Customer expectations are increasing day by day. Meeting these expectations is becoming challenging for today’s brands. They are struggling to keep pace with the increasing growth of innovation. How do they stay ahead of the customer? how often should they be re-evaluating their capabilities, value proposition and point of differentiation?
Over recent years, we have seen brands strategically collaborating to respond to the above threats and challenges. They are forming new partnerships to strengthen their customer strategy, capabilities, customer reach, customer value and future growth.
Not competition, but collaboration – the key to company growth?
“Seek out strategic alliances; they are essential to growth and provide resistance to bigger competition.” Richard Branson
As customer expectations continue to evolve, brands are forming a cost-effective collaborative response; partnerships which have been strategically designed with mutual benefits for both parties.
When managed effectively, there can be many advantages, including.
– Ability to greatly expand your customer base
– Ability to capitalise on another brand’s size or reputation
– Ability to utilise partners expertise and resources
– Access to strategically important customers/partners you’ve been unsuccessful in acquiring
– Cost savings due to the resources available within the other brand
– Flexibility in disruptive market conditions
– The ability to speedily respond to disruption
After all, two companies are better than one right – especially when they combine expertise, value propositions and resources.
But is collaboration the key to future growth? In 2018, KPMG’s Global CEO Survey revealed that a third of CEOs are prioritising strategic alliances over the next three years to drive company growth. It’s clearly a strategy high on the boardroom agenda.
In recent months, we have seen a number of Microsoft collaborations, they are partnering with large brands including Oracle, Sony and Citrix to name a few. Their partnership with Oracle enables customers to migrate and run mission-critical enterprise workloads across Microsoft Azure and Oracle Cloud. A joined up solution which benefits the customer. Speaking of their partnership with Sony, Microsoft’s CEO, Satya Nadella stated “They looked at who are all their partners that they can trust. In fact, it turns out, even though we’ve competed, we’ve also partnered.”
Heritage brands are partnering with start-ups, as they recognise they cannot compete with their quick-to-market approach due to existing legacy systems and the vast amount of change management required to make such a customer strategy shift.
So, how do you ensure a successful collaboration?
Firstly you need to ensure that both brands have complementary values. Ideally, one brand should fill in the gaps of the other, and vice versa. Most importantly, the partnership must bring value to the customers. There is no point collaborating if the customer is not at the heart of the partnership.
KPMG¹ suggest three core elements for success:
1. A clear, mutually understood strategic and commercial ambition
Are you clear as to what problem you are trying to solve and why you are entering the alliance/partnership? Have you set clear goals and expectations on the return you are looking for?
2. A detailed alliance/partnership business model
Have you clearly defined upfront which markets, propositions and customers the alliance will pursue? Have you established what is unique about your partnership and how it benefits both parties, and the customer?
3. A flexible operating model that underpins the business model.
Do you have the right team, governance and infrastructure to make the partnership work? What operational challenges could exist as a result of the alliance, and how will these be managed? Challenges could include a lack of clarity over who is driving the relationship, mismatched strategic objectives, lack of commitment from one brand or lack of internal support.
It’s clear there are many advantages in collaborating with another brand on customer strategy, even a competitive one, to drive future growth. Today it’s not competition, but collaboration that could be the key to success.
Think about your business, the sector you are in, your competition. Conduct a gap analysis to determine where your weaknesses lie. Alliance partnerships could exist in a number of places, such as: existing clients/customers, competitors, brands in a completely different sector or market, trade bodies and associations, former employees – keep your mind and options open.
¹ KPMG International, strategic alliances, an alternative to M&A