In an increasingly competitive landscape, organizations that serve small businesses are looking for more ways to differentiate themselves and gain market share. There’s a burning need for companies to innovate more effectively and deliver the solutions and services that small business owners need, both for the sake of the small business ecosystem, and so that large organizations can grow their revenue.
One highly effective way for SMB-facing companies to improve their business outlook is through strategic partnerships. These are long-term business collaborations where all the partners combine resources and capabilities and work together to reach their goals. In this article, we’ll discuss the benefits of a strategic partnership, how to fulfill your aims, and some strategic partnership examples of success.
What are strategic partnerships?
Strategic partnerships are relationships where two (or more) organizations collaborate to achieve their respective goals and drive mutual growth. Each company stays independent, but they work together in strategic areas, and they share the potential risks and benefits of the relationship.
This kind of partnership is always more than just a passing connection or brief relationship. Rather, they are long-term commitments that involve a high level of trust, communication, and shared dedication. The idea is that the strategic partner can bring knowledge, audience share, services, or other resources that the other partner struggles to access.
A strategic partnership can take many forms, including joint ventures; shared resources like R&D departments, supply chain, or distribution services; joint branding; collaborative product development; minority equity investments; and more.
Why are strategic partnerships important?
These kinds of partnerships bring great benefits. They are excellent ways for companies to grow their business, extend their reach, and improve their bottom line. For a start, partnerships allow your organization to access a new audience and market share that you might not have been able to reach independently, helping expand your customer base. Some companies enter partnerships in order to establish their business in a new geography or demographic.
Atlassian found that its 700 channel partners bring in a third of all their business, and Hubspot’s State of Partner Ops and Programs report states that 49% of organizations attributed more than a quarter of their revenue to partners. According to Crossbeam’s State of the Partner Ecosystem 2023, deals are 53% more likely to close when a partner is involved and reach completion 46% faster.
A strategic partnership also helps all the participating companies to enhance their offering. A single product that includes both companies’ capabilities and features can be more popular than each product on its own. For example, marketing agency SyncShow partners with Hubspot to use Hubspot’s CRM to provide better support for its clients. Alternatively, you might take advantage of your new partner’s capabilities to improve both your products. Workflow optimization company Groove integrates with Clari‘s revenue tracking platform to drive users and engagement for both their solutions.
By working together to leverage each other’s complementary strengths, resources, and expertise, strategic partners can help each other gain a competitive advantage and differentiate themselves in the market. Pooling resources, sharing risks, and capitalizing on each other’s core competencies allows businesses to innovate more rapidly, reduce costs, and provide a unique value proposition.
How to create a successful strategic partnership
Despite the many benefits of such partnerships, it can be challenging to conduct them successfully. Difficulties include agreeing on how to share or isolate proprietary knowledge, managing virtual teams from different organizations, overcoming risk, and maintaining effective communication channels. With that in mind, here are some tips to help you build a successful collaboration.
1. Identify the right partner
The first step is always to choose the right organization to partner with. First, you’ll need to be clear about what you want to achieve from this partnership. McKinsey recommends asking yourself three questions:
- What should the partnership achieve?
- What gaps do you need to fill?
- What opportunity do you want to capitalize on?
Once you know your goals for the partnership, you’re ready to search for potential partners. Look through your existing contact networks, industry associations and organizations, and make connections at conferences to build a longlist of options.
Next, go through your long list to screen possible partners for the capabilities you need to meet your goals. Consider factors like their reputation and market reach within the small business community, track record in delivering value-added services to similar clientele, and technological abilities.
It’s also important to think about whether they’ll be compatible with your business values and corporate culture, so as to ensure alignment and minimize potential conflicts, and do your due diligence on their financial stability and willingness to adapt to evolving market dynamics. Last but not least, talk to the other company to find out if they are willing to collaborate closely to address the specific needs of small businesses.
2. Establish trust and communication
Like every relationship, strategic partnerships can only thrive when they are built on a solid foundation of trust and good communication. As Rinat Bogin, our VP of Channel Partnerships says in her article, “Partnerships are based on people and trust more than products and services.”
This begins in the earliest stages of cementing a partnership. It’s crucial to ask what advantages your future partner wants to achieve from the connection. Be open and honest about your goals and the capabilities you bring to the table, and encourage your partner to do the same, so you can align expectations from the very beginning.
In order to continue to cultivate an atmosphere of trust, you need consistent and open dialogue. Set up accessible communication channels that you can use to share regular updates and business insights. Dedicated points of contact, regular meetings, and collaborative platforms facilitate the exchange of ideas and information.
You should also demonstrate reliability by honoring commitments, being responsive, and offering support when needed. Investing time in relationship-building activities, personalizing interactions, and showcasing a genuine commitment to your shared success are integral in cementing trust and fostering robust communication channels.
3. Explore partnership models
There are many different types of strategic partnership, so you’ll need to carefully consider the various options to choose the one that aligns with your goals. Strategic partnership models include:
- Partnership marketing, where you work together on strategic marketing campaigns
- Distribution or reseller partnerships, where you share each others distribution channels
- Product partnerships or technology partnerships, where you link both your capabilities and features to produce new products or improve existing ones
- Joint ventures, where you share both the risks and rewards of the collaboration
The right type of partnership depends on many factors, such as your mutual objectives, resources, and the desired level of collaboration. For large organizations serving small businesses, a strategic partnership model emphasizing support, education, and resource-sharing can be beneficial.
You’ll need to tailor your strategic partnership model to accommodate scalability, flexibility, and ease of implementation. This way, you’ll be able to ensure alignment with the unique dynamics of serving small businesses while leveraging the strengths of the larger organization. Finally, remember that you’ll need to regularly evaluate and adapt the partnership model based on evolving requirements.
4. Conduct risk management and conflict resolution
Even with the best communication channels and strong trust, conflicts can arise between strategic partners. It’s best to be proactive about risk management. Conduct collaborative risk assessments that comprehensively assess potential risks, including financial, operational, and reputational risks, and establish contingency plans and risk mitigation strategies in advance.
Minimize the chances of conflicts and misunderstanding by setting clear roles, responsibilities, and expectations upfront. It’s also a good idea to implement a defined escalation process for conflict resolution, to enable swift identification and resolution of issues. Many companies set up a special collaborative unit to enable and support strategic partnerships.
Review and revise your risk management strategies and conflict resolution protocols frequently, to make sure that they’re still relevant and effective for your partnership. Most of all, encourage open dialogue and active listening, and emphasize the importance of compromise and finding win-win resolutions. Keeping the overarching partnership objectives in focus helps navigate conflicts effectively, maintaining the health and sustainability of the partnership.
5. Measure success ongoingly
Since a strategic partnership is, by definition, a long-term relationship, it’s critical to set up mechanisms to measure progress and success. This begins with establishing KPIs that align with your objectives.
Choose both quantitative and qualitative metrics, like revenue growth, customer acquisition, market expansion, customer satisfaction, and the development of innovative solutions or services tailored to small businesses. Additionally, analyze the efficiency of resource utilization, the strength of the partnership’s collaboration, and the achievement of predefined milestones to assess the partnership’s overall success.
At the same time, you’ll want to schedule regular evaluations against these KPIs, to facilitate tracking progress and identifying areas for improvement. It’s a good idea to carry out feedback sessions with small business customers to gauge their satisfaction and solicit suggestions.
You should also frequently meet with representatives from your strategic partner to improve your understanding of their evolving needs and gain valuable qualitative insights. When you approach KPIs and assessment methodologies with adaptability, you’ll help ensure relevance and responsiveness to changing market dynamics, allowing for continual improvement and long-term success.
Real-life examples of strategic partnerships
Strategic partnerships are far from being theoretical ideals. Here are some real life strategic partnership examples of organizations that successfully partnered to deliver more value to small business customers and increase their revenue and market share.
Salesforce & Google
In 2017, Google announced a strategic technology partnership with Salesforce, one of the world’s biggest CRMs and sales analytics platforms. The goal was to combine their capabilities to deliver better services for their customers.
Together, Google and Salesforce offer integrated tech tools and services that help businesses bring together all their data into cloud platforms. Customers use Google and Salesforce analytics in tandem to produce actionable insights from their data.
Over the years, the partners have rolled out more cloud computing and CRM solutions that small businesses use to track and measure customer preferences, revenue sources, marketing metrics, and more. Most recently, the two companies announced the launch of new bidirectional integrations that power generative AI experiences for Salesforce and Google tools.
Shopify & Facebook
Shopify and Facebook have been working together strategically since 2015, to help small retail businesses owners to manage marketing. In 2020, they took a step forward with more integrations, including simplified ad management for ads on Facebook and Instagram, omnichannel store management for Facebook and Instagram Shops, and unified analytics for all three revenue streams.
Shopify and Facebook provide small business owners with a single platform that allows them to handle sales across numerous storefronts. These integrations enable online retailers to manage inventory, pricing, product tags, and more across three channels, all from a single dashboard.
inTandem by vcita & Santa Barbara TPG
Santa Barbara TPG, which provides tax-related financial products and services to consumers and SMBs, has been working in a strategic partnership with vcita, the all-in-one business management experts, since 2020.
Santa Barbara TPG joined vcita’s inTandem Complete program to expand their financial service offering. It served vcita’s solution as a white label platform named Marketing Pro, providing all the digital tools their SMB clients needed to streamline administrative tasks and return their focus to generating revenue.
Santa Barbara TPG and vcita together help small business owners to thrive and grow their business without the headache of administrative paperwork. To find out more about inTandem by vcita’s partnership program, click here.
The path to mutual growth
Overall, strategic partnerships have the potential to drive impressive growth for all the organizations involved, while also generating innovative tools and services for small businesses. With the right strategies and preparation, large organizations can achieve their goals of increased revenue, market share, flexibility, and more, while helping small business owners meet their own targets for stability and growth.
How do you identify a strategic partnership?
The defining features of a strategic partnership are a shared vision and mutually beneficial goals for two or more entities. It involves a relationship where each party brings unique strengths, resources, or expertise to the table, contributing to the achievement of objectives that neither could accomplish alone.
These partnerships are often characterized by a formal agreement or collaboration aimed at leveraging combined capabilities, accessing new markets, reducing costs, or innovating through shared knowledge, technology, or distribution channels.
How do you structure a strategic partnership?
Structuring this kind of relationship involves several steps. In brief, you’ll need to:
- Define clear objectives and align them with each partner’s goals and capabilities;
- Conduct thorough due diligence to understand each other’s strengths, weaknesses, and potential risks;
- Establish mutual trust through a formal agreement outlining roles, responsibilities, and expectations;
- Set up regular communication channels and governance mechanisms to ensure transparency and accountability;
- Nurture the partnership through continuous evaluation and adaptation