FROM THE TRENCHES
Working Strategic Partnerships
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Strategic partnerships refer to any relationship between separate companies that involves shared contributions, ownership and control (short of a joint venture, merger, or acquisition). They work best when each participant seeks to augment its existing capabilities with the resources of the other, creating a synergy that enables the organizations to deliver a unique offering that they could not provide on their own. In sum, they grant a company access to new capabilities that allow it to become more competitive.
If executed successfully, strategic partnerships can deliver access to new markets or customers, accelerate new product development cycles, and improve a company’s competitive positioning. They help companies expand their capabilities without the added step of creating those capabilities in-house. Companies therefore perform more efficiently and adapt more quickly than they would on their own.
Given these advantages, it is no surprise that strategic partnerships are increasingly a centerpiece of corporate strategy. Many companies commit more than 20 percent of their assets to developing and managing partnerships, while others depend on partnerships for 30 to 50 percent of their research expenditures or annual revenues . A recent Frost & Sullivan survey underscores this trend: more CEOs cited strategic partnerships as their number-one growth strategy than any other (eclipsing new product launch, geographic expansion, and other traditionally favored strategies).
Strategic partnerships should be based on a clear growth strategy, tight partner alignment and shared capabilities. Successful organizations understand that integration challenges can be offset by conducting rigorous opportunity analysis and partner due diligence. Importantly, they understand that partnerships should play to their strengths, and they do not allow their growth strategies to become overly dependent on the performance or commitment of a single partner.
The following case example demonstrates how Appleton took a principled approach to partner strategy and partner selection, with positive results:
Case-in-Point: Appleton Papers and P&G’s Happy Marriage
Facing stagnating demand within its existing market, chemical and products manufacturer Appleton Papers began a search for new markets that fit with the organization’s core capabilities and growth strategy. To manage this search, Appleton developed a structured process for identifying and commercializing new growth opportunities by:
- Conducting internal and external interviews focused on defining Appleton’s competitive advantages
- Assessing the fit between its product offerings and untapped demand in new markets
- Prioritizing the most promising opportunities through an objective scoring system
- Weighing the growth and revenue potential of each potential market against Appleton’s core capabilities
As a result of these due diligence exercises, Appleton eventually identified a close fit between its core capabilities and opportunities in the fabric softener market. To pursue these possibilities, Appleton developed a strategic partnership with
Proctor & Gamble focused on product innovation tailored to this market. *
Importantly, Appleton understood that a successful strategic partnership would flow organically out of insights gleaned through the above process. It did not force an alliance and only pursued opportunities that (1) fit within the organization’s larger growth strategy, and (2) granted Appleton access to promising opportunities that, without a partner, the organization would not have been able to pursue.
Ultimately, this approach to strategic partnership development—focused on a single opportunity, backed by significant resources and a solid business case—produced positive results for Appleton. The organization was able to access new markets and reinvigorate growth in its product line without straying too far from what it does best. Furthermore, Appleton executives established a repeatable process for evaluating growth opportunities and accompanying strategic partners, thereby improving the approach over time.
Click
here to access a companion Best Practice Guidebook further detailing Appleton’s strategic partnership development process.
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Frost & Sullivan structures the strategic partnerships development and management process around the phases listed below.
To learn more about how you can build a repeatable and unbiased process for vetting, establishing and managing strategic partnerships, please contact us for a detailed walkthrough of Frost & Sullivan’s newly-published Growth Process Toolkit for Strategic Partnerships. (KB Note: you could link to the sample if you want).
I. Harbison, John R., and Peter Pekar, Smart Alliances: A Practical Guide to Repeatable Success, New York: John Wiley & Sons, 1998, pp. 20-23.
II. Ibid., p. 13.
III. Bamford, James D., Benjamin Gomes-Cesseres, and Michael S. Robinson, Mastering Alliance Strategy: A Comprehensive Guide to Design, Management, and Organization, San Francisco: Jossey-Bass, 2003, p. 19.
IV. Frost & Sullivan, The CEO Perspective on Growth: An Annual CEO Survey, November 2009.
V. Frost & Sullivan, Best Practice Guidebook: Appleton’s Mature Product Reinvigoration Process, 2009.
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