How to Build Strategic Partnerships that Drive Revenue
Different people have different interpretations of the word “strategic partnership.” A strategic partnership is defined as a formal collaboration between two or more organizations which includes the following three characteristics:
- It aims to add value to businesses in some way by increasing income, cutting costs, or developing new ideas and inventions.
- Collaborative work is managed to varied degrees by both sides. There isn’t a single party in charge.
- In a strategic partnership, the risks and advantages of the joint endeavor are shared, not always equally, but both parties benefit.
For instance, IBM and Apple allied and began a strategic partnership a few years ago to integrate IBM’s corporate services into Apple’s mobile products and platforms. This allows IBM’s large clients to manage field operations while analyzing data in real time. Both IBM and Apple benefit from this deal.
Alliance agreements, collaborative R&D agreements, co-marketing agreements, minority investments, and equity joint ventures are examples of strategic partnerships that two or more organizations form together.
Mergers and acquisitions occur when one side clearly controls and owns all of the deal’s risks and profits. There are various forms of strategic partnerships, but they all have one thing in common: developing new ways to expand or develop businesses.
Partnerships serve as growth engines for businesses, and despite their intricacies, all partnerships must be handled with care.
6 Ways of Building Strategic Partnerships that Drive Revenue
Creating strategic partnerships is a highly effective sales growth approach that can lead to increased revenue. It all comes down to choosing a partner that provides a complimentary service or product.
Finding the appropriate companion is the most challenging task. Hiring a third party to negotiate the agreement on your behalf is the best method to form a strategic alliance.
A third party can offer advice on how to create successful strategic partnerships, structure the agreement, and keep private information safe during the process.
Below are some fundamental steps to be followed in building strategic partnerships that drive revenue:
1. Establish a Clear Foundation
The first step you should consider in setting up strategic partnerships aimed at driving revenue is having a viable and virile foundation. This involves creating a clearly defined objective aimed at boosting sales, as well as a strong governance strategy.
Partnerships and alliances that are strategic and successful are difficult to achieve. They require substantial planning ahead of time to establish a solid foundation that will support each partner through the hurdles they will surely face.
Adopting a shared foundational objective and a common start will increase your organization’s chances of forming long-term and effective collaborations.
It’s also critical to ensure that all departments are on the same page regarding the aims and priorities throughout the planning phase. This early stage is sometimes cut short. Also, including team members with negotiation experience in those alignment sessions is always a good idea.
Ideally, your operating and management team should be involved in the negotiation phase, as well, so everyone has a clear grasp of the broader market and goals.
Setting up the next step of Key Performance Indicators (KPIs) and processes, and ensuring that everyone understands their tasks, will be considerably more difficult without specifying those expectations.
2. Acknowledge Each Other’s Capabilities
Complementary geographies, corresponding sales, and marketing strengths (or compatibility in other functional areas) are some of the reasons why partners join together. However, it’s crucial to know the area in which your partner excels. This procedure must begin before the contract signing and cannot be stopped once signed.
For example, in one consumer products joint venture, the two partners are readily confident in their strategy to combine Company A's manufacturing capabilities with Company B's sales and marketing capabilities.
When they talk about how to manage financial reporting, it’s evident that Company B already has a lot of planning, budgeting, and reporting experience. Typically, Company A's product team would be expected to handle these financial chores, but both partner teams acknowledge that Company B should apply their expertise to this aspect of the project. In this way, they are able to improve the joint venture’s ongoing operations and assure its viability.
3. Understanding Individual Motivations
You should also keep in mind that understanding each partner’s motivation for the deal is crucial. This is a popular area of attention during early talks; it should be considered in day-to-day operations as well, especially if each partner has supplementary motivators such as access to suppliers or the transfer of expertise.
You should understand the rationale behind the partner’s decision to join the alliance to map out a corresponding strategy.
4. Invest in the Right Tools, Procedures, and Personnel
Given the parties’ different communication styles and expectations, bringing diverse company cultures together can be difficult. The good news is that firms may utilize a variety of tools to bridge any gaps, including financial models, key performance indicators, playbooks, and portfolio reviews.
Not all of these approaches are reliant on technology. Some businesses simply standardize the format and agendas of partnership meetings so everyone knows what to anticipate, while others adhere to strict reporting guidelines.
Convening an alliance-management team is also a smart idea. This group monitors and evaluates the partnership’s progress against predetermined measures and assists in identifying any red flags—ideally with enough time to correct the course should the partners get off track. These groups come in a variety of shapes and sizes, and should always include team members from each partner company.
5. Place a Premium on Accountability and Metrics
Given that good governance is the foundation of successful partnerships, senior executives from partner organizations must participate in the partnership’s monitoring.
At the very least, each partner should appoint a senior line executive as “Deal Sponsor”—someone who can keep operations leaders and alliance managers focused on priorities, advocate for resources when needed, and generally create an environment in which everyone can act with greater confidence and coordination.
The partners must define “success” in terms of their operations teams:
What measures will they use to see if they’ve fulfilled their objectives, and how will they keep track of them?
To define goals, timetables, and essential performance measurements, some firms have created responsibility metrics; others have employed detailed process maps or project stage gates.
When new partnerships are formed, the business development teams are normally in charge of making the case for the arrangement and determining the value that can be made for both parties.
The operations teams will have to take over this role as the relationship develops, but they will need continual guidance from senior officials in the partner organizations.
6. Create a Thriving Collaboration
Sometimes, and not just as a last resort, a partnership needs to be restructured. For example, revisiting the structure of a partnership in which both parties are focused on the joint commercialization of complementary products may be less important than revisiting the structure of a partnership centered on the joint development of a set of new technologies.
There are some general guidelines to follow when considering changes in partnership arrangements. The bottom line is that the nature of the partnership between organizations is likely to change over time. Stakeholders must stay open to collaboration and feedback throughout the entirety of the partnership to remain successful.
Whether the partners are in a single or multi-asset partnership, expect to share services, plan to expand, or have any geographic, regulatory, or structural complexity. Accepting the inevitable will motivate partners to plan ahead of time.
The most effective global strategic partnerships for your company are built on mutually beneficial partnerships and incentives. You may achieve long-term, sustainable growth in business revenue by establishing a strategic partner program, as well as remodeling the partner relationship with time.
By preparing ahead for a partner program, you can design your go-to-market strategy with the end in mind. Continue to make use of referrers, resellers, and affiliate marketers to assist in the development, implementation, and measurement of success.
Strategic partnerships are formed for joint marketing, sales, distribution, and production, as well as design collaboration, technology licensing, and R&D.
Vertical relationships between vendors and customers, horizontal relationships between vendors, and local/worldwide relationships are all possible. As a result, small business alliances are frequently formed in the form of joint ventures or partnerships.
A strategic partnership can help your company generate more money and users. Understanding your sector, potential partners, and their pain points will enable you to make great pitches, close deals, and expand your partner network.
With some ingenuity and determination, these 6 concepts will help your partnerships thrive, regardless of your market, business, or objectives.