At the end of 2021 Forbes Magazine predicted what they termed as co-opetition and integration (collaboration) would be a key business trend in 2022. They said,
“In the future, it will become increasingly difficult to succeed without really close partnerships with other organizations. In practice, this means greater supply chain integration, more data integration and sharing of data between organizations, and even cooperation between competitors.”Bernard Marr, Forbes Magazine
Catherine Metcalfe and Daryl Roberts from Shipleys facilitated the Club’s discussion to explore why business collaborations and partnering is set to be such a trend this year.
In the current environment there are many influences which motivate businesses to join forces. For example:
- Supply chain challenges – Heightened by Brexit and disrupted global supplies in the pandemic, many businesses have encountered logistics problems. In trying to overcome obstacles, businesses are forging stronger partnerships and bonds within their supply chains.
- Tighter talent pool – The smaller talent pool many sectors are facing has led businesses to collaborate to plug gaps in specialisms, knowledge, skills. Outsourcing remains popular and other businesses are making the most of secondments and sabbaticals to tap into talent.
- Rising costs and limited resources – These challenges have led small businesses in particular to form groups or buddy up to achieve economies of scale and negotiate better deals.
- Intense competition – The presence of stiff competition has prompted collaborations among businesses in the areas of joint promotions, product/service bundles, brand tie-ins. Not only do these give them access to a bigger market, it also helps to raise their visibility against larger or well-known competitors. Recent collaboration examples here include Adidas and Peloton at the start of the pandemic, and also Uber and Spotify prior to the lockdowns.
- Impatient customers – Customer behaviour is evolving to want things even faster and ideally through one point of contact. Collaborations and partnerships are being established to help achieve this in the form of creating product bundles, and building a better distribution/logistics system.
- Environmental, Social and Governance (ESG) strategies – ESG strategies have motivated businesses to align with organisations that support their ethics, environmental and social ambitions. Examples here can be seen in organisations working with preferred charities, and/or developing joint initiatives with environmentally-focused businesses.
Different types of collaborations
While collaborations are not new, there’s obviously renewed focus on them recently. As Business Advisors, Shipleys has seen and supported many different collaborations over the years and we certainly help with due-diligence, valuations and advisory for the more formal arrangements.
This diagram shows examples of common collaborations between businesses. They come with varying degrees of involvement and risk – from simple networking (on the left of the diagram) through to mergers (on the right).
Appetite for collaborations and partnering
Club members also participated in a poll to reveal their collaboration and partnering experience. 93% of members had collaborated with another business in the past three years and 85% were also looking to collaborate further in the next three years.
Examples of collaboration shared included:
- Outsourcing administration work to a business in India, so work is done overnight and ensures a speedier turnaround.
- Collaborating to access and bring specialist skills to customers and so the businesses concerned complement each other’s service offerings.
- A variety of different businesses collaborating to support a specific business turnaround.
- Working together on joint bids by having preferred partners for specific contracts.
- Partnering with a business with a different lending platform to quickly meet a growing customer need.
- A collaboration of different charities to meet the Government’s levelling up agenda locally.
In their groups, Club members discussed the ingredients for a successful collaboration and what pitfalls businesses should avoid.
Ingredients for success
Ssuggestions to ensure a successful collaboration or partnership included:
- Being able to work fast together to bring about the desired goal efficiently and effectively.
- Sharing common values and having those values understood throughout both organisations, so there is consistency of approach. Often this comes from finding businesses of a similar size and culture to work with.
- The collaboration has to enhance both of the businesses’ offerings. It has to be a win:win for both.
- Collaborations work best when they fill a gap for each individual party involved, and so the entities involved aren’t directly competing.
- Good communication is essential between all parties.
- Having a project lead and regular meetings helps to maintain progress. The more the two organisations work together, the easier it gets.
- An alignment of the common goal between both parties – that should reflect short, medium and long-term goals.
- Selecting the right framework for the collaboration depending on the businesses involved and the opportunity. For example, referral, outsourcing, sub-contract, joint venture, partnership/LLP or unincorporated partnership.
Pitfalls to avoid
The following pitfalls were flagged as ones which can be detrimental to a collaboration or partnering of two businesses:
- Impatience or not being realistic about likely outcome of the joint effort and how long it will tak.
- Not understanding each other – ie what the two entities stand for and what they’re hoping to gain from the collaboration.
- Insufficient or poor due diligence between the two parties – particularly for long-term collaborations.
- Risk of losing assets such as intellectual property, the client list and data. Also the potential to weaken a brand if things go wrong. The message here is the importance of having the right agreements in place.
- Not building in time for both organisations to go through an ‘onboarding’ together.
- Clash of egos – it’s important to be aligned and trust the people you’re collaborating or partnering with.
- Being clear on the risk involved and protecting against them where possible.
- With outsourcing, not being clear on the latest off-payroll rules.
The session discussion stressed the importance of finding the right partner for a collaboration. Fortunately professional advisers and an organisation’s network provide helpful pointers.
As a final thought, one Club member concluded a good collaboration is no different to good quality team building. Between both parties, it is important to have:
- clear objectives
- clear communication
- each team member having a good reason and purpose for being part of the team
If all these bases are in place at the beginning and managed carefully throughout, then the collaboration has a good chance of success.
And if you would like to join our future Business Club events, please contact the Shipleys’ Godalming team for more information.