Strategic Partnerships In Uncertain Times

Just when we thought things were getting back on track with the waning of the COVID pandemic (fingers crossed), Vladmir Putin decided it was time to attempt to bring Ukraine back into the Russian sphere. As we know, that didn’t go according to plan. In fact, the failure of the Russian army to make quick work of the Ukrainian military is threatening the global order and sending shockwaves throughout the world, impacting pretty much everyone in one way or another.

The Russian invasion of Ukraine served to aggravate already shaky supply chains, which had a corresponding impact on energy prices, due to the sanctions imposed on the Russian energy sector, as well as food costs. The latter is affected because,  combined, Russian and Ukraine account for about 25% of global wheat export, or about 7.3% of global wheat production.

Due to all of this, one of the most immediate threats is inflation. This is something we, as a country, haven’t had to worry about in some time.

During the prior 12 month, prices increased 8.5%, the largest increase in 40 years, and significantly above what the federal government had predicted. Leading the charge is the price of energy, which impacts the cost of shipping, transportation, and just about any service that relies on them.

The tight labor market will continue to cause headaches for businesses as the upward trend on wages continue, with an additional push coming from inflationary pressures.

All these shockwaves, both the big breakers as well as the smaller but constant swells are impacting the global economy right now, and, predictably, for at least several years in the future. The question we need to be considering now is what will our businesses, and the overall business climate look like in the near future and beyond? And what can we do as a hedge against all this uncertainty?

One tactic that may be effective for many businesses to elude the worst of the possible ramifications of the current global disorder is the formation of strategic partnerships.

Although no business is recession proof, inflation proof, or immune to market fluctuations, supply chain disruptions, or (especially) war, all these seldom affect all businesses or business sectors equally.

Forming a strategic partnership, especially one outside of your specific industry can be a hedge against big losses if your industry sector finds itself in rough waters.

There are several advantages associated with strategic business alliances. They generally fall into four categories: markets, technologies, capital, and people.

To begin, you first must assess your own strengths and weaknesses, which will provide you with a list of not only what you need, but what you have to offer. This list will include intangibles, such as skills, knowledge, and expertise, and tangibles, such as people, facilities, and capital.

The advantages of strategic partnerships include:

1.   Reaching new customers by having access to your partner’s established client base.

2.   Sharing resources and risks. A strategic alliance can be a cost-effective way to explore opportunities without risking failure due to your lack of resources and experience in a new field.

3.   Growing your reputation. By choosing wisely, both you and your partner can increase your credibility by vouching for one another. Obviously, it is important to avoid teaming up with someone with a less than stellar reputation.  

4.   Increasing revenue. Access to a new customer base will offer you and your partner a unique opportunity to promote your products and services to an entirely new client base. Of course, it should be obvious that there must be some relevance or complementary values between the partners’ products and services.

5.   Showcasing your value over that of your competition.

When establishing a strategic partnership, there are several things to keep in mind.

1.   It must be clear what the deliverables are for each partner, including who will bring what to the table. This must be completely transparent, with each partner understanding what is expected of them. This will facilitate trust and visibility.

2.   Set the terms of the deal, including investment costs, profits sharing, branding guidelines, and responsibilities.

3.   Be prepared to manage relationships, keeping the chain of communication as clear and minimal as possible.

4.   Make sure the partnership is flexible so not if, but when, things change, the partnership is able to pivot to meet the challenges.

5.   Focus on growth. Whether short-term or long, be sure each partner is totally transparent and understands the goals of the partnership.

Here is one example of what a strategic partnership may look like. A local brewery is looking to expand awareness of its products, while a neighborhood pizza parlor is seeking a way to stand out in the crowded pizza business. By forming a strategic partnership, they both win.

You may not run brewery or toss pizzas, but the basic principle remains. In uncertain times, forming alliances and mutually rewarding and supportive strategic partnerships may be an effective way to keep your head above water while your competition sinks.

If you would like to discuss these ideas with any ASN professional, and explore options you may have in these areas, we would love to talk with you.