Strategic Partnerships: What They Are and How To Create One

Midsized firms aren’t big enough to do it all. For many industries, outside companies bring a lot to the value chain. But what is the best way to establish effective strategic partnerships? Get it wrong and the company can overpay, underperform or miss out on better opportunities elsewhere. But being too shy about partnerships can stifle growth and the company could miss the chance to leverage up. How to get it right?

Speed dating is the first pitfall. Your product has taken shape, the market is emerging, and before you know it, a larger firm approaches with warm words. Is the first offer the best? Another potential organization suggests a perfect partnership but insists on exclusivity. Too restricting? Or a firm competitive in some areas proposes working together to capture market share. Or would they be plotting to just capture your market?

A better way to build strategic partnerships is to take a staged, strategic approach. Move deliberately, take things step by step, and focus on relationships. Forge trust and learn each other’s working cultures before signing a long-term deal. Growing into strategic relationships gradually is worth the effort. Far better to take time than to jump into bed together, only to have sharp regrets down the line.

“The best collaborations come about as a result of relationships,” says Neill Ricketts, CEO of the 100-person-strong specialty materials R&D innovator Versarien, based in Longhope, UK. “It’s about maximizing the opportunity through working very closely together. But it’s also that ability to weather those storms when things don’t go right and provide enough flexibility to continue the relationship over time.” Read on to hear how they have formed a powerful partnership to put a material called graphene to work in garments.

Graphene is a wonder material. It is a single layer of carbon atoms arranged in a two-dimensional honeycomb lattice. The building block of graphite, it is durable and a highly efficient conductor of energy. Isolated in 2004, it has far-reaching applications, from electrical conductors to paint strengthener, from solar panels and concrete to DNA sequencing.

One of the leading developers of commercial uses of graphene, Versarien was founded in 2010 by two men, literally in a garage. Since then, the company has grown rapidly, working at the very edges of scientific discovery, listing on the London Stock Exchange in 2013 and emerging as a rare European scaleup to go to Silicon Valley.

The scale of the challenge has helped them realize that joint ventures or technology licensing to global players can be a better way to drive the last mile into worldwide sales. The relationships with larger firms also bring larger systems, legal teams and other capacities to get things moving quickly, while allowing them to stay nimble.

“I think it’s a bit like dating, having these commercial arrangements, especially in new technology. The first stages are very much that kind of first date, and then you naturally move on and realize that you’ve got something that’s really working. And so you get engaged and move the relationship on a bit.”

“We love working with these guys, so it’s about maximizing the opportunity that we have through working very closely together,” says Ricketts. “Exclusives can be a good thing, but they can also be a negative. When you’re developing technology, you can be led down a blind path. So, we wanted to make sure that we weren’t exclusive, but we also wanted to keep them close and not necessarily develop this with anybody else. There was a bit of give and take on both sides.”

“The key to joint ventures and strategic thinking is to build solid relationships, while keeping a relatively flexible approach,” says Rickets. “Our partnership with MAS has been very collaborative, without any pressure from either side. We’ve both been happy to move along as quickly as we can, while not closing down other opportunities.”

A strategic partnership is a business partnership that involves the sharing of resources between two or more individuals or companies to help all involved succeed. Strategic partners are usually non-competing businesses and often share both the risks and rewards of the decisions of both companies.

5 Ways to Create Strategic Partnerships

Benefits of strategic partnerships

Strategic partnerships offer each company involved the chance to reduce expenses and increase business. A good strategic partner usually is a company that either offers services you can use within your own company or that you can offer to your customers and clients while offering your own services to their customers. These partnerships can expand your customer base, brand awareness, overall reach and service functionality.

These are mutually beneficial partnerships that can help both startups and established businesses.

What are strategic partnerships?

A strategic partnership is a business partnership that involves the sharing of resources between two or more individuals or companies to help all involved succeed. Strategic partners are usually non-competing businesses and often share both the risks and rewards of the decisions of both companies.

The goal of a strategic partnership is to create value for each company by offering information, services and other resources that the other company otherwise either has no access to or could only access through a financial exchange.

6 types of strategic partnerships

There are several types of strategic partnerships, each offering their own benefits. Before entering into a strategic partnership, consider which of the following business relationships would be most beneficial to your company:

1. Marketing partnerships

Marketing is essential to business success and growth. A strategic marketing partnership is one where you and a company in a related field help each other find new customers or clients. For instance, if you own an independent transportation service, you may know someone who owns a small bed-and-breakfast. In a marketing partnership, you could each refer your clients to the other business, as there is a likelihood that many customers would need both services.

Larger businesses, such as manufacturers, may find partners in companies that sell the manufactured products, agreeing to manufacture and sell products exclusively for each other.

2. Supply partnerships

Supply partnerships are the most common types of strategic partnerships. These are the vendors and manufacturers who supply your business with the products, services and materials your company needs. Sometimes, these are exclusive partnerships, such as giving an exclusive contract to a paper supplier for your office needs. If you own a store, you sell shelf space for vendors to sell their products, though this is often non-exclusive.

3. Supply chain partnerships

Not to be confused with supply partnerships, supply chain partnerships involve multiple companies working together to create one finished product. For instance, if your company builds automobiles, but it is more inexpensive for you to purchase some parts from another manufacturer, you may want to enter into a strategic partnership. Think of this as one large manufacturing company, where each individual business creates its own part, ships it to the next company, where it gets added onto a product. The process goes on from there until the last company finishes the product.

Many supply chain partnerships are exclusive, as the finished products are often proprietary.

4. Integration partnerships

Strategic integration is all about making separate things work together. You can see this most easily in the digital landscape, where customers use social media apps to log on to various online stores and websites. Many companies also partner with payment app services to allow for easy purchasing from both their websites and physical storefronts.

The goal of an integration partnership is to make a customers daily interactions with businesses more simple, convenient and tailored specifically to themselves. Ultimately, integration aims to make using your product so easy and useful, it becomes a part of your customers daily lives.

5. Technology partnerships

As the world grows more reliant on technology, it can be important to make sure your business has the resources it needs to take care of that technology. Whether its partnering with a company that can fix your computers at a price that meets your budget or a cloud service that offers discounts for the amount of space you need, finding a technology partner can help your business run smoothly and keep on pace.

6. Financial partnerships

If the company you run isnt in the financial market, it might be helpful to partner with an outside firm to handle your finances. The benefit of hiring a financial firm to handle things like accounting is their ability and expertise and handling these matters exclusively. This is especially true if it would use valuable resources to handle these matters within your own company.

Financial partnerships can cover everything from accounting, to stock programs, to benefits plans. These can still be mutually beneficial. For instance, some companies offer their employees benefits for holding accounts at banks with whom theyve begun a strategic partnership.

How to establish a strategic partnership

There are many ways to begin a strategic partnership, but when you decide entering one is the right decision for you, consider the following common steps you can take:

1. Be clear about what you need

Whether your business needs help with distribution, marketing, finances or anything else, have a specific goal in mind. The only way to know youve succeeded is to know what you hope to achieve. Once you know what youre looking for, you can search for the partner to suit those goals.

2. Do your research

Whether you search online, contact people in your network or call businesses to ask a few simple questions, try to gather information on what companies could most help your business meet its goals and, just as importantly, which companies are likely to enter into a relationship with you.

Try to make sure the partnership is mutually beneficial by finding a business that needs something you provide. This way, they are more likely to offer you what your company needs in return.

3. Create a contract or agreement

Once youve found a company that would make a great partner and theyve agreed to a deal, consider having an official agreement made by a legal professional. A typical strategic partnership agreement includes the following:

When working together to create the agreement, you may find that both parties have their own stipulations that need figuring out before signing. This is why hiring a lawyer or other legal official is helpful. They can also help create the specific language of the contract to keep all parties happy before signing.

4. Honor the agreement and nurture the relationship

These two ideas work together to maintain the partnership as it continues. Once youve entered the partnership, its important to keep the needs of your partner in mind while you work. When possible, keep in contact with your partner, continue to give them referrals or honor the agreement by offering your services. Since the goal is to benefit both companies, consider making sure your partner shares in the success and remains happy with the terms of the agreement.

Though this is a business relationship, its helpful to maintain a positive personal relationship, as well. If you can continue keeping your strategic partner happy and doing your part, they may be more likely to honor their side of the agreement, or even offer expanded services or discounts not in the contract.

FAQ

What are the three types of strategic partnerships?

Some good examples of strategic partnership agreements between brands that you may have heard of include Starbucks’ in-store coffee shops at Barnes & Nobles bookstores, HP and Disney’s ultra hi-tech Mission: SPACE attraction, and Nokia and Microsoft’s joint partnership agreement to build Windows Phones.

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