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Norbert Kytka, Headquarters Plattling
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In the wake of more and more complex business environments, partnerships are continuously becoming a trend in the way organizations carry out their business. When effectively applied, strategic partnerships can be very effective in overseeing the growth and development of a business, especially when focusing on a long-term perspective. B2B partnerships can be used in both small and large enterprises. They mostly encompass joint collaborations between two or more businesses which aim to boost each other in terms of sales, operational resources or to create a strong entity, which will have increased bargaining power in the market. Therefore, B2B partnerships are effective when implemented by those businesses which have got similar goals and objectives. These can either be competitors or businesses offering substitute products. It is worth noting that the benefits of partnerships mostly appear after a relatively long period of time. Therefore, as a partner manager, you should focus on the big picture of the long-term benefits instead of short-term prerequisites which might seem to complicate a partnership.
Before entering into any partnership, it is important to understand the reasons and the main drive for doing it. This will help you to have very specific goals and objectives which will benefit your work with partners. Reasons for entering into a partnership can be to reduce costs, increase accessibility to market in terms of geographical coverage, to promote innovation and invention, to increase access to resources, gain more customers and expand the sources of revenue. These are not just the reasons for aiming to be in a partnership but they are also the benefits which come with B2B partnerships. Apart from understanding and clearly defining this parameter, it is important to also determine the type of partner who will effectively help you to accomplish your goals for partnering. This can either be supplier, distribution or influence partners.
A Supplier Partners is somebody that helps you to complete your solution, facilitates faster time to market and helps you reduce costs. The strategic question you have to answer is “Am I going to buy it or am I going to build it?” If you want to buy it, then the role of the supplier partner can be to complete your solution and services. For example, to deliver a whole product to the market often services go along with that. Are there for example partners that can deliver the service more effectively than you, so that you can focus on your core competencies?
Distribution Partners – The key question here is “do I want to go directly or indirectly to the market”. Therefore, it is very important to define the distribution strategy. If you have an offering in the market which is easy to market, understand and deploy, then you might look for partners that can offer a very low touch environment. For example, partners that can offer your product through their website or in retail stores can perfectly work in this situation. If your offering has a very high complexity or is difficult to deploy, you want to look for partners that have more of a high touch approach. For example, someone with a big sales force who can sit down and work with your customers.
Influence partners are those parties who have got a certain level of influence in a given market environment that you want to enter. Thus, you have to determine whether you want to work on the market solitary or on combined efforts. Influence partners can be great to extend market reach and provide your brand with a certain level of leverage as well as increase the market reach. Each of this type of partners will have a unique influence on any kind of your plans. Therefore, it is advisable to first assess your goals and chose the appropriate partner who will effectively align with those goals. This way, it will be easier to find the right partners for the right reason.
When it comes to partnerships, it is important to understand the level of your business. This will help you to determine the kind of partner whom you will incorporate or associate with. Most small and mid-sized firms will be tempted to go for big companies without even making an analysis of the possible risks they might be placing themselves in. Big companies have got all the might and resources which they can leverage to outdo you and maybe buy you out of the market.
The major challenge however of partnering with big names is the inability to get in touch with the main stakeholders of the target company who can highly help in advancing the partnership deals. This leads to a situation whereby the firm seeking partnership will have the contacts of only a few people who have got limited influence on the company. Therefore, although the partnership agreement might be active, it will be difficult to make a follow-up and seek clarifications on various issues due to increased bureaucracy and limited access to the main influencers. Therefore, before entering into a partnership with big firms, you need to be aware that these sorts of partnerships can take much longer to make work and needs lots of patience.
Many firms think of the first meeting for a partnership as a sales pitch. Instead of trying to sell your company and products to the potential partner, it is more promising to equally focus on the partners’ portfolio as well.
The major mistake with many firms is that they focus more on their products and how they can become better without keeping in mind the interests of the other target partner. Therefore, the concept of self-interest tends to prevail in a partnership, as a result of this self-centered focus on products and services. This can make the other partner get frustrated very quickly since the other party is not looking for synergy but rather out for their own. Therefore, it is advisable to incorporate and integrate the views of the other firm while explaining your products. In simple terms, you should build bridges so that your solution as pertaining to certain issues coincide with those of the other partner. This will create a center of an agreement, which is actually the thriving point of any partnership. However, for such a center to be created, there is the need to have a complete understanding of the products as well as the services offered by the other company. This will call for a deep analysis of the other company, in order to get a complete picture of both the internal and external environment. This will reveal the strengths, threats, opportunities, and weaknesses of a company which is a good basis for making the integration decisions. Moreover, for your meetings with the partner firms, you can use the following business overview to consider the perspective of both parties.
Endurance is the most important ingredient that you will require in any B2B partnership. Fairly often things will not turn out in the way you expected. Thus, you will need to put in more efforts and you need to be able to deal with some degree of frustration and still push forward. This makes you understand that partnering is not a sprint, but an endurance sport where sometimes you fall and get back up. You have to keep them balanced if you want to remain relevant. Hence, it does not matter how fast you start but how prepared you are to face and handle the challenges which come with the partnership process. Having no endurance and patience is almost never forgiven and is one of the most reasons why partnerships fail. One or the other party is focused too much on quickly achieving fast results and forgets to follow through on a consistent basis. This leads to little trust and enthusiasm working together with that firm again. The ultimate impact of this is finding it hard to recommit and make the partnership work again. Therefore, you should always strive to make things work from the get go because you might not get a second chance.
It is worth noting that the majority of partnerships will start to work after around 1-2 years. This is because a lot of time is required to smoothen the various operational adjustments which are required for proper thriving to be affected. For instance, in case the partnership is made with a sales company with the goal of increasing the number of sales, it will take time to come up with the most effective advertising strategies since it might require a lot of research-related approaches. Therefore, settling on a specific approach and convincing customers to buy a product might take a relatively long period of time. Furthermore, the early phases of a partnership are sometimes characterized by leadership wrangles due to the unclear delegation of activities as well as the imprecise chain of command. All these might lessen the productivity of a partnership in its early stages and hence the need to be patient and endure for at least 1-2 years. It is also important to note that the concept of trust is very crucial and it should be cultivated by all the means possible. This is because it is through the trust that it is possible to work with the other partner with minimal conflicts if any. This can be achieved by upholding the virtue of honesty at all times and on a consistent basis.
Prior to engaging in any partnership activity, it is important to understand whether you really need a partner program or not. When it goes well, a partner program is highly effective when it comes to creating awareness of various goods and services, generating sales, and also access to resources which a business entity could not have accessed when operating on its own. Usually, it should be manageable to keep track of around 50 partners, with individual agreements. When it gets more it can make sense to standardize processes with a partner program. As soon as you have a partner program, the partnership is more on the formal side of partnerships. Without a partner program you can still have your formal partnerships with individual contracts but at the same time, informal partnerships are more common.
According to Farrelly et al (2005), Partnerships can exist in two broad categories; formal and informal partnership. Formal partnerships are those type of joint alliances which are characterized by an increased amount of documentation and is subject to the legal system. That is, the breach of one of the partnership agreements may lead to prosecution in the court of law. Basically, this is the type of partnership that is recognized in any constitution and is fully covered by the law. On the other hand, informal partnership mostly occurs when two firms agree to collaborate with each other especially on the basis of mutual agreement. Therefore, the major founding factor of informal partnerships is the concept of good faith. Whether or not to use a partner program depends to a large extent on the product and services that your firm offers. Partner programs are more common with firms that offer products. Therefore, it is important to assess the type of product offered by your firm and ascertain whether it is good for introducing it to a partner program.
Differentiation is the process of making your product look different from your competitor’s products. It helps in reducing competition in a given market niche and hence more profitability is realized. When it comes to partnerships, it is important to differentiate your product and services so that it does not offer direct competition to the goods and or services of your partner company. This differentiation process can be affected on the basis of packaging, size, ingredients, branding, and many other approaches. Differentiation on the basis of packaging means that you are supposed to package your product on a different package as compared to that of your partner company while differentiation in term of ingredients means that you input different contents in your products. This differentiation will eliminate the concept of competition that is not healthy when viewed from the perspective of partnership. Therefore, you should look for a partner whose portfolio will readily complement your goods and services in order to avoid direct competition.
It is important to also note that as much as you are in B2B partnership you should have an exit strategy. Sometimes things get out of control and you might lack the power and the strategy to influence them. The only option you will have in such a situation is to make a strategic withdrawal from a partnership. Therefore, having a good exit plan is very crucial. This plan should clearly explain the situation under which the exit will be affected, the steps to be undertaken during the exit, who will be notified, and the possible aftermath of the exit. Although partners agree on the conditions of exiting, it is also advisable to have an exit strategy at a company level. This is because, this type of plan is more specific and can effectively address the strategies of dealing with the impacts of a partnership.
