by Mark Brigman
Competence: When seeking and selecting strategic partners, we should prioritize “best-in-class” providers. That is, companies that have demonstrated a real expertise within their given craft are much more likely to provide the value-add that we need in a partnership. Competence is the know-how that allows our partner to be the expert in their specific field. Competence is this expertise that we seek in our partners so that we can develop a competitive advantage in order to create market differentiation.
Forward-Looking: Business leaders need to be agile and adaptive to the ever-changing business climate. Having a partner who is forward-looking will ensure they are taking the necessary steps to mitigate risks either before or as they are presented. Forward-looking partners are able to seize opportunities to strengthen their market position because they are aware not only of their environment, but the environment of their partners.
Innovative: Oftentimes, when we think of innovation, we think only of discovering or using new technologies. Although technology is important, it is not the only form of innovation. Being innovative really speaks to an organization’s ability to be creative and to solve problems by seeking new solutions. It seems that as each month passes, the “ways of doing business” constantly change and the solutions to challenges from last year do not work, at least not as well as they used to work. How many of us have heard a co-worker say, “Well, that is the way we have always done it,” or “It has always worked in the past”? That may be correct, but the past is just that—the past. With the speed of information and the hyper-competitive business environments that we work in today, being innovative is not only a great trait, it is quickly becoming a must for survival.
Adaptive: Great strategic partners are agile. They can quickly adjust when and where needed in order to deliver value without being taken off course because of an unforeseen event. Being adaptive not only means an ability to adjust to outside forces, but also the ability to lead change internally within their organization in order to maximize opportunities to provide value. It has been said that, “the one thing that is sure to be constant, is change.” Having a partner who can seamlessly adjust to the ever-changing market conditions and outside forces will add a tremendous amount of benefit to your partnership.
Understanding: By its very definition, strategic partnerships are joint relationships that contain unknowns. The relationship requires that the partners constructively and methodically work to mitigate risks as they pursue the joint goals and objectives. Strategic partnerships are a journey, a voyage into the unexplored. This scenario is the precise reason that a competitive advantage can be born from the partnership. But the navigation of the stormy seas will bring challenges, many decisions, and inevitable poor choices that result in some suboptimal outcomes. It is absolutely imperative that we be understanding and objective to the inevitable setbacks that will surely occur from time-to-time. If we did our homework during the partner selection process, meaning our partner is competent and committed, our level of understanding and grace will buy us a deeper level of respect and strengthen the overall relationship. One thing is absolutely certain when leading strategic partnerships: things will go wrong. Setbacks will occur and our partner’s ability to adapt and stay focused will be the difference between success and failure.
Selfless: Esprit de corps means the spirit of the group or to have shared commitment for team success. When a strategic partnership is forged, the partners agree to a union where the interest of the collective goals should always be considered first. I realize this is not the norm and that it is absolutely unnatural for most business executives who have a board or some other higher power that is constantly stressing about your company’s financials. Go into strategic partnerships knowing that they are investments and that the vision of the partnership should rule stronger than the contract that was signed. That is, the health and well-being of your partner is now your responsibility. Being selfless means that when the partnership is faced with an obstacle, each partner always asks what is in the best interest of the partnership first, and then considers the impact to your own business second. As with any relationship, strategic partnerships—at times—require you to give when you feel it is your time to receive.
Solvent: All strategic partnerships come with risk and a requirement to “build new roads.” After all, if the roads already existed, we would use them, and so would everyone else. But what we are looking for is a competitive edge, a strategic advantage in the market for our product or service. This requires that we devise and execute a strategy that will deliver newfound benefits to our clients. The path to business success, even in strategic partnerships, is not perfectly straight. Having a partner who has the financial wherewithal to weather inevitable storms along the journey is imperative. The long-term success of a partnership not only requires emotional commitment, it requires the financial resources to continually support the joint initiative until the finish line is reached. If your strategic partner is financially constrained, they may not have the ability to adapt or seize opportunities that transpire.
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CHAPTER 2
PARTNERNOMICS.com/C2
Partnership Success Pyramid
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Why Partnerships Fail
I am a big fan of Stephen Covey, and I believe in his recommendation to “begin with the end in mind.” As we embark on the prospects of a new partnership, building a successful relationship is our end goal. Before we start this exciting, yet precarious journey, we need to understand the potential landmines that exist. Better yet, we need to intimately understand the success characteristics that we must proactively create in order to maximize our likelihood of success.
The interviews I conducted as part of my research for this book allowed me to connect with some powerhouse senior-level executives who are absolute masters at forming powerhouse partnerships. These executives are responsible for forming and building strategic partnerships that aim at creating competitive advantages for their respective organization. Their insights provided great value in the formation and validation of this book.
After combining my qualitative research results offered by these seasoned executives with my own strategic partnership experiences, I was not surprised to find a perfect match. I offer the following five key reasons why strategic business partnerships fail. My intent in doing this is not to recommend that we dwell on the past but to use our failures to expedite future success. Remember, smart people learn from their mistakes; successful people learn from their own mistakes and the mistakes of others.
Lack of Trust
Lack of Alignment
Lack of Transparency
Lack of Esprit de Corps
Lack of Results
Trust:
Trust is the absolute foundation of all relationships; it is unequivocally the most critical element of success for the company and all strategic partnerships. Real economic gains will be realized for organizations that embody high levels of trust.
As Stephen Covey points out in his book The Speed of Trust, high levels of trust, both within your company and within your external partnerships, will dictate the speed of your growth. Essentially, if trust levels are high, then intense validation efforts are lessened or even eliminated and that time can be spent on activities that deliver results.
“Widespread distrust within an organization causes a tax of sorts, a cost of time and effort, a tax that high trust organizations do not have to pay.”
– Francis Fukuyama
Earning high levels of trust can be a very powerful tool. Notice I used the word “earn” as trust is truly earned and never given. A great story about the dividend that trust pays was captured perfectly in a story shared by Stephen Covey, which goes as follows:
Jim, a street-side hotdog vendor in New York City, found that he was losing customers because he was taking too long to make change for his customers after they purchased their lunch. His hotdogs and condiments were so good, that people would wait in long lines to savor the rich flavor of his gourmet dogs. But, unfortunately, lunch hours are only so long.
Jim struggled to find a way to efficiently service his great customers, but he only has two hands, right? He is only one human after all. How could Jim cook the food, serve the food, and complete the financial transactions for each customer any quicker? It seemed like it took about the same amount of time to tender the transaction as it did to prepare and serve the hotdogs.
So Jim decided to set a basket next to his stand and allow his customers to complete their own transactions. That is right, customers had to use the “honor system” and make their own change. That is insane, right? Would you ever think of doing this, especially in New York City?
Jim quickly learned that his customers not only did not cheat, but they paid him a premium. That is right. On average, he earned a higher profit margin because his customers left him larger tips because they valued the fact that Jim trusted them to not cheat. This simple innovation allowed Jim to serve twice as many customers over lunch and his revenues doubled as a result.
This awesome example of Jim and his New York City hotdog stand drives home another point: Empirical research has shown that people who offer trust are more likely to receive trust. And they receive trust more quickly. That is because if you are trusting, you are more likely to be trusted.
Have you ever attended a class on sales? What is the key topic-of-the-day in all sales training classes? That’s right, how to gain trust. The three elements to close a sale: know you, like you, and trust you. This is why the car dealer asks you how many kids you have and what part of town you live in within the first three minutes of your conversation.
There is no doubt that trust is an economic driver. Trust can affect the bottom line in a hurry, both positively and negatively. If we have a strong reputation of trust, our future relationships will be accelerated. This is the power of referrals. On the contrary, if you or our company has a poor reputation of trust, your future success will suffer.
In 2014, Entrepreneur magazine polled more than 5,000 of its readers and asked what company brands they trust the most. The results are below:
1. Sephora
2. In-N-Out Burger
3. Publix
4. Patrón
5. Trader Joe's
6. The Ritz-Carlton Hotel Company
7. Panera Bread
8. Virgin America
9. Southwest Airlines
10. Apple Store
The survey results beg the question, what creates the perception of trust in a company’s brand? After all, you cannot really trust a company, can you? Just as you cannot trust your car to start tomorrow morning. After all, your car and the company that built it are not human.
The truth of the matter is, no pun intended, companies are led by people and these people have the potential to be trusted. Trust is built by having people see what we do and see that we deliver consistent results with integrity. Business leaders must act with the highest levels of ethics in order to instill trust within the organizations that they lead. If this occurs, trust will permeate into the brand’s reputation and into the marketplace.
I feel compelled to share the story of Bob Chapman who wrote a book titled Everybody Matters: The Extraordinary Power of Caring for Your People Like Family. In his book, he shares the inspiring story about leadership, courage, and trust that was embodied during the major recession of 2009.
Bob is the Chairman and CEO of Barry-Wehmiller, a $2-billion international capital equipment manufacturing and engineering consulting company. The company, over the course of its history, has acquired almost 80 companies to amass its 9,000 team members around the world. Their vision is to use the power of business to build a better world.
In 1988, Barry-Wehmiller adopted a “people centric” approach to leadership where every person in the organization was to be treated like a family member. The company committed to change from the traditional ways of corporate America where people were treated as expendable objects. In the “shareholder supremacy” of current business management, if the financials look bad for a particular quarter, simply layoff a couple hundred people so the shareholders are not significantly impacted. Bob Chapman was not a fan of this ideology, and he intended to change his 100 year-old company to a new model.
In the early part of 2009, Bob Chapman’s resolve would be tested in a major way. During this time, the world economic markets fa
ced their biggest challenges since the Great Depression. Barry-Wehmiller’s customers had reduced their orders by 35% in the matter of just a couple months. Can you imagine what you would do if you woke up one day and your household income was cut by more than 1/3?