How Strategic Partnerships Can Help Build a Successful Business
Partnering with like-minded companies in your community offers a solid opportunity for both parties to see significant financial growth.
Starbucks and Pepsico did it. The Walt Disney Company has done it with Hewlett-Packard, McDonald’s, Kodak and Coca-Cola. Twitter and IBM do it. What have they done? They’ve all formed strategic partnerships to maximize reach and profits.
What Is a Strategic Partnership?
A strategic partnership is a venture in which you create a relationship with a company that complements your company. This partnership benefits both organizations, primarily by expanding their markets and introducing new customers to each company. It’s very different from what we’ve come to expect in business.
“The typical culture of competition between businesses is the mindset of ‘In order for me to win, you must lose,’” says George Athan, CEO and chief strategist of MindStorm Strategic Consulting in New York. “Countless books have been written about applying the art of war to business, where business owners feel like they must fight for market share like it’s the last bit of oxygen. The reality is that this mentality will put you at a competitive disadvantage in today’s world. Smart business owners understand the power of strategic partnerships, and those who do not adopt this way of doing business will be left behind.”
“All companies face a growth challenge, but there are two possible sources of growth: increasing your share of the existing market, and growing the market,” explains Karl Ronn, coauthor of The Reciprocity Advantage: A New Way to Partner for Innovation and Growth (Berrett-Koehler 2014). “The traditional focus of business is on the market share game. This is win–lose. Growing market share is important, but large growth comes from creating new sources of growth. Reciprocity Advantage is about identifying those new areas of growth by embracing the disruptions that are occurring, and then partnering to become a leader in the new market—while maintaining your strong traditional business.”
Doug Holt, owner of Conditioning Specialists in Santa Barbara, California, saw potential benefits in forming a strategic partnership with local chiropractor Izzy Lira, DC. “We refer clients to each other,” explains Holt. “This level of partnership not only allows for both businesses to grow, but also it ensures that the client is taken care of with a complete handoff.”
Cross-promotion is another benefit of a strategic partnership. “We’ve cosponsored charitable events to raise money for great causes and to cross-promote each other’s services. This has increased public awareness of both businesses, and it has brought a teamwork approach to wellness for Conditioning Specialists clients and Dr. Lira’s patients.
“Our partnership goes beyond a basic agreement. Both businesses offer more options to clients and to staff. Having two different approaches to wellness allows for continued growth in education and also for awareness in the community. If one partner doesn’t know the answer, we now have our own version of a pit crew to help solve a client’s health or fitness challenges. In the end, it’s about adding more value for the client.”
What Makes a Good Strategic Partner?
“Your ideal strategic partnership is a business that caters to the same target audience but does not compete with your product or service directly,” explains Athan. “Strategic partnerships do not succeed when there is a direct competing product or service and each business has to worry about whether customers will switch to the other company.
Partnerships may also fail if there is not a direct correlation between your products or services and those of the other company. For instance, it probably doesn’t make much sense for a personal training company to partner with an accounting firm.
Ronn suggests, “When assessing a partner, begin by asking, ‘What is it that I’ve always wanted to do, but couldn’t do unless we did it together?’ You can’t partner without being able to find that answer. Reciprocity Advantage is about sharing capabilities to create new growth. To create new growth for both partners, you want to partner with someone who needs your capability and has a capability that you need.”
Ronn adds this: “Start slow and start small. Experiment together at low cost and on a small scale to figure out the new business. And be patient.”
Athan suggests some simple ways to get started:
- Send your menu of products and services to your strategic partner’s email list.
- Offer your existing clients a free or discounted product or session when they purchase from your strategic partner.
- Bundle one of your services with clients’ purchase of your strategic partner’s services.
- Include your brochure inside your strategic partner’s catalog mailing.
“You are limited only by your imagination. Get creative,” encourages Athan. “Most likely, you will have to approach someone with the idea, because the average person is not thinking about how to put these together. Make a consistent effort to systematically build your strategic partnerships. Set goals and surpass them. This is the secret to creating a highly profitable business that grows exponentially.”
To Partner or Not to Partner?
At this point, “the wheels are turning” and you’re thinking about potential businesses you could partner with. Or perhaps you’re thinking you can do it all on your own, and you don’t want to share any pieces of your pie.
“Do strategic partnerships only when you must,” warns Ronn. “Don’t confuse this with the normal ‘partnerships’ that are really customer–supplier. If you could do this with anyone, then the relationship is a transactional, customer–supplier one.”
In other words, if you’re a gym owner, partnering with your office supply provider is a customer–supplier relationship, and the two of you are probably not potential strategic partners.
“Think of your Reciprocity Advantage partner as a cofounder of the new business that will complement your core business,” Ronn continues. “IBM and Twitter signed a deal that keeps them both doing their core business, but it’s focused on changing the way we do work at the office. IBM has the access to offices and knows the current IT systems. Twitter is changing the way we communicate socially. . . . Together, they can experiment to learn how to make social media work in the office. While these are huge companies, the principle is the same for small companies.”
“No one becomes massively successful completely by themselves,” observes Athan. “And cutthroat-type marketing will get you only so far, attracting customers who are just as cutthroat. People who are not loyal to your brand will haggle with you to drive down the price, potentially reducing your profit to almost nothing, and they’ll leave you the minute they find a better offer. People who are referred to you by your strategic partner are typically the easiest to deal with. They tend not to argue over price, and you are likely to adopt the long relationship that this customer already has with your referring partner. You build high-quality relationships with satisfied, lifelong customers and clients.”