Strategic partnerships often bring surprises

Collaboration between organizations is more popular than ever, but the results are hard to predict. This is the conclusion drawn by long-standing researcher of the subject, Hannu Seristö, Professor and Vice President at Aalto University.

Heidi Hammarsten, 12.06.2016

Collaboration between organizations is more popular than ever, but the results are hard to predict. This is the conclusion drawn by long-standing researcher of the subject, Hannu Seristö, Professor and Vice President at Aalto University.

Hannu Seristö has both practical and theoretical expertise in collaborative networks. He became interested in the subject as a Finnair employee at a time when airline alliances were beginning to grow in importance. This led to a doctoral dissertation on airlines and Seristö is now a Vice President of Aalto University, from where he can closely follow the development of strategic collaboration between universities.

"According to statistics by Thomson Reuters, around 4,000 strategic partnerships are formed every year. They are difficult and challenging, and the results are seldom easy to predict," explains Seristö. Let's leave it to him to answer some basic questions on the subject and explain how to make success more likely.

1. What constitutes strategic collaboration and what does not?

Although many partnerships tend to be branded as 'strategic', the word does not apply to every form of collaboration. According to Seristö, such collaboration must be systematic, long-term, wide-ranging and deep, with the parties sharing their best expertise on a fairly open basis.

"The word 'strategic' originally referred to generals and the factors that win wars, rather than individual battles. So the issue in question must be important to the entire company," Seristö observes.

In addition, there should be a limit to the number of strategic partnerships. For example, Aalto University has five strategic university partners and ten or so corporate partners.

Another hallmark of strategic collaboration is that the partners commit to each other. A partnership is far more difficult to end than, say, a normal customer relationship.

2. What are the goals of strategic collaboration?

Strategic collaboration can have a range of goals, such as gains in terms of efficiency, marketing or corporate image.

"A critically important element is what the organization can learn – you learn things from good partners. In addition, partnerships can often provide surprises, where you gain benefits that you weren't seeking."

Despite such surprises, the objectives of a partnership should be defined before entering it.

"Increasing attention is also being paid to partnership portfolios nowadays. The discussion is about managing the entire entity and thereby maximizing your own benefits."

3. With whom should strategic relationships be formed?

Strategic collaborations can be formed as a replacement for traditional customer relationships within the value chain and between companies in the same sector, as in the case of airline alliances or partnerships between universities. In this way, competitors, too, may end up collaborating.

"In such a case, the idea is to grow the cake together rather than optimizing the size of your own slice."

The markets and earnings logics are being rapidly transformed by digitalization: new players are emerging and established ones are moving into new territory. An alliance can be used to defend your position against new players, or to seek new opportunities.

"All such moves have become faster – to the extent that a sector can be shaken up in just half a year. This means that firms have to monitor their sector and scan their partners more extensively than before."

A relationship can only be formed if both partners have something to offer. Brand factors tend to present the leading companies in a sector with more freedom of choice than their competitors.

4. How are collaborative relationships managed?

Although strategic partnerships seem to revolve around certain issues at first glance, social relations are involved in every case. Seristö points out that the rationally-minded Finns tend to forget this.

"Finns typically downplay the management of interpersonal relationships, despite the fact that partnerships are not always purely rational in nature. You should engage in sufficient interaction and discuss issues openly with your partner. Otherwise, the partnership may look good on paper, but the interpersonal chemistry and communication will not work."

Strategic relationships are deep i.e. are implemented at many levels of an organization, but always require commitment and time from executives.

"Although day-to-day work is often handled by the middle level of an organization, senior management will need to meet with the partner for, say, a couple of half-days each year. If problems arise, and in general they always do, senior management is the pillar on which the organizations can rest while solving them."

5. How can we measure the success of strategic collaboration?

When measuring success, the basic problem lies in the lack of points of comparison: if there is healthy sales growth or an improvement in the corporate image, how much of this is due to the partnership?

"Because it is rarely possible to set clear metrics, it is important that the people maintaining the partnership experience it as being beneficial. In the case of a partnership portfolio, it is also possible to compare partners to each other: what benefits does one partner bring compared to another."

More than half of strategic partnerships fail, if measured in terms of the termination of partnerships.

"A partnership may have lasted for several years and end because it has achieved what it set out to accomplish. On the other hand, one criterion for failure would be a partnership ending due to problems."

Professor and Vice President Hannu Seristö of Aalto University coaches executives on the following module of the Aalto EE Global Leader Program: Marketing in a Global Context - Strategic Partnerships, Marketing Digitization and Marketing Metrics.

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