It’s Time To Reset Your Definition Of Partnership
Business models are being reset everywhere around the world. Tensions between the world’s economic powers, the threat of conflict and the COVID supply chain hangover are testing companies like never before. CEO’s and business owners acknowledge their organisations can’t ‘do it all’ and are turning their attention to their home countries to find answers to a daily paradox. How to achieve growth and maintain continuity while managing escalating costs of fragile supply chains.
The idea of partnering with organisations to scale supply and distribution isn’t new. However, in recent times, the concept of partnership-driven growth has taken centre stage as companies move to reconfigure their business models to focus on strengthening their bottom line and core capabilities.
Partnership-driven growth moves beyond the simplistic notion that the lowest-cost supplier or highest-margin distributor wins. Instead it focuses on how suppliers and resellers can be incentivised over the long term to actively help the organisation sell, innovate and sharpen its responses to changing market demand.
Two important ideas live at the centre of making the shift to partnership-driven growth.
‘Partnering In’
The first idea focuses on ruthlessly defining an organisation’s core capabilities. These are the distinct technical and business skills and know-how which an organisation does better than any of its competitors. They are the factors that make an organisation famous.
It’s common to find a layer of people and processes that are peripheral to core capabilities, especially in high growth and mature companies who have favoured growth at all costs. While this layer may have been necessary to achieve scale, it’s now likely to come at a premium to the organisation and herein lies the basis for this first idea.
‘Partnering in’ involves identifying and forging strategic partnerships with organisations that can tangibly strengthen the quality of core capabilities in the short and long term. This strategy can also yield two important short-term benefits. The first is reduced operating cost as the organisation aligns resources to focus on core capabilities. The second is that ‘partnering in’ can expose commercial models that were previously unavailable to the organisation.
‘Partnering Out’
The second idea is ‘partnering out’. This focuses on identifying and partnering with organisations who can increase customer growth and retention, and reduce the cost to acquire and serve those customers. Channel and alliance models aren’t new and most favour the acquisition process. Designing an incentive and accreditation model that educates and supports partners to attract, serve and retain customers is only done well by a handful of companies and herein lies the opportunity for your organisation.
Consider John Deere and SpaceX
Agriculture giant John Deere entered into a strategic partnership in January 2024 with SpaceX to expand rural connectivity. In an industry first, and utilising the Starlink network, this example of ‘partner in’ by Deere helps farmers with poor conventional connectivity to fully leverage precision agriculture technologies. Access to reliable, remote connectivity creates the opportunity to reconfigure the business models of farmers and the industries that support agriculture.
This partnership also serves as an excellent example of SpaceX ‘partnering out’. By offering connectivity that unlocks significant potential for farmers, SpaceX is creating a model that educates and supports partners to attract, serve and retain customers.
It’s about strategic incentive design
Leaders and business owners already have a strong sense for the incentives that have worked in their industry to date. When that building block knowledge is combined with the trend towards partnership-driven growth, those organisations will not just become more resilient, they will be at the helm of productive ecosystems that deliver sustainable growth thanks to loyal partners across their value chain.
If you’re thinking about the role that partnership-driven growth can play in your organisation, consider asking three questions:
What is the current state of our partnerships portfolio?
Given our strategy, should our early focus be ‘partnering in’ or ‘partnering out’?
If we could only choose one, who would we like to call a business partner in 2024?
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