Strategic partnerships have the potential to provide tremendous benefits to your business. Once you have partnership capability, forming an alliance with the right partner can lead to certain advantages you’d never experience on your own, such as:
• An increase in market share
• Pooled resources
• Improved brand recognition
• Better quality product/service
• Greater customer satisfaction
And, ideally, many celebrations over the years as you and your strategic partner reach each business goal.
However, you’ll only enjoy these advantages if you can manage a successful alliance. The reality is that many businesses rush into partnerships without putting in the appropriate preparation, planning, and vetting work required. Or, they go in without an understanding of how to manage the partnership on an ongoing basis. As a result, it is estimated that more than half of alliances fail.
When you understand what is typically behind failure, you can take the appropriate actions to ensure you don’t make these mistakes. Ready to enter into your fruitful, sustainable strategic partnership? Here are the common pitfalls you want to avoid.
1. Lack of Trust and Transparency
In our recent Strategic Partnership Expert Panel webinar, the primary reasons why partnerships fail was one of the main topics discussed. Research highlighted in the webinar shows that poorly crafted legal and financial terms are behind only 14% of partnership failures – because if it’s a poor relationship with a poor partnering model, the legal agreement will not save it.
Without clearly set out expectations, including intellectual property protection, a proper confidentiality clause, and an understanding of what exactly each party is offering—and not offering—it’s not realistic to expect both parties to truly feel comfortable with the working relationship. And without trust, there’s no way the relationship can survive, no matter how advantageous it appears to both sides.
To help build a foundation of trust, both parties should take the time to assess what they’re looking for and what they can offer. This requires a thorough audit of resources and an honest look at what you can commit to. Then, this information is brought to the negotiating table and included in the financial and legal agreements.
2. Working Relationships that Just Don’t Work
Even if a potential partner appears to have a lot to offer, that’s not the same thing as being a good fit for your business. 40% of failures can be attributed to poor or damaged working relationships! If you want to avoid failure, you have to take the time at the beginning to ensure you have your sights on the right partner. I truly believe, the right partner wants you as much as you want them. A truly ideal partner will be much easier to connect with than one that simply was never going to be a good fit.
Ensure that your values are aligned with a prospective partner. For example, a conservative company might not fit with a business that is driven by a strong entrepreneurial spirit. When the then CEO of British retailer, British Home Stores, David Dworkin, would determine which suppliers to partner with, he would meet with the head of each prospective partner not to discuss products and finances, but rather business philosophies.
Most people don’t even remember this failed partnership—when American food giant, Kraft Foods, formed a partnership with Starbucks to distribute their coffee into supermarkets. This failure ended up being quite messy, with both sides hurling accusations to explain why the relationship fell apart. Kraft later partnered with a company more aligned with its market and brand values to bring coffee to supermarkets—Midwestern fast food company, McDonald’s.
Even if a partnership looks good on paper, you don’t want to waste your valuable time and resources entering into a relationship that’s not value-aligned. Remember, your partner is someone you’ll potentially be collaborating with, sharing ideas and resources, and working with for years—so you better enjoy having a cup of coffee with them!
3. Flawed Strategy and Planning
The biggest reason that strategic partnerships fail is neglecting to create comprehensive plans for the alliance. Businesses tend to spend about 10% of their time honing in on business case and internal management, and only 20% on developing a healthy business model and structure—yet these two factors are known to account for 60% of the partnership’s value.
Businesses focus too much time on the deal terms and too little on the relationship itself. Too much emphasis on the terms of the relationship, without actually fleshing out the structure of the partnership and creating a roadmap for how it will work, is a sure way to cause strategic partnership failure.
4. Is It a Win-Win?
When it comes to building a successful partnership, both parties need to have win-win intent. This means that both sides have to be strategically aligned, desiring the well-being of the other and be capable of bringing advantage to the other party. In the webinar we also discussed that when James Stevens, Founder of Roses Only, couldn’t see how he could add enough value back into a partnership, he wouldn’t even bother.
Businesses are motivated when they’re going to get something out of a relationship—why bother putting in effort and resources if your partner doesn’t have value to offer? You don’t want to be on either end of an imbalanced relationship. If one side doesn’t have enough to offer, the other will lose interest for this very reason. Ask yourself: Are your target markets well-aligned? Will your success lead to their success and vice versa? Are you in complementary industries? Will you be in competition and if so is that ok?
By Actively Avoiding Failure, You Can Create Success
Take proactive steps to help ensure that any strategic partnership you entertain is one that is capable of bringing you the success you envision. You can watch the full recording of our Strategic Partnerships Expert Panel webinar here to get a deeper understanding of why partnerships fail, as well as other insights into forming successful business alliances.
When you’re ready to start preparing for a strategic partnership, Partner2GROW can provide you with the guidance, mentorship, essential advice, and other tools that can help you form the perfect partnerships for your business’ growth.