Why Partnerships Fail and How to Save Them
We establish business partnerships because they make sense. Two companies offer complementary products or services, and by working together both organizations believe they can achieve more than they would on their own. The sense that the collaboration is more powerful than working independently is the actual definition of the business buzzword “synergy.” Through partnerships, our productivity increases.
However, an agreement to work together does not guarantee a smooth relationship. At the turn of the last century, Henry Ford and Harvey Firestone formed a partnership around motor vehicles and rubber tires. The two companies worked together to provide high quality products to consumers and made incredible profits over the years. But in 2000, a series of accidents led the National Highway Traffic Safety Administration to contact the two organizations about a possible defect. Ford and Firestone, desperate to avoid responsibility, each blamed the other. The controversy ended their 100 year partnership.
Shifting, Not Sharing: That’s the first reason that business agreements fail. We sometimes think of a partnership as “divvying up” the duties. It’s true that Ford built the cars and Firestone made the tires, but a partnership isn’t about shifting responsibility, it’s about sharing responsibility. Accept that there will be challenges and that agreeing to work together means acknowledging that you will tackle problems as a team.
Another major challenge of business partnerships is communication. About the same time that Ford and Firestone were getting a divorce, Sony approached Toshiba and IBM about creating a new processor for the next generation of PlayStation video game consoles. A year later, Microsoft approached IBM with the same question. Everybody in the initial partnership knew that IBM would eventually sell the new technology to other customers, but apparently nobody at Sony thought about IBM offering the processor design while it was still being designed. Therefore, a significant amount of Sony’s R&D budget went to help create the chip for it’s biggest competitor: Microsoft’s Xbox 360
Communicate and collaborate: Just because the partnership documents make it possible for you to work together doesn’t mean you are actually speaking openly about your business plans. Talk through all possible scenarios. Identify what could go wrong. Show trust by volunteering ideas that benefit you and offering to close loopholes. Work together by talking things through.
Finally, another major reason that partnerships struggle and collapse is because values change. For decades, school systems and soda bottlers had a profitable symbiotic relationship. Vendors would be able to sell their products to students unobtrusively while the public institution could raise funds for important projects. Yet in recent years, these contracts have come under fire and manufacturers have had to pledge to remove sugary drinks from schools. Therefore, a major source of discretionary funds is starting to disappear.
Strategy and Stakeholders: Just because a partnership makes sense today doesn’t mean it’s going to be perfect forever. Not only do the organizations need to plan for the future, but they must involve those people in their community affected by the partnership. That might include customers, suppliers or other officials. Get connected with the stakeholders that power your partnership, and make sure you have a roadmap to ensure their future in your agreement.
Keep an eye on your own partnerships. If you truly share, constantly work together and communicate, and focus on a long term strategy, you’re likely to stick together. The sum of the parts can be greater than the whole—but only with attention and intention
Have we met?
Experience authentic networking in Indianapolis!