Getting Strategic Partnerships Right
Written by The One Page Business Plan Company, on May 12, 2022
Establishing positive partnerships takes effort, so it’s worth mapping out a deliberate approach to help find the right companies and forge enduring relationships.
First published in Forbes…
Midsized firms aren’t big enough to do it all. For many industries, outside companies bring a lot to the value chain. But what is the best way to establish effective strategic partnerships? Get it wrong and the company can overpay, underperform or miss out on better opportunities elsewhere. But being too shy about partnerships can stifle growth and the company could miss the chance to leverage up. How to get it right?
Speed dating is the first pitfall. Your product has taken shape, the market is emerging, and before you know it, a larger firm approaches with warm words. Is the first offer the best? Another potential organization suggests a perfect partnership but insists on exclusivity. Too restricting? Or a firm competitive in some areas proposes working together to capture market share. Or would they be plotting to just capture your market?
A better way to build strategic partnerships is to take a staged, strategic approach. Move deliberately, take things step by step, and focus on relationships. Forge trust and learn each other’s working cultures before signing a long-term deal. Growing into strategic relationships gradually is worth the effort. Far better to take time than to jump into bed together, only to have sharp regrets down the line.
“The best collaborations come about as a result of relationships,” says Neill Ricketts, CEO of the 100-person-strong specialty materials R&D innovator Versarien, based in Longhope, UK. “It’s about maximizing the opportunity through working very closely together. But it’s also that ability to weather those storms when things don’t go right and provide enough flexibility to continue the relationship over time.” Read on to hear how they have formed a powerful partnership to put a material called graphene to work in garments.
Establishing positive partnerships takes effort, so it’s worth mapping out a deliberate approach to help find the right companies and forge enduring relationships. Key steps include:
- Know your market and be known within your market. Potential partners must have a way of finding you and validating how good you are to justify the costs of reaching out to you.
- Identify your areas of need, or weakness, where a partner can be useful. Use a tool like the business model canvas to break out the steps your business must take to deliver and focus on the gaps that could be filled by partners.
- Be strategic about looking for the right candidate – not unlike searching for strategic acquisitions. Falling in love with the first possibility is almost always a mistake. Instead, search widely, flush out all possibilities, and choose the best one. Take the time you need to get it right.
- Avoid competition. Partnerships between companies who are even partly competitive are usually doomed to fail. Competition creates suspicion and kills openness and teamwork. It rarely works out.
- Don’t rush it. Dating before getting married is ideal, and it’s the same with partnerships. Find ways to get any sort of collaboration going before signing a long-term agreement. If you can get past key risks first, you’ll have a more lucrative deal.
- Only set up the partnerships you need. They often fail, so engage them only when essential and keep an exit ramp as long as possible. This is not to be negative, but realistic and wide-eyed.
- Avoid exclusivity, especially early on. Once your product or service has proven itself in the market, the valuation of your firm will jump, the number of your suitors will increase – and you’ll have to give up less. The more mature your product, the better your price leverage.
- Target like for like, situations that will create mutual dependence. Two midsized firms are more likely to balance, each needing each other. Private owners will share motives, while investor-backed firms will focus on financial outcomes as the executive team turns over.
- Identify someone in the bigger firm with power and authority willing to take a risk to make the partnership work over time. They must be emotionally invested. If your partnership is just another portfolio bet, watch out.
Some partners can be as straightforward as your vendor list, a simple seller-to-buyer handoff. But many industries have more complex connections. Software collaborations, cooperation between distributors and manufacturers of industrial equipment, construction partnerships across owner, engineer, architect and builder – relationships built over time help make such intricate projects successful.
Graphene is a wonder material. It is a single layer of carbon atoms arranged in a two-dimensional honeycomb lattice. The building block of graphite, it is durable and a highly efficient conductor of energy. Isolated in 2004, it has far-reaching applications, from electrical conductors to paint strengthener, from solar panels and concrete to DNA sequencing.
One of the leading developers of commercial uses of graphene, Versarien was founded in 2010 by two men, literally in a garage. Since then, the company has grown rapidly, working at the very edges of scientific discovery, listing on the London Stock Exchange in 2013 and emerging as a rare European scaleup to go to Silicon Valley.
Based in Longhope, Forest of Dean, Gloucestershire, the group is confident in its ability to innovate, but keenly aware of the need to think beyond.
“We need to understand our own limitations,” says CEO Ricketts. “The UK is a really small market, so we can’t be insular. We need need to be thinking much bigger than startups in the UK tend to. We need to be thinking global.”
This ambitious vision is paying off. In 2014, they could make half a gram of high-quality graphene. Now they can produce tons of the material and are targeting production of hundreds or thousands of tons.
With all their scientific expertise, however, Versarien are not experts in commercial industries. They don’t have access to enough capital, even as a public company, to bring in-house the knowledge they would need to start selling products profitably – a conundrum true of many R&D companies.
The scale of the challenge has helped them realize that joint ventures or technology licensing to global players can be a better way to drive the last mile into worldwide sales. The relationships with larger firms also bring larger systems, legal teams and other capacities to get things moving quickly, while allowing them to stay nimble.
“We’re attracting really big companies who have big aspirations to get this technology into their products. So we can develop great ideas, and then license them to global companies who have the cash to scale quickly,” says Ricketts.
Betting Your Shirt
Versarien has identified an intriguing use for graphene in sporting attire, to distribute heat evenly and reduce microbial growth, helping athletes stay cooler and more comfortable. An advanced application can even monitor body heat, providing vital performance data. Cutting edge stuff, but how to get it to market at scale?
Choosing the right partner can be difficult – matching cultures, expectations and needs and building trust and healthy ways of communicating.
In 2017, Versarien received a speculative email from a large but not widely known Asian firm. At first look, it might not have seemed like a great match.
MAS Holdings, based in Sri Lanka, is a major producer of lingerie and other apparel. With 93,000 employees worldwide, it manufacturers for H&M, Calvin Klein, Marks & Spencer, Nike and Ralph Lauren, among others.
“This inquiry could easily have gone straight into the bin. An awful lot of our colleagues would have written it off because it isn’t a household name,” says Ricketts.
Ricketts did his homework, and saw that even though they were large, they had an innovation team that could potentially work well with Versarien.
The two companies began to collaborate, developing a common understanding of how they could use the technology to move heat around in sports clothing. MAS provided their expertise on textile development and Versarien got MAS up to speed on what graphene could deliver.
Costs had to be kept down for a price-sensitive product. They started by producing and testing samples using Versarien materials, so the IP is shared. The results were encouraging, but not perfect. They developed a production process together that would work for both sides.
“I think it’s a bit like dating, having these commercial arrangements, especially in new technology. The first stages are very much that kind of first date, and then you naturally move on and realize that you’ve got something that’s really working. And so you get engaged and move the relationship on a bit.”
In 2018, confident that their idea was progressing, the two sides signed an agreement together. But it was non-exclusive, more of a gentleman’s understanding that they were partners on this.
“We love working with these guys, so it’s about maximizing the opportunity that we have through working very closely together,” says Ricketts. “Exclusives can be a good thing, but they can also be a negative. When you’re developing technology, you can be led down a blind path. So, we wanted to make sure that we weren’t exclusive, but we also wanted to keep them close and not necessarily develop this with anybody else. There was a bit of give and take on both sides.”
Versarien has had some unsuccessful partnerships, where clients expected results that just were not achievable or asked for long-term commitments that a small firm just couldn’t provide.
MAS has been an ideal partner not only because of their ability to scale and reach large customers, but also because of their flexibility and understanding and readiness to work with a relatively small company and new, experimental technology.
“If MAS wanted results immediately, it’s unlikely we would be able to deliver because the technology just didn’t exist,” Ricketts says.
Finding the right partners and establishing lasting, mutually beneficial relationships is a vital asset worth the investment.
The risks of unsuccessful partnerships remain. Getting locked into a ruinous contractual relationship can at worst spell bankruptcy. At minimum it can be a waste of time, opportunity, and money. With very large firms especially, predatory instincts are also always possible.
It is vital therefore to be deliberative and encourage robust internal debate over every new strategic departure – whether that be a new partnership or a new product approach encouraged by a partner/client. Regularly reviewing and evaluating partnerships is also positive practice.
Yet partnerships can help midsized firms retain the dynamism which is much of their value while increasing their results and market access and helping build their own scale. Done right, these will complement capacity and income, and can be significant drivers of growth.
Versarien is approaching more large companies in the sporting goods field, seeking new ways to extend their commercial reach. It has partnered with apparel brand Superdry on enhanced garments and with Flux Footwear on graphene technology for new shoes.
“The key to joint ventures and strategic thinking is to build solid relationships, while keeping a relatively flexible approach,” says Rickets. “Our partnership with MAS has been very collaborative, without any pressure from either side. We’ve both been happy to move along as quickly as we can, while not closing down other opportunities.”
Want to know more how we work with companies that are contemplating strategic partnerships?