Why partnerships fail (and how to develop successful strategic partnerships!)

Publication date
Author
Imogen Beech
Reading time
10 minute read

We’re going to talk straight with you: more than half of partnerships fail. Exactly how many is up for debate. According to Mark Sochan in ‘The Art of Strategic Partnering’, strategic partnership failures stand at 60-65%. Meanwhile, Harvard Business Review states that the failure rate for corporate alliances ‘hovers between 60% and 70%’. And LGC simply reports that ‘up to 70%’ of partnerships fail.

But one thing that all these sources agree on is that your partnership is more likely to fail than survive. Depressing, right?!

However, looking just at the odds implies that whether or not your partnership survives is down to chance alone. Which of course, we know is nonsense – as the great Ernest Hemingway once said, ‘you make your own luck’.

This article is for those of you looking to turn those odds in your favour. We’ll take a look at exactly why partnerships fail. And, more importantly, how to manage a partnership that avoids these common pitfalls, resulting in a successful strategic partnership for you both.

1. One partner is less committed

commitment

If you’re going to develop a successful strategic partnership, you’re going to need your partner to be just as ‘into it’ as you are. It makes sense really – you’re not going to want to invest all the time, money and effort into a partnership that ultimately benefits you both. And vice versa!

Solution:

Want both sides to be equally committed? Then you’ll need to take on an equal share of the risks. This ensures that you both have a vested interest in contributing your skills and talents to developing a successful strategic partnership.

Taking on a share of the risks is going to look different for each partnership and doesn’t always mean matching a partner’s contributions like-for-like. Your partner might be able to invest more money and resources while you might be more willing to put in the ‘sweat finance’, for example (in other words, the time and labour). It’s important to document exactly what each partner is going to contribute before signing an agreement, in order to give each party accountability.

Both sides also need to stand to gain equally from the relationship. Think about it: you can’t expect your partner to be just as committed as you if they’re not going to see an equal share of the benefits.

That’s exactly what happened in Tiffany & Co’s licensing and distribution agreement with Swatch. Tiffany & Co didn’t do much to market the watches at all. But there was a good reason. Swatch chose a market position that favoured their portfolio instead of reflecting Tiffany and Co’s brand. Ultimately, the partnership couldn’t have gone much worse – not only did it prove unprofitable, but both sides ended up suing one another in 2011!

At the end of the day, as tempting as it might seem, it’s best not to over-negotiate. When you’re striking a deal, you’ll need to come to a solution that works equally well for both parties. Which leads us onto...

2. Disagreeing on the goals of the partnership

Different goals

At the end of the day, if you can’t agree on what constitutes a successful strategic partnership, there’s no way that you’re going to create one! And although you might think that it would be natural to discuss common goals during the negotiation period, this often gets overlooked in the rush to complete the deal. In fact, according to a McKinsey & Company study, 35% of managers cited alignment on objectives as a missing factor in failed joint venture partnerships.

One excellent example of a joint venture that’s failed because of a lack of clear goals is Motorola and Cisco’s joint venture – Spectrapoint Wireless. The partners agreed to spend $1 billion to become leaders in fixed wireless services, but the partnership was called off after just one year because there was nobody to sell to. This is a classic example of a partnership that placed ambition ahead of realistic, achievable goals.

Solution:

No matter what type of strategic partnership you enter into, it’s absolutely vital to agree on measurable objectives first. At the end of the day, if you can’t agree on what you want to get out of the partnership, it’s simply not going to work!

Objectives should be SMART (specific, measurable, attainable, relevant and time-bound) so that you can easily agree upon whether you’ve achieved them without relying on subjective judgments. Just a few examples of useful measurables include: reach, engagement, actions taken, sales, time, cost, referrals and revenue.

Some benefits, like awareness, product improvements and user experience aren’t as quantifiable as others. So, be prepared to get creative and collaborate to find ways of measuring them.

That said, as partners, you don’t have to want to get the exact same thing out of a partnership. For example, in Wattpad’s collaboration with Ben + Jerry’s Canada, Ben + Jerry’s was looking to better its reputation by aligning itself with the LGBTQ+ community. Meanwhile, Wattpad was able to use the collaboration to drive more readers to its platform.

Despite their differing perspectives, these partners came up with a measurable, joint objective that would ultimately help each brand to achieve their individual goals – the brand partners aimed to generate 10,000 stories through the campaign, a target that they ultimately smashed by 170%! You can read more about it in our piece on fantastic co-branding examples.

By establishing common goals and priorities during the negotiating period, you reduce the stress that’s placed on the partnership later down the line, making the partnership easier to manage and maximising its chance of success.

3. Failing to involve the whole team during negotiations

whole team

It seems natural that the people handling the day-to-day operations should have a say in how to negotiate and manage a partnership. However, all too often, a negotiation is handled by the leaders of two companies and then simply announced to two teams who are expected to integrate and execute the vision seamlessly. You can understand, then, why things might start to go wrong!

Solution:

It’s true that negotiations will usually start and end with a company’s senior leaders but if you’re hoping to manage a partnership successfully, you’re going to need to engage the whole team.

Whether it’s the operations team, marketing team or members of a wider partnerships team, allowing roles across both companies to be involved in the negotiation period will almost certainly flag up a host of factors that hadn’t previously been considered.

Not only that, but opening up negotiations in this way allows both brands to get to know key stakeholders in their partner company. This helps to build trust and also allows you to avoid confusion over who’s accountable for what, enabling individuals to take on a greater level of responsibility and accountability.

On top of all this, don’t underestimate how much wider involvement can help to make sure that everyone’s on board with the motivations, aims and objectives of a strategic partnership, so that it can be executed much more seamlessly.

4. Culture clashes

Culture clash

In a strategic partnership, you’re expecting two often very different teams to collaborate for the success of both, which isn’t always plain sailing.

In Business Insider, Steve Case (the founder and CEO of AOL) cited culture clash as the main reason that his company’s partnership with Time Warner failed. Of course, this is only one side of the story. But with AOL’s aggressive style providing a stark contrast to Time Warner’s more corporate and old-fashioned outlook, perhaps that shouldn’t be a surprise.

Solution:

When you’re on the lookout for potential partners, it’s important that you focus on finding the right fit (check out our piece on creating strategic partnerships that work for your brand for more). Rather than just focusing on what a partner could do for your business, make sure that you could work together effectively.

If your ways of working are worlds apart, this could be detrimental to the success of your partnership. Imagine that you’re a fast-paced organisation that prides itself on getting things out there quick. Now imagine that your partner is much more bureaucratic and takes three days to respond to an email, let alone approve a joint press release. It’s just not going to work.

In fact, when McKinsey & Company polled executives on their perceived risks of strategic partnerships, the executives frequently cited their partners’ inability to quickly adapt to changes in the market and other circumstances in order for the relationship to survive.

Most of all, it’s important not to compromise on your brand’s identity, values or product. Just look at Lego’s co-branding partnership with oil giant Shell. The partnership was perceived to be detrimental to Lego’s social and environmental values, resulting in a great deal of public backlash and preventing Lego from renewing the contract.

So, if your potential partner asks for terms that don’t align with your company’s core beliefs, or if your values just don’t gel, it’s time to walk away.

That said, sometimes personality differences can be an asset. Your partner brand might have valuable outlooks, skills and processes that you’re lacking in. For example, your partner might be great at forecasting, budgeting, and reporting whereas you might have more sales and marketing expertise.

If that’s the case, make sure that you assign responsibilities to each partner in line with their strengths and weaknesses. This will heighten your chances of developing a successful strategic partnership.

5. Lack of immediate results

A man who jumped ship

We know what it’s like: a partnership seems promising but when you don’t see any immediate results, it’s all too easy to lose interest and let it fizzle out. However, seeing results straight away isn’t always realistic. And these false expectations can result in jumping ship far too early.

Solution:

As we’ve already mentioned, setting SMART goals prior to signing any contracts is key to making sure that neither party is entering a partnership with unrealistic expectations.

Without clear goalposts, there’s a danger of judging a partnership as either a total success or a total failure, without any understanding that there is an in-between. A poll by McKinsey & Company revealed that a whole 25% of joint ventures didn’t meet or exceed anyone’s expectations, but still benefited all the companies involved.

Setting these goals during the negotiation process is important to start the partnership off on the right foot, but it’s also important to revisit them as time goes on so that your relationship is continuously being optimised towards achieving your ultimate objectives.

When it comes to setting the duration of your strategic partnership in a formal contract, make sure that you don’t set anything too short. A longer timeframe might seem daunting, but it gives you a better chance of getting things done. And we all know that it takes time and patience to achieve growth! In ‘The Art of Strategic Partnering’, Mark Sochan recommends setting a duration of three to five years initially, saying that one year is simply too short to get anything accomplished.

That said, there are, of course, exceptions – like seasonal partnerships, which are usually only designed to leverage one season. One thing we would say, though, is to include information in your agreement about how your partnership could be extended if it does well. It might be that you could continue to work together in different ways. Or, it might be that you could bring back your joint activity in future years. Hampton Court Palace and the Terrible Tudors is a great ongoing seasonal partnership example, as these partners team up regularly in May half-term holidays.

6. Lack of trust and communication

trust

Lack of trust and communication can form a bit of a vicious circle in strategic partnerships – you’re not going to want to open up to somebody that you don’t trust, but no-one can trust someone who doesn’t open up to them… you can see the problem! In McKinsey & Company’s 2015 poll, 38% of respondents cited communication and trust as a factor missing from failed partnerships.

One high-profile example is Volkswagen’s (VW) failed partnership with Suzuki. VW wouldn’t give Suzuki access to its core technology. But Suzuki wouldn’t grant VW access to the Indian market without it. Ultimately, this breakdown of trust led to Suzuki accusing VW of trying to control it and filing a notice of breach of contract in 2011.

Solution:

Building trust and communication is an ongoing process that doesn’t end until your partnership does. This is the only way that you’ll truly be able to put yourself in your partner’s shoes and vice versa.

Establishing trust starts during the negotiation process. It’s important to be really honest about your motivations, how you operate and what your strengths and weaknesses are. Some companies, particularly small SaaS businesses that are entering into negotiations with larger companies, can understandably worry about giving away their ideas to a potential competitor. This can be a real barrier to communication!

In ‘The Art of Strategic Partnering’, Mark Sochan advises coming to a clear, written understanding that each company owns its own IP and that if a product is developed together as part of a joint product partnership, you jointly own the IP. It’s in both partners’ interests that the smaller company remains a healthy, innovative business and retaining and protecting its IP is vital for this.

On a different note, trust in affiliate marketing partnerships often breaks down because of issues with attribution and, in particular, forced click. To put it simply, voucher sites can have a whole bunch of sneaky ways to force attribution for the last click – even if it’s not deserved. A customer who’s found a brand through one affiliate will commonly head off to hunt for discount codes from another before purchasing, so affiliates may not feel confident that they’re going to be rewarded for their work.

Brands can provide this trust by setting up multi-touch attribution, ensuring that all affiliates who help to promote their product are fairly rewarded. At the same time, a brand needs to trust that their affiliates are going to use legitimate methods to promote their products – this is where clear guidelines and communication are vital.

However, once the contract has been signed and the negotiations have finished, the open communication and building of trust can’t end there! Just like in a romantic partnership, strategic partners need to continuously nurture their relationship to keep it healthy.

This might include connecting with one another socially in order to build up that trust. And it certainly includes regular communication and the development of frameworks and processes. This is something that any partnership manager worth their salt will take very seriously. Just think: in a romantic relationship, a therapist might give you special frameworks to help you better communicate with one another. Similarly, frameworks are a great communication aide in strategic partnerships!

Entrepreneur magazine advises ‘Treat the partnership like a customer relationship, monitoring partner satisfaction and adjusting processes according to the insights.’ And we’d certainly agree!

--

So, as you can see, managing a partnership between businesses that’s healthy and successful is much like maintaining a relationship between two individuals. It’s all about compromise, mutual respect, teamwork and finding that other entity that you simply click with!

If you’re on the lookout for your perfect (strategic!) partner, just sign up with Breezy. Then, choose from hundreds of potential partners to find your perfect match!

Sign up for free 14-day trial.