Have you ever used the expression "Two heads are better than one"? As a midsized business, we routinely have to find more heads on a regular basis. In normal economic times there are always moments in the creation of a label product when certain new skills, capabilities and a variety of resources are not resident within your four walls. During these current economic woes, we need to develop alliances to tag-team new opportunities that our limited resources are far too stretched to absorb.
So where do you turn in times of opportunity or an operational challenge to serve these new needs? Where do we find the great minds that have traveled these roads before and could help accelerate a solution and ramp up a new venture faster than ourselves under our own power?
It is in these times that strategic partnerships, formal or informal, can multiply your strengths, build on long-term resources/relationships, and renew your team's energy in their willingness to take on challenging business opportunities.
In doing research for this article I uncovered a series of terms that all have one theme in common: partnerships.
We all have exposure to partnerships each and every day. Our lawyers and accountants are partners. Our advertising agency and insurance agents are partners. Heck, even our doctors and dentists tend to have partners! So why can't we join the new knowledge economy and have some formal or informal partners?
A recent flurry of innovation within our companies has resulted in the adaptation of some of the traditional and non-traditional means of strategic partnership execution. Benjamin Franklin's message that "time is money" certainly applies to any form of partnership and its inherent compression of time when putting our heads together to fulfill an opportunity.
Some of the common terms used include:
2)Alliance, local or global
It is highly likely that we would tend to establish most partnerships with a key supplier first. Some of our long-standing suppliers have become like partners to us in the development of materials or enhanced processing technologies. In some cases things like enterprise optimization occurs with a co-developed software in partnership with your preferred ERP supplier. Or when we are executing an innovation growth strategy, we tend to lean on supplier partners to develop some of our concepts, leveraging their talent and asset pool, to accelerate the success or failure of a new design.
A partnership structure truly eliminates some of the risks associated with commercializing any new innovation. This brings me to one of the words I just hate using, but unfortunately it fits right here…. synergy!
The real power behind any of the varied methods to a successful strategic partnership is good old synergy. The leveraging of technology, talent/expertise, clients or markets, and patents/processes resulting in a radically reduced risk and a clearly accelerated financial outcome is truly synergistic. Within the body of any strategic plan these days should be the systematic combining of formal and informal resources.
One of the most prolific partnership methods is driven from the numerous mutual benefits found in a joint venture, fundamentally a legally independent new company. First and foremost in a joint venture, two or more parties will truly share in the financial outcome of the venture's intended mission. Second, this method tends to take on a well planned corporate life of its own, as two or more businesses combine in a legal and structural way to create an independent and shared entity. Under a typical JV, the structure of the investment, the organizational/responsibility framework and the business goals and objectives all tend to take shape in a more formal and conventional business planning arrangement.
Joint ventures tend to have strategic plan development embedded within the root of their existence. Both partners tend to spend as much time validating the feasibility of such a formal and long-term structure as they would on the actual triggering source of the venture. A good example would be a medical products company working with a converter to jointly develop a new medical device where both parties have limited knowledge or exposure to each other's technical world, but in fact need each other's unique make-up to execute a jointly developed and commercially viable solution.
In a joint venture there are significant efforts put forward in understanding the resources needed, be they equipment, people or technology (intellectual property). All the objectives associated with the successful long-term partnership found in a JV need to be fully accepted by both parties. In a JV there tends to be more rigid due diligence as to the true skills and abilities that each brings to the table. In some cases both parties go on an active search to find a suitable partner to form such an arrangement…. kind of like recruiting a key employee. This usually occurs after the originating JV partner accepts their resource gaps or in some cases just reluctance to invest in creating the new capacity.
As with most partnership arrangements and especially a JV, contract creation and negotiations tend to also take on a life of their own. The most important parts of the contract creation is determining if:
-We all have realistic goals;
-We have a clear understanding of everyone's ability to contribute (money, ideas, systems or production capacity);
-We understand how we will operate the new business; and
-We understand how, when and why we should end the enterprise.
The formal and legal JV structure can also allow with greater ease the formation of cross border enterprises and provide a global beachhead within the two parties' distinct locations. In a past life I helped develop a JV between a foreign government, a European engineering infrastructure company and the technology firm I led. This JV operated exclusively within the partners' country and its three adjacent neighbors. It had a varied percentage share of ownership based on the agreed-upon impact of the partners. And it survived for nearly a decade.
A next step in the partnership world would be called an alliance. In this area I have found that the partners tend to focus more on the outcome of the shared resources or competencies. The partners are not involved in the creation of a new enterprise, but rather realizing the benefits each business can attain on its own, using the other's unique toolbox.
An alliance still uses some sort of operating agreement creating a formal structure and expectations, normally protecting one of the parties' resources, such as intellectual property. An alliance tends to utilize very high-level management commitment to the freeing up of key resources in each other's enterprise, without the necessity of elaborate terms and conditions driving the results. In its basic state, our trade association (TLMI) could be termed an alliance, in that it creates a defined association of contributing members, each of which gains some unique benefit. The pooling of resources in a team-based way (committees) creates shared outcomes that build on the intended foundation of the association or alliance.
An alliance we have in place today is based upon the skills and advanced technology we developed a few years ago that we made available to a company trying to avoid the investment in these economically difficult times. The alliance will provide them a reliable and accelerated new product introduction, and our business will achieve a stepped change in the utilization of this available capacity. We have each shared our unique intellectual property, and within this disclosure we each stand a much better chance of success.
The third of the four examples is the commonly used strategic partnership (SP). In the SP method we can focus internally by creating the partnership with our supplier base or look externally to a special relationship with a key client. As a midsized converting and printing company, we tend to build these around unique products for our top clients. The SPs tend to take the shape of supply agreements, technology transfer agreements, joint development agreements and extended enterprise arrangements (like business process outsourcing).
A typical example would include an agreement to develope, tool, package and distribute a proprietary product on behalf of the customer in an exclusive and long term arrangement. These arrangements allow the client to focus on its more strategically important business growth opportunities, while we maintain or enhance the life of a product in which they are unwilling to share their own resources toward its optimization or growth.
I could compare it to Peterbilt trucks furnished with Caterpillar diesels. One is focused on the fit and finish of a varied line of semi tractors, while the other is focused on engine development and performance that suits a wide range of markets beyond trucking. Peterbilt gets the extra benefit of selling a product with a world-renowned brand engine, and Cat utilizes its engine capacity to drive out cost to its broad user base. And Cat has the worldwide service and distribution network to service the essence of the truck – its engine.
Can you imagine the customer intimacy that is embedded in a structured and open partnership? It's a far cry from a one-sided supply agreement. We have seen this intimacy result in stronger year-on-year growth than supply programs to our conventional clients. The openness and company wide commitment to accomplishing the common good is infectious within these partnerships.
In any partnership there needs to be some sort of commitment to the good of all participants.
The following Ten Commandments on partnerships would apply.
1)Thou shall respect one another
2)Thou shall trust one another
3)Thou shall support each other with all resources needed
4)Thou shall communicate … abundantly
5)Thou shall add value
6)Honor thy agreement
7)Thou shall do this without duress
8)Thou shall share the risk
9)Thou shall share the rewards
10) Thou shall measure the results!
Go forth and tap the value of a new partnership today!