Traditional companies are looking for ways to cope with the disruptive change associated with the digital revolution. We believe strategic partnerships with selected newcomers provide the answer. To maximize chances for success, a well-thought partnership strategy must be developed and implemented.
These days, even the most digital-adverse professional would admit that something fundamental has been going on, which has a profound impact on existing traditional business models. Part of it may be (and will turn out to be) hype, but the innovativeness, diversity and collective push is such that at least some initiatives will become breakthrough game changers – impacting the way traditional companies (TradCos) tend to do things.
However, this doesn’t help much if you happen to work for a TradCo. Being convinced of the phenomenon is one thing; coping with it is something else. Most TradCos are (sometimes desperately) trying to find ways to strike back, but too often with structural handicaps. They simply lack the flat organization, risk-fostering corporate culture, innovative young geeks, flexibility, and lack of legacy which are vital characteristics of successful startups.
So how can TradCos survive and take advantage of digital?
Opening up the company for flexible partnerships with disruptive innovators is the answer. Embracing your enemy – if you can’t beat them, you better join them. Why?
- TradCos have fundamental flaws in their business models, organizational structure and company culture, which take too much time and effort to change. The speed of change in today’s economy is such that there simply isn’t time is to transform TradCos adequately.
- Startups can fill the structural gaps TradCos are facing, while bringing all the complementary skills, competencies and cultural elements needed – often at very limited costs.
- A balanced partnership strategy allows the seed/early stage that startups go through to be skipped. Partnering with startups after the ‘proof of concept’ stage avoids wasting time and money on finding the right solution on your own.
- Partnerships offer TradCos access to talent they otherwise could not attract. In the current war for talent, this is a vital element that is often neglected.
- Upon proven success, partnerships can be transformed into more structural forms of cooperation, including M&As.
- If it fails, the partnership can be dissolved with limited impact on the existing business.
All this seems obvious and the right way to go. However, setting up and executing a successful partnership strategy requires an in-depth knowledge of both your own organization, including strengths & weaknesses, as well as that of the innovative crowd out there, to make sure that the most promising partners with the best operational and cultural fit are selected. A successful partnership strategy includes the following steps:
- Define the purpose of the partnership strategy
- Define the appropriate selection criteria
- Select the right partners carefully, starting with an exhaustive long list
- Set up the right corporate governance from the start
- Create a win-win mindset, respecting each other’s strengths, and recognizing each other’s weaknesses
- Evaluate frequently and remain open for what happens outside
In some countries, TradCos react by embracing the newcomer – e.g. in the US, taxi companies simply put their entire fleet on Uber, partially benefitting from the technology breakthrough. Other countries have reacted by imposing legal barriers to entry, leading to customer alienation and free publicity for the newcomer, ultimately further accelerating the pace of change.
On which side do you want to be?