Are you committed to your partner?
Why business as usual is not a partnership.
Ian Spatz | April 11, 2016
A Financial Times Stock Exchange (FTSE) 100 telecoms executive recently told me that 8% of group earnings come from partnerships with close to zero capital employed. Think about that for a moment: hundreds of millions of margin from hardly any investment. Who wouldn’t want that?
I work for a US firm establishing a practice in the UK. Even though we’ve grown rapidly in our first year from two to nearly 40 consultants, what can we really offer in a partnership? I suspect that most of the partnership offerings are asking for our investment in free time or reduced rates. Since we’re investing in the UK market, that might be an appropriate proposition for us, but in a wider context, I think something more complex is afoot.
The telecoms exec works for a company with a great brand and a huge list of loyal customers. Some of his partners can obviously see that access to those assets will be lucrative. To his credit, however, he focuses the partnerships on how they can work more closely together, create better customer experiences in innovative ways, and establish mutual value to create trust for a long-term relationship. Were those the focus areas that came to mind when you read the money-for-nothing 8% of earnings statement?
Focus on people, not sales
Has the success of a few perpetuated a myth for the rest of us? Partners offer great value with minimal effort. In my experience, this myth has been a source of competitive advantage for those working diligently to build strong, trust-based, strategic partnerships for the long term.
I have worked on several engagements over an eight-year period with an energy company that made a $1 billion gross margin from a portfolio of 10 strategic partners. What did they do right?
- They diligently built and tested value cases for the most promising partners and ruthlessly weeded out the ones who were not valuable or willing enough to partner.
- Then they put in high-capability account managers whose success or failure was entirely dependent on delivering with their number-one strategic partner.
These practices are not easy to implement in a complex global organisation, and there will always be tension between a single point of accountability and the business units that need to be bought into a plan. How did this group overcome those challenges? They made a commitment to investing in people, both in their account managers and the relationships at all levels with their partners.
I’ve had the privilege to be in partnership discussions in many forms. The reality is that most just want more business, and “partnerships” is a nicer-sounding word than “sales.” It’s important to test the commitment to invest resources into a partnership. Willingness to spend time, build relationships, and perhaps co-invest in developing new offerings are all signs that there's more to the partnership than sales.
For a smaller firm like ours, we’re coming around to taking our own advice. We’ve put in a single accountability for choosing and establishing partnerships and thinking carefully about where we invest our limited resources. Selecting our partners needs to be something beyond sales, and more about where our strengths complement each other.
This approach is forcing us to be clearer about our points of differentiation in the London market. Our aim is to develop strong long-term relationships, and to do so, we need to look at partners differently. Business as usual doesn't cut it anymore.
Help both partners' bottom lines
Partnering means doing something different with another organisation that is not normally done. Value should be viewed in 3 areas:
- Service quality
All too often the focus is on contracting. Speed of contracting is always welcome, but the expectation is too often explicitly in the higher price/lower cost business case that is often associated with committing to a long-term partner. Usually partners end up paying/buying the market rate with their partners.
Instead, focusing on win-win situations such as better aligned service quality, joint innovation, and offer development often lead to significant advantages in speed to market and service quality that helps both partners’ bottom lines.
Invest in the right partnerships
A lot of effort goes into choosing partners and delivering the value potential from the partnership. Although it may feel like a luxury, the most successful organisations spend time carefully developing specific sources of value with partners that are tied to bottom-up business cases.
Successful partnerships often establish tough criteria in terms of value, complexity, and willingness to partner to gain confidence in entering into a strategic partnership. Many of the partnerships that prove most successful weather several crises together—if there had been less investment and commitment the partnership would end.
The next time someone mentions a partnership, stop and think about the effort it takes to make it a success. If you’re prepared to make the investment, it can be rewarding, but do it deliberately. Business as usual is not a partnership.
Originally published by Ian Spatz on LinkedIn Pulse.