It’s estimated that upward of 70% of strategic partnerships end in failure, with some of the most commonly cited issues being unrealistic expectations, disagreement over objectives, and poor trust and communication. But when respective parties get the formula right, great value can be created far beyond what any one company can do alone.
What’s the differentiator? Research from the University of Tennessee (UT) suggests the strongest alliances in business focus on finding collaborative solutions specifically tailored to the needs of each partnership.
There’s a tendency for business relationships in the tech space to primarily take on a transaction-based approach, especially in supplier and outsourcing relationships. Enterprises provide money for a set range of products or services with little to no value or interaction beyond the basic items included in that transaction.
The transactional nature of these relationships means they’re often not sustainable for the long-term, leaving the partnership lacking potential to deliver value beyond basic contractual obligations. While transactional contracts certainly have their place in the tech world, relational contracts designed to motivate win-win solutions over the long-term will ultimately deliver greater value.
Here’s why forging stronger alliances matters, and ways to achieve them.
1. Drive value through relational contracts
CIOs have myriad opportunities to create value for their organization — especially through sourcing partnerships where a supplier brings skills, innovation, and technology to a company. How contracts with prospective partners are formed is a key foundational piece to ensure the partnership can sustain for the long-term. IT sourcing models exist on a spectrum, ranging from basic provider models for standardized goods and services, to more collaborative performance-based and vested sourcing models.
With these types of contracts, the partnership moves away from simply prescribing a set of activities to be performed by one or both sides. Instead, the focus emphasizes desired outcomes that often require transformational work.
By their very nature, these relational contracts require more input and communication from both sides to determine desired outcomes, how the value of the partnership will be measured, and any guidelines for the work that partners will perform. Since these contracts are more focused on outcomes rather than a set list of services, strong communication and collaboration are essential for the partnership to succeed.
2. Find collaborative solutions
The importance of collaboration in business partnerships has been recognized for a long time — even though it hasn’t always been practiced. A Harvard Business Review analysis noted that “Alliances that both partners ultimately deem successful involve collaboration (creating new value together) rather than mere exchange (getting something back for what you put in). Partners value the skills each brings to the alliance.” In addition, such partnerships evolve progressively, “opening new doors and unforeseen opportunities.”
For example, in a case study published by software company Zight, when a customer review site needed help scaling its sales process, its partnership focused on identifying video-based solutions to help the sales team create personalized video sales pitches. By working with their partner to identify how to incorporate webcam-enabled recordings and annotated screenshots, the company’s sales reps were able to save 88 hours per week and shorten their sales cycles while generating a $7 million sales pipeline.
In this and other successful partnerships, it’s common for both sides to engage in deep communications to determine which solutions will work best to solve a particular problem or achieve a transformational initiative. They don’t settle for a one size fits all, product-based approach because they identify that the challenge to be solved relies on a customized approach based on the specific needs of the business.
3. Develop trust and mutual benefits
A recent PwC survey found nearly all executives face challenges building trust and understanding stakeholder needs, which can directly impact productivity, operational efficiency, and even the quality of products and services.
Further research from UT suggests business partnership contracts that stand the test of time utilize a contract framework that focuses on the relationship rather than a transaction, with a co-created vision, objectives, and a strong set of guiding principles that ensure expectations and goals are fully aligned. This collaborative approach to building out the contract is important because it enables both sides to develop trust and identify mutually beneficial outcomes. For such contracts to be effective, both sides must be open and transparent regarding their needs, values and goals from the partnership.
While this may seem like it requires putting in more work upfront than a standard transactional contract, creating an environment of greater trust puts both parties on equal footing. Clarity and ownership are clearly defined so all sides understand what’s expected and will act in a manner that strengthens the partnership.
Delivering lasting win-wins
The tech space has historically been more transactional than partnership-driven, but in today’s environment, IT leaders can’t afford to remain trapped in this mindset. By identifying relationships that can deliver mutual value for both parties and coming together with a collaborative, vested mindset, leaders can create more sustainable partnerships that lead to high-value outcomes.
