Perils and Promises of Business Partnership– When It Works, It’s Fantastic; When It Doesn’t, It Can Get Ugly…

Most business partnerships fail– research show that the failure rate for business partnerships and strategic alliances is up to 80%… Should your company invest in a venture where there is a 4 out of 5 chance of failure? However there is another side to the 80%; the success side: So, companies that follow a structured approach to establishing and managing business partnerships reach a success rate of up to 80%… Hence, business partnership do work, but they should be entered into with a healthy dose of reality…

According to Amanda Neville; a business partnership is like marriage; they both have similar baggage, but partnerships are far more difficult to maintain than marriage and, just like marriage, partnerships are not for everyone; sometimes it makes sense, and sometimes it does not… One formulation for business partnership success = shared vision + common values + complimentary strengths + communication… Any thing less will fail…

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According to David Gage; business people are experts in what they do; not in partnership… If you are considering a partnership structure for your business then ask these questions: Why do I want a partnership? Are there better alternatives than a partnership? Who are the best candidates for a partnership? Then also ask: Does the potential partnership have compatible work ethics? Are partnership vision compatible? Does the partnership share values? What is the exit strategy from the partnership? You must discus all the issues before you start a business partnership to create a healthy foundation, which is essential for long-term success… It also establishes a framework of ‘trust’, and trust is absolutely essential, especially in the fragile world of business relationships…

In the article Profits and Perils of Business Collaboration by Tass Messinis writes: Strategic partnerships and collaboration help businesses grow… Think IBM and Apple’s partnership last year, aiming to bring together IBM’s analytics and ties to corporate enterprise with Apple’s image, innovation, and consumer experience. Both partners get something new and unique out of the pairing, and help to cover each other’s weakness or inexperience… Hence when looking to collaborate with other businesses, consider both benefits and pitfalls, for example:

  • Building a Partnership: Many partnership occur naturally over time and can be highly successful– but just as often they are born of a company’s weakness or need… The first step in a mutually beneficial partnership is identifying where you are weak within your business, e.g.: Is there an area in which you are losing customers? Are other companies offering a capability or service you simply aren’t able to? These are the areas where a partnership can supplement your weaknesses and help you retain a competitive edge. They need not always be borne from a negative issue, though– it could be that you’re simply looking to expand services or value-add on existing business… The actual relationship-building that’s part of a collaboration between businesses will vary depending upon the approach and industry… But, you need a shared understanding of the scope and boundaries of the collaboration…
  • Reaping the Benefits: Collaboration between businesses can unlock a whole host of benefits, such as; learning and the sharing of expertise, technology… By bringing businesses together, they can share– in an atmosphere of trust– invaluable information about what has worked for them, what has failed, and where they are headed next… Another benefit that often arises from collaboration is access to new markets that were previously inaccessible, e.g., in the IBM/Apple example; Apple is incredibly successful in the consumer market– but in partnering with IBM they open-up opportunities to make inroads in the enterprise space… Also, partnerships can give a business the reach for customers or deals it might not otherwise have the size to navigate…
  • Avoiding Pitfalls: Though the potential benefits of business collaboration are significant, it’s still an area where your company should be cautious… the primary thing to remember is to stick to the scope and understanding of the partnership agreement… Go in with eyes wide open about what you will be giving to your collaborator in terms of knowledge, industry insight, or services, and what’s off-limits… Be especially cautious when your partner is a competitor or potential competitor– make sure you’re getting as much as you’re giving out… However, the business ‘bottom-line’ should not be the only consideration that goes into whether to collaborate with another company. What also needs to be recognized is the potential of impact on your reputation… reputation is one of the most powerful commodities a business can trade in…

In the article Partnership Perils: Planning to Prevent Them by David Gage writes: Horror stories about business partnerships float around in the business world… The stories strike a chord of fear in the hearts of many business executives… But despite the fear, and often against advice of lawyers and accountants, who warns of the dangers of partnerships, every year thousands businesses form them anyway, even though they are told; it’s too risky… Sadly, within a few years of formation, the majority of partnerships fizzle, and often because the partnership simply just don’t get along– it’s a personality thing…

Also, far to often, business executives think that if they put appropriate legal documents in place, they’ve done everything that needs to be done for the partnership; but in fact, legal documents give people a false sense of security… legal documents, although necessary, only scratch the surface of what people need to– discuss, negotiate, and come to agreement on for the partnership to work… Business people are experts in their business, not in business partnerships; and entirely too often, businesses work in a rudderless partnership– no direction, no communication, no outcome…

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In the article Some Business Partnerships Don’t Work by Donata Huggins writes: There are countless stories of business partnerships going bad. Steve Jobs famously teamed up with John Sculley only to be fired by him two years later… Facebook founder Mark Zuckerberg’s falling out with his partners is so well known they made a film about it. Some clearly do work out though, and here are several successful pairings that worked for them.

  • LAUGH AT MISTAKES: Hayley Sudbury, co-founder of The Tasting Sessions, says her relationship with Angella Newell is pretty rare: We are best friends and business partners. I think the secret to our success is to have a drink and laugh when things go wrong…
  • TRUST: Redington’s co-founder Robert Gardner says that his relationship with his co-founder is just like marriage: It’s all about trust. If that’s broken between the two of you, then things break down…
  • VISION: Eric Partaker, co-founder of the Mexican chain Chilango, says that– success is built on alignment of vision. You are asking for trouble if you need to negotiate the way through every decision…
  • MOTIVATION: Barry Ferdinand and Jason Collins from the company Apogee say that it’s motivation that holds them together. We worked with people in the past who didn’t have the same work ethic as us. It didn’t work out…
  • DIFFERENCES: Michael Hayman and Nick Giles who run the agency Seven Hills say their business needs their differences to survive; it works because we are not the mirror image of each other. We have different skills, outlooks and passions and this creates the dynamic that works…

In the article Perils of Business Partnerships by tb writes: Partnerships are very common but, successful partnerships are relatively rare. They start with the best of intentions and seem like a great idea but far too often end in acrimony, bitterness, anger… However, partnerships are still an excellent way to get the necessary resources and skills necessary for a business to succeed, but steps must be taken at the very start to maximize the chances of success and minimize the hassles if things don’t work out as envisioned…

Another way to understand the dynamics of a partnership is to think of it as a marriage. As in marriage, ‘trust’ is essential in a partnership; also– respect, ability to listen, open communication, compromise, empathy… Even if all these things are present there is still a good chance that the relationship will break down, so before forming a partnership, ask; Do I really want to be married to this partnership?

In the article Avoiding the Perils of a Bad Partnership by Mike Armour writes: No partnership is ever formed with people expecting things to go wrong; quite the contrary. Despite having heard all the horror stories about partnerships that proved disastrous, business people who approach a partnership are always convinced that their undertaking will be the epitome of harmony, good will, success… but, before you commit, map out how you will get out of it if things go wrong…

Map out your exit strategy– legal issues, organizational issues, issues of technology, markets, customers, employees, business reputation… In a word, detail the consequences of the partnership failing… It behooves you, therefore, to approach potential partnerships carefully. Surely, a good partnership has the advantage of leveraging the collective experience of its partners and creating a synergy that can pay huge dividends… But, put together carelessly or managed poorly, partnerships can be an absolute disaster…

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The heart of a partnership is building relationships and trust… and that means working together on projects, socialize, share ideas… Also, issues of power and control are central to the development of partnerships, for example; Who designs the partnership building process; to whom are they accountable? Who sets timetables and controls the agenda? Who makes the final decisions?

Conflicts often arise in partnerships because people are looking for different things, and may not understand each other’s hopes, expectations… That’s why it’s very important to see a partnership as a process of creating a shared vision, building trust, open communication… but, ultimately, partnerships are all about delivering results, and anything less puts the partnership in peril…