Almost every salesman wants to be their customers’ “partner”. And almost every organization benefits from having the right partners. Unfortunately this seemingly natural bias to partner leads to bad choices without a strategic approach to partnerships and guiding criteria. The most valuable partners 1) share interests and 2) have differentially valuable strengths. So, partner with organizations that meet both criteria and work with other organizations in other ways.
• Partner with organizations with differentiated strengths, and more shared interests.
• Contract with organizations with differentiated strengths and less shared interests.
• Relate with undifferentiated organizations with more shared interests.
• Transact with less differentiated organizations with less shared interests.
All organizations are interested in their own advantage and wellbeing. They share interests with other organizations when the same things result in advantage and wellbeing for each of them. Convincing a baseball stadium to stop serving hamburgers is in the best interest of both hot dog manufacturers and mustard manufacturers since that will help both their sales.
As the old saying goes, there is no value in sameness. If organizations have similar strengths, their basis for competition defaults to price. Organizations with strengths different than others’ can create superior value by leveraging their strengths to do things others cannot do.
The combination of shared interests and differential strengths yields strategic guidance on choosing partners.
Transact — Undifferentiated strengths and low shared interest.
These organizations cannot help your organization move forward and don’t really care about your success. Manage them from transaction to transaction, comparing their offerings to their competitors and choosing the lowest price or lowest total cost each time.
In general, suppliers of commodities like heating oil fall into this category. Assuming quality and service are comparable, choose the least expensive supplier in each incidence.
Contract — Differentiated strengths and low shared interest.
These organizations have something valuable to offer your organization even if they have fewer shared interests. It’s likely more important to reach a longer-term agreement with them than to squeeze them for the last penny of cost reduction. In some cases you may be able to grow your business to represent a large enough share of your suppliers’ business that your success becomes a shared interest.
Sticking with our heating oil example, in times of heating oil shortages, having a reliable supply of heating oil will be a differentiated strength. In these cases, you will be well served to lock in your seasonal heating oil requirements with a contract.
Relate — Undifferentiated strengths and high shared interest.
Even though these organizations do not have differentiated strengths, their shared interests will bias them to care more about your business than will those without shared interests. It’s worth investing in these relationships and perhaps even helping these organizations strengthen their offerings to you as you work together over time.
Examples of this would include service suppliers whose services get more valuable the more their people know about the organizations they serve. Advertising agencies often fall into this bucket. As agency personnel build relationships with internal marketing people, their working relationships become more efficient (and hopefully more effective).
Partner — Differentiated strengths and high shared interest.
The best strategic partners meet both of these criteria. They bring something of value to your organization and there’s a high level of shared interests. Treat these relationships as partnerships because investing to help them helps you.
Sticking with the advertising agency example, an organization with a strong offering to Hispanic consumers might partner with an advertising agency with a deep knowledge and expertise in Hispanic marketing. These two could grow each other’s businesses in partnership, each focused on what they do best while working together to better serve the same end consumers.
Strategy is about choosing what not to do. Choosing to partner with a differentiated supplier who shares your interests is easy. The hard part is choosing a relational, contractual or transactional relationship with those that do not fit as well.