Whether you, like I, buy into Gassmann’s Magic Triangle or you prefer Osterwalder’s Business Model Canvas when working with business models, then you need to consider, directly or indirectly, “Key partners”. However, unfortunately many don’t or at best only scratch the surface. That’s really a shame, because to me there's no doubt that this part of a company’s business model becomes more and more important. The reason is obvious: In a world that moves faster and changes more frequently than ever before there is no chance that a company can cope on its own. It needs key partners.
Overall there are three different motivations for choosing to enter a partnership with another company:
1. Optimization and economy of scale
Most organizations are heavily focused on the bottom-line, so consequently cost-cutting and smart-spending is high on their agenda. This, still, is the most common motivation for companies to enter into strategic partnerships because key partners can assist in optimizing the production flow and thereby increase the efficiency.
2. Reduction of risk
If a company has a good relationship with a key partner, it can reduce the inherent risk that comes with doing business, like for example the vast risks involved with developing new products and services and bringing these to the market. Key partnerships can also speed up the entire process and thereby minimize the risk of being “late to market”.
3. Acquisition of particular resources and activities
If there are certain competences that a company doesn’t have in-house and which would require a heavy investment of time, money or both, a key partner who already has these would come in extremely handy. This will become even more important in the future taking the speed of change we are experiencing into consideration.
Key partnerships can be formed in various ways:
- Buyer-supplier relationships
- Strategic alliances
- Joint ventures
Co-operate With Your Competitors
Co-opetition is often overlooked as this is a partnership between competitors. Such a partnership will help spread the risk both companies may take and, perhaps more importantly, it may also help when both partners are trying to do something new and in that way expand the market they both compete for (no need to fight for small increases in market share when you can help each other increasing the market size).
Approach a competitor (or a few) who are in the same business as you, but with slightly different core competencies, and ask them this:
“We both make Product X and both you and us have limited resources to bring something really groundbreaking to the market. However, you are good at doing A and we are good at doing B so why not join forces so instead of both of us developing Product X version 1.1 let’s create Product X2 and expand the market?”
For many industries this makes sense. Why not bake a bigger cake to share? What it means though is that a company needs to be good at sales and marketing and that’s a challenge for many who have focused for decades on keeping up with their competitors in terms of their products.
Are you ready for this change?
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