One of my colleagues just asked me: What’s the difference between a vendor relationship and a true business partnership? This is a vital question when any individual or firm is innovating, because when anyone is doing something truly new, it is impossible to pre-specify everything needed from a vendor — because you are busy creating something never seen before!
Of course there is a legal definition of a business partnership, but I’m interested in the broader idea of what creates a vibrant commercial affiliation. Five things came to my mind that differentiate a “vendor” from a “business partner”:
- Partnership has mutual vulnerability and risk sharing. Vendor relationships can be contracted to have this type of dependence, but usually they do not. Vendors often work to the letter of the agreement, but partners are willing to do what it takes to make the other party whole.
- Partnership means you work together to create new possibilities in the future. Usually, vendor relationships look backward — to what was, not what could be.
- Partnership means that you have a social as well as a commercial connection. In every partnership agreement I have been involved in, there is a mix of personal as well as commercial commitment to each other.
- Partnership means that you are willing to leave important things unspecified in the interests of flexibility, and due to trust. This may be the most important part from the point of view of innovating together. Those joint ventures or agreements that begin by fighting over the intellectual capital or products that will be created, rarely get off the ground.
- Perhaps most importantly partnership means that you live to the spirit of the agreement, not the letter of it.
Given the cynicism of the current media environment, and the speed with which business is transforming, those firms that are able to create true partnerships will get differential opportunity and customer longevity. Plus, it’s more fun.
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Economic pressures of today may actually enforce a partnership culture.
Wisdom and sympathy may after all result from desperation.
Research suggests that in certain sectors, at least, organisations deemed to be especially good at forming partnerships create more shareholder value than those that are not thought to excel in this area. This is the underlying principle behind the framework, ‘The grid’ developed by Anne Deering in her book – The Difference Engine. Every box in the grid is what an individual perceives an organisation to be or wants it to move towards.
Nevertheless, not all partnerships are equal. According to Anne Deering of the management consultants AT Kearney, the author who developed the grid, whether or not a partnership is successful can have a lot to do with why it was established in the first place and what the parties involved are hoping to get out of it.
Problems are likely to result if one party wants to behave cautiously when the professed aim is to use the partnership as a launching pad into new markets, so the aim of holding still will be undermined if one of those involved actually wants to be creative or bold.
There is great potential for partnerships to become more powerful than traditional mergers and acquisitions if organisations set about linking with those that are different from them. Companies are frequently held back from such ventures by what might be termed cultural issues. However, organisations might not be so fearful if they understood the differences between them better.
The “partnering grid” uses management consultant’s favourite tool of the matrix to define and evaluate the different cultures behind partnerships. Once this has been done, they it is possible not only to identify those cultures that are compatible and incompatible, and the ease of moving from one culture to another, but also to isolate certain behaviours or issues and intervene to change them. The grid focuses on how partners view the differences among them. Partners may adopt strategies which are aimed at avoiding differences, tolerating differences or valuing each others differences and thereby complementing each others strengths and weaknesses. This is represented by moving left to right on the grid. Additionally, as we move bottom to up on this matrix we see strategies which are aimed at avoiding pitfalls towards strategies which are aimed at creating or innovating or promoting the positive. A bottom to up movement focuses on defensive strategies towards strategies aimed at innovation through mutual co-operation.
The importance of this lies in the finding by Ms Deering and her colleagues that partnerships tend not to break down over transactional and legal matters, but over so-called soft issues, such as trust and differences in ways of working. Moreover, there is, they say, no correlation between the time spent laying the groundwork for a partnership – such as the documentation of procedures and setting out of shared values – and the success of the venture.
In other words, the people involved in such situations should be encouraged to break out of concentrating on each other’s characteristics and get on with the job of making the partnership work.