As the global economy emerges from its recent slowdown, many small businesses have turned their thoughts to how they will achieve growth in the coming months.
Although the nature of the economy has changed, strategic partnerships remain a useful option for small businesses looking to drive growth. Here is some information about the types of strategic partnerships that are available and how your business can use these types of relationships going forward.
A strategic partnership is a mutually beneficial relationship between two businesses which aren’t in direct competition with each other. These partnerships usually involve businesses sharing one or more of the following: customers; industry knowledge; resources; marketing resources; events and data
The primary goals of strategic partnerships are usually to improve your customer offering, offset costs, or expand your customer reach.
By combining resources, both businesses become stronger and more resilient. Strategic partnerships often provide new growth opportunities, something which is particularly useful in this difficult business climate.
There are several types of strategic partnerships, but the most useful options for small businesses are:
Strategic Referral Partnerships
A referral partnership involves each of the business partners referring customers to the other. It is a very common form of partnership amongst small businesses.
A real world example of a referral partnership would be a car tyre sales business partnering with a local car repair shop. When the car repair shop notices that a customer requires new tyres, they are directed to the tyre shop and vice versa. The two businesses share customers, which provides opportunities for growth.
Strategic Marketing Partnerships
A strategic marketing partnership involves working with a partner to co-brand products or services in combined marketing campaigns. Food companies and technology companies often use this type of relationship to reduce marketing costs, increase customer engagement, and boost sales.
Strategic Supply Chain Partnerships
This is a coalition of two or more businesses in the same supply chain. The businesses in the partnership work together to create more value than they would if operating independently.
Some of the activities businesses can perform together include manufacturing, marketing, sales, distribution, product development and research. This is a more sophisticated form of partnership, but it can be very advantageous for small businesses involved in manufacturing.
Strategic Technology Partnerships
This is a partnership that a small business makes with an external technology provider. In return for exclusively working with the technology company, the business receives cheaper rates and access to new technologies to improve workflow. Small businesses can save money and improve their operations by entering into technology partnerships.
Strategic Financial Partnerships
A strategic financial partnership is similar to a technology one, with a focus on financial activities instead of technology. Your business can form alliances with accounting agencies, banks, lenders, and finance professionals to achieve better outcomes.
One recent example of this type of relationship is the partnership between Nigerian-founded Fintech, Flutterwave and Uber. Flutterwave is providing access to their Pan-African network of remittance partners, so Uber can deploy its cash digital wallet feature for their customers. Both companies benefit from this relationship.
Strategic Integration Partnerships
This type of partnership involves combining the different technologies, products, or services from a variety of businesses. The partners remain independent, but share the benefits and risks involved in their joint venture.
A large-scale example of this approach would be the Nike and Apple creating products (shoes and phones) which could integrate with one another.
Small businesses can use a similar approach whenever there are complementary products or services in the same market. For example, a fruit shop could form a partnership with a local chocolate factory to produce a line of chocolate coated fruits.
Businesses can also share infrastructure or occupy the same space in order to reduce overheads and operating costs. In many cases, this approach can help both businesses generate more sales. Since they share customers they can attract more customers to their shared space as it will be more convenient for their customers to shop in a single location.
Are Strategic Partnerships Still Useful in the Emerging World?
The shakeup of the global economy has presented many challenges for small businesses. Businesses that are able to quickly adapt to these challenges have the greatest chance of success.
Strategic partnerships give small businesses an opportunity to diversify their operations, become more agile, and improve their financial stability. Small businesses can use partnerships to improve their products or services and interact with consumers in new ways, which may be critical to survival in the coming years.
Partnerships provide an excellent opportunity to improve the financial position of small businesses and make sustained growth possible. Here are a few useful tips for using strategic partnerships:
Understand your market
Perform extensive market research before entering into a strategic partnership. This will help you understand what strategic fits are available, where opportunities may lie, and what new offers your customers may be interested in.
Look for competitive advantages
Strategic partnerships that give you a competitive advantage over other small businesses are particularly valuable. Look for relationships that can reduce your marketing costs. Alternately, look for partnerships which will provide a significant technological or financial boost or access to markets
Some of the best strategic partnerships are not obvious. Take Uber and Spotify for example. One company is a ride-sharing service while the other is a music streaming service. Not the most complementary partnership at first glance.
However, both companies realised that customers wanted to listen to their favourite songs while travelling. Spotify added the ability to automatically play a user’s playlist when entering an Uber vehicle. This improved the value of both services for their customers.
As you can see, there are many benefits to strategic partnerships. Despite the current economic turmoil, it is still a good time to look for these kinds of business relationships.
•Olatunji is the CEO of Arcane Insights Ltd.