Business Partnering to Improve Performance

Business partnering is the development of formal strategic relationships between independent companies to achieve better results than one could reach on its own.  The most common goal is to grow revenues and go-to-market capabilities.  Business partnering can also enable cost savings by pooling fixed and variable costs.

Business partnering is as old as commerce itself but current collaborative solutions are much more sophisticated.  Successful, long-term relationships can create sustainable competitive advantage.  The size of the companies involved and the extent of the strategic alliance coverage add complexities.

When multiple firms enter into formal, complex business relations we often call it ecosystem development.

Areas of business partnering solutions include all major functional domains:

  • research and new product developmentall_globe_rgb
  • marketing and advertising
  • sales and business development
  • production and manufacturing
  • distribution and logistics
  • human resources and recruiting
  • information technology and infrastructure
  • finance, accounting and legal

All of these business functions have corresponding service firms and consultants outside their organizations who provide partnering solutions.  Strategic alliance professionals work with client organizations to find, integrate and optimize business partnerships between one business and/or organization and another one.

Services include the architecture of the collaborative relations, governance, facilitation and ensuring the program management of the strategic alliance.

One exciting recent development has been advent of ecosystems:  multiple partnerships among independent companies and organizations.  Public-Private Partnerships (PPP) are a common form of ecosystem development to design and implement major infrastructure projects.  Contract Research Organizations (CROs) are examples of ecosystems in the life sciences industry, particularly with bio-technology firms.

The past decades have witnessed a strong trend towards the international dispersion of value chain activities such as design, production, marketing, distribution, etc.

International production, trade and investments are increasingly organized within global value chains (GVCs) where the different stages of the production, sales and distribution processes are typically located across different countries.  Globalization is the complete value chain integration worldwide.

Ecosystems allow for GVCs to be established not just across geographic zones, but across multiple firms and even across vastly different industries.  Ecosystems are advanced collaborative frameworks which enable new types of partnerships which reconfigure the traditional competitive landscape.

Coopetition is the new normal with competitors becoming complementors for specific product and service offerings.  The technology sector is leading the charge in the new networked economy.  One of the best and most profitable and most renowned examples of coopetition is the Microsoft-Intel partnership, called Wintel, which created tremendous value for both firms for two decades.

Associations and member firm organizations are business partnerships representing ecosystem developments.  How do they work and what types of results can be expected from these advanced partner networks?

In the case of major infrastructure projects, ecosystems are mandatory to achieve maximum effectiveness.  At a recent Smart City conference, many examples of ecosystem development were put forth of intelligent networks, public-private shared investments, green buildings, sustainable solutions (especially in waste & water management) and energy efficient engineering.

To improve performance, business partnering requires companies to transform their businesses in terms of relationships, behaviors, processes, communications and leadership.  We are now beginning to see joint transformation projects, but these innovative organizational designs remains timid and overly cautious.  Top executives tend to favor control over partnerships where shared project management pushes them out of their comfort zone.

Business partnering to improve performance varies from sector to sector.  Each industry vertical brings a different set of values, priorities, resources and competencies to a partnership. The challenge of any partnership is to bring these diverse contributions together, linked by a common vision, in order to achieve sustainable development goals.

The Association of Strategic Alliance Professionals (ASAP) is the foremost global strategic alliance not-for-profit group which promotes the practice and discipline of collaborative solutions partnerships.  The sectors which dominate this association are technology (software) and life sciences (biotech) firms.

Effective collaboration is not just a principle but a process, one that can be complex and challenging. Success requires a particular skill set and knowledge of partnering processes. With these critical elements in place, partnerships can achieve real impact. Without them, partnerships are likely to under-perform or fail altogether.  Consultants are used to make sure the design and implementation create optimal conditions for success.

Another common strategic partnership involves a supplier / manufacturer partnering with a distributor or wholesale consumer. Rather than approach the transactions between the companies as a simple link in the product or service supply chain, the two companies form a closer relationship where they mutually participate in advertising, marketing, branding, product development, and other business functions.

Business partnering to improve performance takes on many forms, including:

  • horizontal alliances characterized by collaboration between two or more firms within the same industry, bundling products and services to the benefit of the end customer, and presenting the new product or service to the market
  • vertical alliances characterized by collaboration between two or more firms within different industries, tightening vertical integration along the supply chain, enriching the product or service of one of the firms
  • inter-sectoral alliances characterized by collaboration between two or more firms outside similar industries and vertical value chains, to provide multiple product/service offerings as a convenience to the end customer

Business partnering can involve various levels of equity investments:

  • acquisitions – gradual or sudden majority financial ownership of one firm by another, this relationship often starts out as an alliance and morphs into the purchase of one firm by another
  • joint ventures – creation of a new legally independent company, sharing investments and resources and capabilities, building a new firm (or a holding firm) to achieve market success in a more powerful or nimble manner than heretofore
  • minority or non-equity alliances – partnering solutions which are commercial and more often transactional in nature so that the collaboration is totally flexible and various as per market conditions and the success of the partnership

Collaborative solutions between independent companies are not new, but the increasingly complex configurations require new ways of working.  This is the advent of an entirely new form of business partnering – ecosystems are the wave of the future and the best companies, large and small, are just scratching the surface of new value creation through strategic alliance development.