Partnerships in business conjure up many images. Some see a savvy group business people who founded a privately held business; read: Sterling Cooper Draper Pryce a la Mad Men. Others envision the mom and pop hardware stores that join a cooperative buying program enabling preferring pricing. Whatever model of partnerships you may be picturing, they all exist for one reason: mutual benefit. I’d like to explore the various benefits and structures related to partnerships.
My career started in a large privately-held consultancy where each partner was paid a bonus from the profit according to the number of units they held in the partnership. If there was no profit the partners didn’t get paid. In order to avoid the risk of no profit they offered a portfolio of services (with respective partner leads) instead of just one service (with only a few partners). In this case the partnership afforded a distribution of risk in exchange for a distribution of profit.
Similarly, agricultural co-ops offer a way to share risk and reward. A local farm agrees to box up harvested produce each week and drop off the box to crop share owners. If there is a drought there is less food, but if there is a bumper crop then the crop share owner gets more produce. Either way, the farm will have received revenue from selling crop shares before the growing season.
Lastly is a form of co-op: a buyers club much like Costco only more specific. For example, Ace Hardware and Do it Best offer memberships to have access to preferred pricing (among other services) for items commonly sold in hardware stores. The benefit to the store is reduced variable cost, but the risk the upfront membership dues. Generally speaking, most stores don’t have trouble getting past the breakeven point when it comes to realizing the benefits of this kind of partnership.
Many service firms will find value in partnering with a vendor. Many times the vendor will provide product training for the service firm vendors know this means the service firm will be more familiar with the benefits of their product and may be more likely to recommend a solution that involves the vendor’s product. Service firms also benefit by being on a short list when it comes to providing service for product that the vendor has sold. This partnership requires each party to have very clear intentions because some service firm wish to maintain the perception of being vendor agnostic, additionally vendors don’t want to invest in service firms that aren’t positioned to generate leads.
Hardware and Software companies may partner in a complimentary offering. Generally, this partnership is a either a financial play and/or a distribution play (such as Microsoft Windows Mobile and Nokia).
Outsourced services are also supplier oriented partnerships. While some may not consider the purchase of outsourced services to be a partnership, I would argue that effective outsourced services can fall into that category. Take Ruby Reception as an example they offer an answering service, but do a great job of representing themselves as your company. They could simply take messages, but instead they take the extra step to be a part of the team. Another example is West Monroe Partners Managed Services we can fill your company’s IT gaps with professionals that know IT and know your business. Customers pay for the service, but get the benefit of someone who does what they can to understand your business.
At West Monroe Partners we do our best to earn and keep the trust of our clients and earn the title of trusted advisor. With each project we form a sort of partnership with our clients so that when our clients need additional services we can beat our competitors because our client sees us as a known entity instead of having to invest time with a firm less familiar with their business. We know that if we are able to learn more from our projects we can better protect the interests of our client in future work. This leads to less cost of acquiring new clients, but our clients also benefit by not having to pay another firm to learn about their business. This benefit is really just the opposite perspective of the supplier partnership.
I recently learned about the Pan Nordic Building of Nordic Embassies in Berlin, Germany. Denmark, Finland, Iceland, Norway, and Sweden partnered to commission a shared embassy. This is a great example of how difference countries could collaborate to produce something greater than the sum of its parts. Recognizing similar geography, climate, political perspective, and language they decided it was feasible to join forces. Designed by architects from each Nordic country, they were able to make their own unique contributions to the building. The features and scale of the building give a greater presence than any one of the countries could give individually. This is a great example of how understating shared values can lead to a meaningful partnership.
Another example is artists (such as artist in residence programs). In art there is little motivation for the financial only the desire for expression. We can all think of great partners in art: Charles and Ray Eames; Christo and Jeanne-Claude; John Lennon and Yoko Ono. Regardless of the subjective feelings toward these partnerships, it is evident that colocation of diverse people can lead to interesting results that would never have existed otherwise.
Partnerships can take many forms and must contain mutual benefit to be purposeful. Look for value alignment, natural exchanges, and transparent financial benefit to get the most out of your partnerships. Additionally, consider the intangibles perception, performance, and collaborative benefits of a partnership. Lastly take some calculated risks…partners have a way of pushing each other towards greatness while providing a form of a safety net.