Partnerships: Taking a Small Piece of the Bigger Pie
“Two brains are better than one.” We have heard this time and time again. Think back to your last meeting or the last brainstorming session you participated in - chances are this message of working together was at the heart of the discussion, and for good reason. Psychology has shown that, more often than not, we work more innovatively in teams than we do individually. But when should different teams work together?
As a business leader, I’ve put the “two brains are better than one” concept into play many times – across business partnerships, strategic alliances and especially client relationships. The challenge is not only understanding the right time and place for collaboration, but also identifying who to collaborate with. What I’ve learned is that success first and foremost depends on the cultural alignment of the partners. Things go wrong and issues arise. A strong cultural alignment ensures that the relationship will prosper both in good times and bad. This is all easier said than done, but beyond cultural fit, there are a few key elements that have helped me to successfully develop and foster strategic business relationships.
To Partner or Not to Partner
While two people working together are more likely to solve a problem, that doesn’t necessarily mean a partnership is always the right choice. I think the key is to understand when a partnership makes sense, and recognize each party’s contributions as well as the limitations to the relationship.
The first thing to do is to determine if you are buying a commodity, outsourcing a critical service, or partnering on revenue generation. Generally speaking, everyone is willing to partner on buying commodities. Do you really care which electric company services your home or do you just shop on price? It may be a bit of both, but few and far between are the people who outfit their homes with solar panels, generating their own electricity. The tricky question comes with the critical service, such as the manufacturing of a key component. Do you own the production or outsource? There is no right or wrong answer, but I am a strong believer in that you can’t always do it all. Generally speaking, focused rather than sprawling business models lead to the greatest success. Maybe, your organization doesn’t have all the internal specialization that is needed to meet the demands of the specific area that is under consideration for outsourcing. Maybe it has a high fixed cost. No one does it all and more and more, businesses are slimming down their own business models and finding partners to do everything except what they consider to be core.
The tricky question is always when revenue comes into play vs. cost. Sometimes you have to push pride and ambition aside, and realize that taking a small piece of the bigger pie can actually be more rewarding for your organization and, more importantly, for your clients and industry as a whole. The power that can come from two organizations joining forces, supplementing each other’s limitations with their own strengths, is immense. It allows you to focus on your key competencies, and for your partner to do the same. This is what makes a partnership more beneficial than doing something alone. It can also help you move faster as you can do many more things.
At Northern Trust, we recently recognized the opportunity to establish a partnership in order to build scale for our private equity blockchain platform. For the benefit of the industry as a whole, we handed over the keys to this platform to Broadridge, a global technology provider with deep FinTech and software sales expertise. This core competency makes them an ideal firm to open up our blockchain application to the marketplace, pave the way for the digitization of the asset class and continue to drive innovation in our industry.
Picking Your Team
Realizing that a partnership is the right move is just the first step. Actually selecting a partner is where the real challenge and opportunity arises. After all, two brains are better than one….but only when they work well together. And this goes for any opportunity. Who you decide to partner with, outsource to or hire can impact your bottom line, so finding the right fit from a strategic, cultural and personality standpoint is critical. When you interview a person for your organization, I bet you spend most of the time answering the following question - “Will this person fit in our team?” When selecting organizations to be part of the team, the question should be no different. This fit should be closely enough aligned such that it feels as though your partner is an extension of your own organization.
Bottom line – don’t be afraid to explore the opportunities business partnerships can bring. Be open to the idea that sometimes two brains are better than one…when they work well together.