
Decide which ones of those objectives you need (or want) to fulfil through partnerships and which ones by yourself
Understand what type of partners would be the right ones for you to achieve those goals
Define if you’d need several or just one partner to accomplish your targets
Determine what you can offer those partners in return to what you need from them, something that will be unique and valuable and only you can provide them
Research to find those partners whose strategic goals can be achieved, more effectively and efficiently, by what you have to offer them
Create a long list of potential candidates to become your strategic partners based on the above
Shortlist those that share a similar purpose and values than yours, and preferably, don’t compete with you
Engage with them actively to confirm if they will be the right fit for you and you for them
Once all the above steps have been executed, you can apply the following principles to ensure the Strategic Partnership will be successful:
Make time to understand the strategy, core values and culture of your partner.
Develop a strategy for your partnership that combines the ones from both parties, where there’s a shared investment of time and resources supporting it
Set clear objectives for the alliance, and ways to regularly evaluate them together by all of those involved
Have agreed milestones and plans how to reach them, and be ready to adapt, together, when there are obstacles on the way
Be open about pivots in your strategy, how they could affect the partnership and the other side of it
Don’t be afraid of change as many strategies fail, and strategic partnerships will not be an exception
Following the above steps and principles, and giving Strategic Partnerships the value they deserve, you’ll achieve success that you couldn’t accomplish alone, and that is the whole purpose of having partners.
I am curious about your opinion so let me know what do you think, for instance, what other criteria would you add to call a partnership "strategic"? How would you suggest those should be build?