Collaboration and working in partnership with other businesses can be one way to help your business grow. Communication and knowledge transfer represent the power behind today’s small and midsize businesses (SMBs). Whether it’s responding to customer inquiries or planning the next big product, small businesses can transform beyond corporate borders and capture immediate value with a strong partnership.
Just about every aspect of a business is in some way dependent on a strategic partnership. Long before selling products and services, we engage with a range of partners, including manufacturers, suppliers, payroll companies, builders, technology companies, lenders and investors. The value of these relationships is well understood by executives. The groundbreaking Grow From the Right Intro study by the Chief Marketing Officer (CMO) Council reveals that 85 percent of companies view finding strategic partners as essential or important to their business and around 60 percent are focused on developing a strategy for finding strategic partners. Some companies have tried collaboration with only limited success. If most companies start again and rethink the nature of their strategic relationships, they can get more from their collaborations. This article discusses, the importance of these agreements.
Key Factors to Develop Profitable Business Collaboration
Develop a high ‘trust quotient’: the foundation of effective collaboration. The importance of trust between strategic partners is acknowledged at several points. With trust in the relationship, decisions or actions can be executed quickly, and that usually means less time and expense. Higher trust equates to less blame when things go wrong — which, in turn, can promote more innovation and creativity. Where there is low trust, things tend to slow down as decisions and outputs pass through processes of supervision or checking, which, in turn, impacts efficiency and increases costs — often with little or no value added. Low trust inhibits the sharing of information, ideas and lessons learned.
“Alliances are often said to be like marriages. The partners have to understand each other’s expectations, be sensitive to each other’s changes of mood and not be too surprised if their partnership ends in divorce.”
—The Economist
Companies that integrate deeply with suppliers grow faster and outperform their peers. Most companies align their suppliers, products or service lines and start with the input of relevant functional leaders internally, such as manufacturing, R&D, engineering and product line leadership. Ultimately, supplier collaboration teams should work on large projects for the maximum impact and decide which specific value-sharing mechanisms to invest.
Before embarking on a new program, it is important to know if all partners have the internal capabilities and strategy alignment to make the external collaboration a success. Functional leadership must consider the skills required and assess if a solid foundation exists, and what the availability is of internal knowledge, supply-chain management and product development. The search and connect process should be prioritized based on factors benefiting both large and small businesses, and support cross-functional leadership. Companies connecting with only those best placed to deliver a real business outcome can turn a process that often takes many months with no guarantee of success into one that can take just a matter of weeks and ensures only compatible firms connect.
In the formative phase, clearly outlined goals of the program as well as roles, responsibilities and identifying the type of collaboration to meet specific business imperatives require varying degrees of expertise. The leadership team should determine the type of collaboration program that will best deliver real-world value. .
Types of Supply Chain Integrations for Successful Collaboration Programs
Reduce Cost Collaboration — This program focuses on reducing costs for both partners. Vendors are treated as partners rather than cost centers, strengthening the development of a long-term trusting relationship. The right approach has to take into account the current business funding structure, the line of sight on efficiency and the prevalence of initiatives. Cost efficiency, cost reduction and spend analytics continue to be among the top business priorities in supply chain management (SCM) and procurement. According to Deloitte’s 2016 Global Chief Procurement Officer (CPO) Study, 74 percent of CPOs are citing cost reduction as a strong business priority for the upcoming 12 months.
An example of cost reducing collaborating is small companies that cannot order through multiple units forming purchase consortiums with other firms in their industry. In 2008, a group of four banks controlled the ATM market in one U.S. market. To counterbalance the group’s power, four suppliers created a purchasing consortium for ATM parts and maintenance, ultimately cutting their costs by 25 percent.
Value-Based Collaboration — “Collaboration” is defined as “people working together on nonroutine cognitive work.” The concept of value collaboration doesn’t point in one direction to advance your business goals. Consider a wide range of interlocking issues. The project’s sponsors must demonstrate that it creates value. As planners follow the core steps, they should continually revisit their solution factors to check whether the project remains oriented toward the company’s business use cases.
Identifying Correct Key Values Can Help Strike the Right Balance on Several Issues
- The following are examples of aspects that should be considered:
- Does the leadership of both companies view the support of collaboration as a strategic or tactical effort?
- How does the organization support collaboration activities?
- Will the organization primarily react to demands from the business side, or will it proactively offer solutions to challenges that business units face?
- Is the organization providing users with a rich set of collaborative functions?
- The organization must take stock of its biases to be sure they align with value.
Technology and Innovation Collaboration — Widespread Internet connectivity is making it easier than ever for people to work together no matter where they are in the world. With social networking, voice mail, blogs, Twitter, Wikis, voice-over-IP, teleconference, videoconferencing, instant messaging, chat forums, mobile and computing, never have we had so many ways to collaborate. The demand for freedom of access to rich media websites (like YouTube), has never been greater.
Here are a few themes you should consider for 2018 technology collaboration best practices:
- Learn from the consumer virtual world. Researchers at UC Irvine, with a $3 million National Science Foundation grant, plan to study how online virtual multiplayer games, such as World of Warcraft, can help organizations collaborate and compete more effectively. A proprietary Twitter knockoff, and Cisco’s collaboration software, called Quad, integrates WebEx monitors task accountability productivity across teams. When you are ready to partner with another company, technology allows teams to be more efficient by streamlining workflows.
- Don’t assume that high-performance collaboration will happen just because you have the technology tools. Collaboration must fit with the culture of an organization. Collaboration platforms aren’t just for those uber-techy, ever-mobile, digital-loving millennials. Collaboration tech brings generations of workers together on common ground, giving them the tools they need to thrive together and elevate a business.
- Keep it real. Large corporate partnerships offer a lot of advantages for young technology companies. Most small tech businesses wish to develop long-term corporate relationships, but only half of them are successful.
Why So Many Tech Relationships Fail
The downside of technology-based collaboration is its intangibility. It’s hard to visualize remote colleagues or a set of abstract tasks and deadlines. Many leading collaboration tools (Trello, Slack) can make collaborators even more “real” to one another by tracking and connecting them virtually.
- The small business fails to adequately prepare to understand its true proof of concept and value proposition.
- There is misaligned timing and no clear decision making.
- There is no high-dollar funding for the small business that cannot maintain inventory or demands from the larger partner.
- There is lack of buy-in from employees on both sides.
The large company is not totally off the hook. Deep tech integrations with young companies require decisions early in the relationship on the fit and structure of the collaboration. Bigger companies must share past experiences and, often, their complexity with small-business leaders to avoid potential pitfalls.
Finding Strategic Partnerships
For some partnerships when there is value for large companies to partner with small business, companies strategically partner with smaller players to bolster their position in the marketplace. This is fueled by changing consumer needs, the rapid rise of competitors, and the unrelenting acceleration of technological shifts that requires a new model for large companies.
A case in point: Imagine you’re Marriott. Of course, when people go online to book a hotel, you naturally want them to book with you directly. But you’ll miss out on a lot of room sales opportunities and increased exposure unless you partner with online travel agencies like Expedia and Orbitz. Both companies started small and grew into large businesses through partnering.
Start with a very tight vertical and then grow larger. Start making a list of potential partners that can deliver the hottest new leads of companies with complementary products and services. Create a mutually beneficial relationship. A deal where a startup makes millions might be amazing for the startup and completely irrelevant for the multi-million-dollar conglomerate.
The company asking for the integration can often run away with all the value, leaving the partner with nothing.
If you are a small tech business and you were able to convince PayPal to add a little check box on their website of your new discount shopping app, you would have hundreds of thousands of clients, but what would be in it for them? However, if you are a small business in the travel industry, you may be able to convince an airline to endorse you on their website or in their in-flight magazine. Even better, you could get them to add a little check box next to your ticket purchase button. In this instance, the airline also benefits because they are potentially providing a helpful service to their customers.
Striking a deal with a large corporation should not just represent more revenue. It also has the potential to enhance the defensibility of the small business for a competitive advantage. If the small partner becomes the preferred and/or exclusive provider, it locks out a lot of other, similar, businesses. Eventually, it might even be able to start charging more for its services because it has the channel locked up. That’s how you build equity value.
The relationship between large companies, small business suppliers and vendors can be transformative, with free, open communication and a constant exchange of ideas, technology and preconditions. In addition, leadership of large companies must have mechanisms in place for communication, transparency, evaluation and systems for sharing new ideas and growth. This is the foundation of a win-win, highly effective collaboration and partnership. The best result and competitive advantage for all players.
The Arizona Small Business Association has a proven track record in developing and improving collaborative business relationships. Visit online for details:
Angelia Hill is vice president of Marketing & Business Solutions with the Arizona Small Business Association.
