Strategic Partnership Best Practices

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What is a Strategic Partnership?

A Strategic Partnership is an agreement between two companies or organisations made with a view to helping one-another and working together to a achieve a mutually beneficial outcome.
A Strategic Partnership does not necessarily require formal documents or structure (although these are highly recommended when a Strategic Business Partnership is to be set between two large partners);
instead it relies on a common objective and a trustful relationship between partners.

What types of Strategic Partnerships are there?

There are several types of Strategic Partnerships that can be created, based on the main field of cooperation defined by the companies entering into the partnership.

1) Strategic Marketing Partnerships:

a simple and effective way for brands to expand their audience by accessing twice as many contacts and customers as each of the partners would access if there were to work individually.

2) Strategic Supply Chain Partnerships:

these partners may be manufacturers, distributors or vendors that will supply your business with everything from complex raw materials to every day office supplies.

3) Strategic Technology Partnerships:

as the modern world is heavily reliant on technology, a close relation with technology partners is key to success. It could be the people who design and run your website, create custom software, provide digital security etc.

4) Strategic Financial Partnerships:

financial partners will help you monitor the cash flow of your business and come up with new solutions that can increase the amount of resources available to you.

Strategic Partnerships and Strategic Alliances

Strategic Partnerships are often referred to as Strategic Alliances. As closely linked as the two terms may seem, the words strategic ‘partnership’ and ‘alliance’ should not always be used interchangeably. What is the difference? Strategic Alliances stand for a part of Strategic Partnerships and create a group of more formalised versions of strategic relationships. To define a strategic alliance in simple terms, one could say that ‘every strategic alliance is a strategic partnership but not every strategic partnership is a strategic alliance’.

Types of Strategic Alliances:

1) JOINT VENTURE STRATEGIC ALLIANCE: a joint venture is a new entity that occurs when two companies decide to form a smaller new business together.
2) EQUITY STRATEGIC ALLIANCE: for an equity alliance to occur, one company must purchase a specific percentage of equity in another company.
3) NON-EQUITY ALLIANCE: a non-equity alliance takes place when two companies agree on a contractual relationship that allocates various assets/resources to one another.

Business Benefits of a Strategic Partnership

The process of building Strategic Partnerships requires a high level of cooperation, trust and organisation, but, if managed properly, a Strategic Partnership can lead to very valuable Business Benefits:

1) Access to new markets and technologies.
2) Reduction of expenses.
3) Risk sharing.
4) Opportunities to branch out.
5) Higher scope for growth.

Potential Risks and Reasons for Failure of Strategic Partnerships

The business world has seen multiple failed strategic alliances (43% of business partnership are reported to have failed, another 45% are unable to maintain a long-term, successful relationship) that occurred due to various gaps and omissions:

1) Lack of true motivation.
2) Lack of a uniform partner strategy.
3) Lack of communication.
4) Lack of equality that results in a win-lose situation.
5) Misuse of the business trust.

Being wary of these risks and reasons for failing may help you create better partnership management strategies.

5 Tips on How To Create a Win-Win Strategic Partnership

1) Identify who can help you achieve your goals and choose your partners wisely.
2) Create a formal agreement setting out what both parties expect from the partnership.
3) Make a plan of relationship management, including check in calls and meetings.
4) Tightly cooperate with your partners at all times.
5) Fulfill your commitments.

Read more on the Topic of Strategic Partnerships

Strategic Partnerships (University of Pennsylvania)
The Right Way to Build Strategic Partnerships
Strategic Partnerships (IMD Research & Knowledge)

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