The old mantra “You Can’t Go It Alone” has never been so true in business. Mostly gone are the vertically integrated corporate giants who once lumbered across the planet and controlled global markets. Today, business success depends on a company’s acumen and agility in identifying and collaborating with a wide range of value chain partners—from suppliers, manufacturers, IP owners and logistics companies to co-competitors, distributors and businesses of all types who provide access to new customers, markets and innovation.
Independent research by both Columbia University and the Economist Intelligence Unit indicate the percent of revenue tied to alliances grew eight-fold during the past two decades, accounting for some 40% of total corporate revenues for companies worldwide by 2010.
In a recent survey by market research firm Frost & Sullivan, CEOs cited strategic partnerships as their number one growth strategy, surpassing the traditionally favored strategies of product introductions and organic expansion. Companies of all types are making strategic partnerships a centerpiece of their corporate game plans, committing more than 20% of assets to developing and managing alliances.
Yet, for most companies, strategic partnering is still very much a work in progress. Too often, alliances are opportunistic rather than based on rigorous qualification and compatible fit. Most companies lack the knowledge, connections and management capabilities to realize the full potential of partnering. Many companies lack the formal strategies and expertise to identify and nurture the most beneficial relationships.
Those are some of the insights of new research conducted by the Business Performance Innovation (BPI) Network and the Chief Marketing Officer (CMO) Council, in cooperation with Powerlinx, an intelligent BtoB partner matching platform. The study, called “Grow From The Right Intro,” examines the current state of partnering among businesses worldwide and demonstrates that alliance building is now a top priority for companies of all sizes. But it also shows that partnership failure rates are unacceptably high and the vast majority of companies still do not have formal partnering strategies.
The study was based on an analysis of 330 survey companies around the world, as well as in-depth interviews with senior executives in strategic partnering roles.
A few salient findings
Not a single survey respondent thought strategic partnering was unimportant to their business, and most said it was “extremely important.”
Only 33% of companies said they have put into place a formal strategy for partnering, and 42% said they were not very good at developing these business alliances.
Fewer than 10% of executives believed they excel at identifying and securing the right partner introductions.
Almost half reported failure rates of over 60%.
The study also finds that business alliances are growing because the competitive landscape in every industry is rapidly changing. Innovation and transformation are more critical than ever, and businesses must look beyond their own boundaries for the intellectual capital, ideas and approaches that can help them compete.
In fact, while acquiring customers and growing revenues are viewed as the primary benefits of alliances, executives believe the driving forces behind increased partnering are the need for new ideas and innovation and the overall complexity and pace of business change.
Improving alliances
Given the critical need for partnering, what should companies do to improve their capacity for building, growing and leveraging business alliances? We believe most companies must do more to integrate business partnering into the core of their strategic planning process. They need to dedicate top management talent and the right resources to finding and nurturing relationships that deliver benefits on both sides of the partnership equation. And they should look for new technologies that can assist in the partnership process.
Bain & Company highlights four steps to developing successful strategic alliances in its 2013 management guide. First, companies should define their business vision and strategy to understand how an alliance might fit their objectives. Second, businesses should evaluate and select partners based on their synergies and ability to work together.
Next they must develop a working relationship with mutual recognition of opportunities. Finally, they must negotiate and implement a formal agreement that includes systems to monitor performance.
Partnering is a critical and strategic business process that is ripe for technology transformation and disruptive new solutions. For example, big data analytics and cloud services are bringing radical efficiency and automation to partner matching. These data-driven innovations will give both large and small enterprises more frictionless access to new customers, channel opportunities, joint ventures, innovation, affiliations, acquisitions and funding that can generate a competitive advantage if embraced and managed effectively.
New York-based Powerlinx, for example, has developed a platform that provides a cost-efficient, secure and seamless way for businesses or all sizes to connect intelligently with partner prospects, customer opportunities and acquisition candidates using a global database of 20 million businesses. Making smarter, more appropriate and more functional fits can spur the global economy by multiplying the potential and value of synergistic partnerships. It can also greatly reduce the vast amount of financial and human energy drain associated with ill-conceived partnerships.