Grab Your Partner(s)

Business alliances and other joint ventures will remain a popular strategy, but the reasons for teaming up will change.
Josh HyattApril 1, 2011

Like flailing swimmers clutching life preservers, companies reached for customers, suppliers, and any other third parties they thought could help keep them afloat during the recession.

Now, with the economy’s choppy waters calming down, those same companies are finding that a partnership strategy born of necessity can also be a valuable part of a growth strategy. A new study from CFO Research Services, prepared with Ariba, surveyed almost 200 global senior finance executives and found that forging partnerships still remains a top priority.

Not surprisingly, companies’ goals have changed. While the financial crisis often drove stronger companies to cozy up to suppliers in hopes of extracting better terms and prices, the focus has now moved to collaborative process improvements and shared risk exposure, among other aims. Companies are also taking a more strategic view of partnerships, thinking less in terms of tactics for winning bids and more about longer-term goals, like nurturing new markets.

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Forging deeper ties requires delicacy and due diligence. Survey respondents pointed out that forming third-party relationships can be a distraction, particularly if they are, as one respondent phrased it, “one-off ventures that dilute resources from the core focus” of the company. And, while such partnerships can play a crucial role in penetrating new geographies (thanks to the local knowledge of the partner), there’s always the risk that the third party will drift away from its original intentions or ethical standards. Like any relationship, corporate couplings need to establish — and maintain — strict ground rules to uphold a shared vision.

It’s hard work, but that isn’t dissuading corporate finance executives. As the survey found, many plan to ramp up their pursuit of strategic alliances, joint ventures, exclusive sourcing arrangements, and other partnerships in the months ahead. In an uncertain economy, after all, the greater risk may be in going it alone.

Importance of ext. relationships in the recovery; likelihood cos. will pursue strategic partnerships