Even as the U.S. economy regains steam in 2021 and GNP grows by 10%, some companies still struggle to survive. This is especially true for businesses that rely on foot traffic or office workers since the demand for office space is down 38% nationally. The good news is that strategic partnerships can improve any business’ chance of weathering these fiscally turbulent times.
What are strategic partnerships?
In a nutshell, a strategic partnership is any mutually beneficial relationship between two or more businesses. This is a pretty broad definition and could cover both formal and informal partnerships where each party benefits from the resources (expertise, technology, connections, consumer base etc.) of the other. The important thing to note is that strategic partnerships should offer business advantages or benefits that the company could not gain working alone.
Why Should You Consider A Strategic Partnership?
There is no boilerplate scenario where strategic partnerships are the absolute best choice for your business. However, there are some circumstances where considering a strategic partnership might benefit you.
Lack of capital.
If you’re expanding your business but lack the much-needed capital, a strategic partnership could be beneficial. Strategic partners can help you acquire supplies, tools, or even property need for growth. For success, decide the role of the partner and their equity stake in advance. If expanding your franchise, be clear about what part of the business the new strategic partner would access. For example: Are you offering an equity stake in the new franchise expansion only or the entire business?
Lack of market access.
Want to expand your market geographically but don’t have local contacts? A well-positioned strategic partner can make entering that new market easier. By leveraging their professional contacts and their reputation with customers, a strategic partner can soften your entry into an unknown market.
Lack of expertise.
If you’re trying to break into a market where you have no expertise, bringing on a strategic partner could flatten the learning curve and give you an advantage.
When considering strategic partnership opportunities, it’s important to think creatively and to imagine what kinds of strategic partnerships could benefit your business BEFORE you desperately need them. The best strategic partnerships are imagined and crafted because someone envisioned a win-win situation for all parties involved.
Here are two real-world examples of strategic partnerships that turned out to be winners for both parties.
Ford and Eddie Bauer – Ford doesn’t have a reputation for luxury. If anything, the Ford brand appeals to the working person who wants a reliable but affordable vehicle. But when Ford wanted to enter the luxury market, it partnered with Eddie Bauer who had a name and reputation for luxurious excellence in its “outdoorsman” clothing. The partnership lasted nearly 30 years.
Starbucks and Barnes & Noble – As brick-and-mortar bookstores faced the squeeze from digital competition, Barnes & Noble partnered with Starbucks. The partnership gave the bookstore access to the customer base of a brand that’s synonymous with coffee. That customer access has helped Barnes & Noble survive. And since 1993, their partnership has evolved and survived.
What Are The Best Practices?
If you want a long-lasting and mutually beneficial strategic partnership, consider implementing these best practices.
Answer your why. Why do you want to enter into a strategic partnership with this particular business or individual? Be clear about how you will benefit and what price you will need to pay for those benefits.
What is it that you and your partner expect from each other? And what do you expect to gain from the partnership? Try to be as specific as possible so that you can temper any expectations not aligned with reality.
Plan for change.
No strategic partnership lasts forever. Even if the partnership lasts for decades it will evolve as market demands shift. You must incorporate into your partnership agreement flexibility and the ability to exit the agreement if necessary.
Understand your partner.
A strategic partnership is like a marriage. You will need to get to know your new partner and create a “courtship” period where you can test out the efficacy of your partnership in the market without a long-term commitment.
Give your strategic partner enough information to understand your larger vision. Candid communication about how the partnership feeds your larger vision will give your strategic partner the information their need to get creative about helping you (and themselves).
As you push through 2021, look at every new business interaction as a possible opportunity for strategic partnership. You never know where you might discover opportunities for growth and expansion.