What Is a Strategic Relationship in Business

A strategic alliance is an agreement between two companies to carry out a mutually beneficial project while maintaining each its independence. The agreement is less complex and less burdensome than a joint venture in which two companies pool their resources to create a separate business unit. How can partners take action against this? The people who are supposed to lead the day-to-day operations of the partnership, whether they are business unit leaders or alliance managers, should be part of the negotiations from the beginning. This happens less often than you might think, as business development teams and lawyers are typically tasked with crafting the terms of the business – the objectives, scope, and governance structure – while the operational part is often clarified retrospectively. A company can form a strategic alliance to expand into a new market, improve its product range or develop an advantage over a competitor. The agreement allows two companies to work towards a common goal that benefits both. The activities of a strategic partnership may also include a joint research and development department between the partners. This requires a higher level of knowledge exchange as well as a higher level of sharing of technological skills. In this way, however, the costs and risks of innovation can be shared between partners. [1] A strategic business partnership is not a business relationship that aims to exchange or extract value for your business from the other organization. But in the rush to reach the agreement, discussions about common goals are often overlooked. This is especially true for strategic alliances within an industry, where everyone assumes that because they are in the same industry, they are already on the same page.

By skipping this step, companies increase the stress and excitement that is applied to the partnership and reduce the chances of success. For example, day-to-day operators end up receiving confusing advice or conflicting priorities from partner organizations. Whether you`re doing an online search, reaching out to people in your network, or calling companies to ask them a few simple questions, try to gather information about companies that could help your business achieve its goals and, just as importantly, which companies are likely to build a relationship with you. Of course, the constant problems related to the management of business partnerships do not disappear either, especially as companies establish more and more relationships with partners from different sectors and regions. The last time we asked executives about their perceived risks to strategic partnerships, 1 1. Insights from the 2015 McKinsey survey of more than 1,250 executives. Sixty-eight percent said they expect their organizations to increase the number of joint ventures or large partnerships they participate in over the next five years. A separate follow-up survey conducted in 2018 found that 73% of respondents expect their business to increase the number of large partnerships they enter into. The most important were: disagreements between partners over the central objectives of the relationship, poor communication practices between partners, poor governance processes and, when the market or other circumstances change, the partners` inability to quickly recognize and make the changes necessary for the success of the relationship (figure). Skipping the step of keeping everyone informed can lead to unnecessary confusion and tweaking for partner organizations. This is the case of an industrial joint venture: the first partner of the joint venture involved a major business unit manager in all discussions related to the company. The second partner informed a senior business unit manager of the important developments, but this person did not participate in the discussions until late in the joint venture negotiations.

At this point, as he learned more about the agreement, he pointed to several issues, including inconsistencies in partners` access to suppliers and related data. He immediately recognized these problems because they directly affected the operations of his department. However, since he had not been involved in the initial discussions, the partners wasted time designing an operating model for the joint venture that would probably not work for one of them. They had to go back to the drawing board. Strategic partnerships have also emerged to solve many of the company`s business problems. The book Vested: How P&G, McDonald`s and Microsoft are Redefining Winning in Business Relationships[2] describes strategic partnerships in large-scale business process outsourcing relationships, public-private infrastructure projects, facilities management, and supply chain relationships. Modern strategic procurement and procurement processes allow companies to use performance-based or acquired procurement business models to build strategic relationships with suppliers. [3] Although the strategic alliance may be an informal alliance, the responsibilities of each member are clearly defined. The needs and benefits of partner companies will determine the duration of the coalition`s entry into force.

Finally, invest in the tools and processes that help both companies work together effectively. The right resources can help you fill the occasional communication gap. In our work, which helps management teams establish and navigate complex partnerships, we`ve seen first-hand how these problems occur, and we`ve observed the different ways companies deal with them. The reality is that successful partnerships don`t happen by chance. Strong partners lay a clear foundation for business relationships and maintain them. They focus on accountability within and between partner companies and use metrics to measure success. And they are ready to change things if necessary. Focusing on these priorities can help partnerships thrive and create more value than they otherwise would.

Transparency during negotiations is the only way to ensure that everyone understands the partners` goals (whether they focus primarily on improving operations or introducing a new strategy) and that everyone applies the same measures of success. Most importantly, transparency fosters trust and collaboration between partners, which is especially important when considering the number of leaders in organizations who are likely to hold leadership roles for the duration of the relationship. Another good step is the establishment of an Allianz management team. This group tracks and reviews the partnership`s progress against defined measures and helps identify potential problems – ideally with enough time to change course. These teams take different forms. A pharmaceutical company with dozens of business and research partnerships has a nine-person alliance management team primarily tasked with monitoring and reporting potential issues for business unit leaders, so it consists primarily of junior members and a senior executive who interacts directly with partners. An energy company with four large joint ventures has taken a different approach: its alliance management team consists of four people, but each is an experienced business leader who can serve as a resource for the respective joint venture management teams. Partners should also consider the potential for restructuring during the negotiation process and, ideally, shape the potential end of the relationship. What market changes could occur, how could this affect the interests and incentives of both parties, and what mechanisms would allow for orderly restructuring? When an oil and gas joint venture began to struggle, the head of the joint venture realized that it was being pulled in opposite directions by the two partner companies due to the companies` conflicting incentives. „This made the alliance completely unstable,“ he told us. He brought the partners back to the negotiating table to determine how to reconcile these conflicting incentives, restructure their agreement and continue the relationship to avoid deep resentment and frustration on both sides of the agreement. When your business provides useful, co-created content to a select audience, you start solving problems, coming up with solutions, and meeting needs that your potential customers may not have known they had until you flagged them in your content.

Once you`ve established yourself as an authority, you`ll stop following prospects – potential customers will be looking for you. In addition, partners need to define the „success“ of their operations teams: what indicators will they use to determine whether they have achieved their goals and how will they track them? Some companies have established responsibility matrices; Others used detailed process maps or project phase gates to clarify expectations, timelines, and critical performance measures. .