Entrepreneurs quickly learn that “you can’t do it all yourself.”
Partnerships are one way to improve and preserve market position. Especially in difficult times, it is important to focus on core competencies and find partners to help deliver cost-effective solutions to customers.
There are many ways to partner–from small-scale collaborations to joint ventures or acquisitions. Traditional ways of reaching new customers and specific territories include using distributors and resellers.
More complicated business collaborations include joint development and licensing programs. In some business sectors, multiple parties join forces. For example, travel- and tourism-related collaborations have been established among airlines, hotels and car-rental services, and among travel agents, tour operators, tourism promotion groups and reservation systems.
On the internet, worldwide collaborations are possible for even the smallest company.
Business partnerships between bigger and smaller companies can produce great outcomes for both:
- Smaller companies gain access to larger markets and take advantage of the bigger company’s sales, marketing, distribution and support resources.
- Bigger companies find it cost-effective to obtain new products and technologies by partnering with smaller companies.
Seeing the mutual benefit is usually the easy part–but differences in infrastructure and operating style can derail a partnership.
The great potential of partnerships is frequently not achieved because the partners are not on the same page. That’s why it’s important to understand where you are in the process. It’s imperative to write down your assumptions and agreements: Otherwise, people remember things differently, and problems arise. So the following is intended as a guideline to facilitate successful implementation of the partnership “process.”
The goal is to clearly document the mutual understanding of the partners so there is less chance of a misunderstanding down the road. Frequently, the process of writing the agreement brings differing assumptions to the surface, enabling adjustments to be made before a big problem occurs.
Critical Success Factors:
Clear goals:
- What’s in it for both companies? If you and your partner can’t clearly articulate mutual benefit, the partnership is doomed.
Strategic fit:
- Smaller companies tend to underestimate the complexity of dealing with bigger companies.
- Bigger companies tend to have more resources but are slow to make decisions. It is common for bigger companies to have a number of committees involved and to move people around so that the players keep changing. Employees see doing business with a smaller company as risky and fear losing their jobs if the relationship doesn’t go well. Hence, it’s critical to have senior people from a big company involved and committed to the implementation, or the relationship is doomed to failure.
- Smaller companies need to “prove” that they can deliver and meet their commitments.
Infrastructure and Stages of a Partnership
Business relationships also progress though predictable stages. The following discussion is adapted from Bruce Tuckman’s Forming, Storming, Norming, and Performing model for team development.
Learning how to manage through the predictable stages of business relationships is critical to a successful partnership.
Forming
This is sort of like the “dating phase.” When a business relationship is forming, people feel excitement, anticipation and optimism. They are focused on the mission, vision and goals of the relationship.
At the forming stage, a written agreement provides clarity about mutual expectations, roles, responsibilities and financial commitment.
Storming
In this stage, people are adjusting to working together. Storming is like “living together” and learning to accept each other’s personal habits.
As working styles are merged, people experience arguing, conflict and dissent. There can be significant disagreement and confrontation. Confrontations can be about how work is accomplished, how transactions are reported, and the way fees are paid. Differences of opinion over how things will be done should be addressed in a constructive way to find the “best practices.” Failure to constructively resolve conflict usually results in the end of the business relationship.
At the storming stage, a written agreement provides a framework for resolving issues and, if necessary, exiting the partnership.
Norming
Business relationships that make it through storming emerge into a new stage in which people begin to integrate their various ways of working in a cohesive manner.
Norming can be like marriage and “settling into a long-term relationship.” In the norming stage, people feel a sense of belonging and are comfortable sharing ideas and feelings, and giving and receiving feedback. Norming involves moving beyond the work into enjoying each other, socializing and having fun.
At the norming stage, a written agreement helps to define “best practices” and systematize the working relationship.
Performing
At this stage, business partners achieve interdependence. This means that they work well together, achieving more together than they would as individuals. The analogy for performing is “successful parenting,” in which you work as a team to handle the challenges.
At the performing stage, a written agreement helps to keep priorities and plans aligned.
Unfortunately, many business partnerships do not progress to the performing stage. If the partnership derails, you need an “exit strategy” so that you can end the relationship without resorting to litigation.
Business partnerships are an important way to expand the range of products and services that you provide and the markets you can reach. These tips can help you maximize the potential of a strategic partnership and minimize the risk.
