Unlocking Growth Through Strategic Partnerships: When, Why, and How to Collaborate for Success
By Kelly Lawrence, Founder & CEO, Lawrence Innovation
More and more, project teams are discovering significant customer unmet needs that the company lacks capability to solve. As a leader, you have to decide when to invest. If the opportunity is attractive enough, you may choose to build capability or buy it through an acquisition. But a third option exists - partnership.
This article digs into how solutions can be created through partnerships. We’ll look at when partnering makes sense, some examples of real world partnerships and share tips from a legal expert regarding considerations before entering into a Joint Development Agreement.
The Innovation Process
In the world of innovation, we first figure out unmet customer needs and market opportunity. Then, the exciting process of developing solutions ensues. Solutions can be products or services. Companies get to apply their unique capabilities and ideally leverage them to create the best solution for their targeted customers. Done well, the full innovation process should lead to significant results of higher revenues, higher margins, a bigger moat to defend competition and of course improved conditions for customers. Many industries are constantly innovating. In automotive, car companies typically release new models every few years. In digital printing, companies like HP and Epson release new printer models and inks annually. Paint companies like Sherwin-Williams introduce new paints and color trends for home decorating annually. In a world where customers expect your organization to innovate, how do you ensure you solve customer unmet needs with the launch of every solution you develop and with the entry of every market you choose to serve?
How to Know When a Partnership Makes Sense
In an industry that is always innovating, why not go-it-alone? When does a partnership make sense? In the innovation process, we try to match customer unmet needs with our unique capabilities to solve them. What happens when your company is missing some of the capabilities to deliver the ultimate solution to solve these customer unmet needs? What if your grand vision can only be achieved if you somehow can gain access to these capabilities?
Maybe our organization has an awesome channel to market, but lacks the capabilities to develop the chemistry to make an incredible ink or surface treatment. Maybe we have chemistry capabilities, but don’t make the equipment and need a partner that gets fluid dynamics with a different perspective. Whatever the reason, sometimes partnerships make sense as a way of gaining capability.
Why partner when we could build capability internally? Speed to market. Partnership can accelerate the process of having access to the capabilities that we need to develop a better solution. Building everything internally may be the ultimate goal, but it takes time. While you’re building capability, it’s possible your competitor is partnering with someone who has the capability you are building. Together, they solve the problem faster. They launch faster. They deliver revenue faster. They diagnose any bugs and deliver generation two faster. Meanwhile, you’re still building capabilities, have not launched anything and are now further behind. Your moat just shrank, and your business is at a greater risk of being displaced.
To summarize, partnerships often make sense when our customers have unmet needs that we can only solve by gaining access to capabilities we do not yet have and a need for speed exists within the market that makes internal capability building an unviable solution.
Real World Partnership Examples
HP + Koenig and Bauer: Corrugated and Folding Carton Printing
HP developed the PageWide T700i Press in cooperation with Koenig and Bauer. The press unveiled at Corrugated Week 2022 as a new 67 inch, digital web-fed platform to help converters achieve greater operational efficiency for high-volume production of digital single-face lamination, corrugation and folding carton applications. Here HP is a long known figure in digital printing going after a relatively new space. Koenig and Bauer is known as one of the world’s leading traditional press manufacturers with extensive expertise in the packaging market. This is the second press collaboration for HP and Koenig and Bauer following the launch of the T1100S Press in 2015. This newer partnership notes the capability to configure the press to address specific customer and market needs.
T700i Key Features
· Print speed: Maximum print speed of 305 m/min (1000 ft/min)2
· Print technology: HP Thermal Inkjet Technology Native resolution: 1200 nozzles per inch Ink type: Water-based HP pigment inks, Bonding Agent, and Priming Agents Ink colors: Cyan, Magenta, Yellow, Black, Orange, and Violet (CMYKOV) Printable width: up to 1.7 m (67 in) Printable frame length minimum: 0.3 m (12 in) Printable frame length maximum: variable up to 2.7 m (108 in). Extended frames above 2.7 m (108 in) with gapless printing
Using our criteria for when partnerships make sense, these two companies came together to introduce a technology where one partner had expertise. The other partner had significant expertise in a market where the first company had limited knowledge. The collaboration enabled both companies to learn from one another and more quickly come to market with a solution that addressed comprehensive needs that neither company had intimate knowledge of individually. Second partnerships are of course an excellent indication that the first partnership went well for all involved.
LG Energy Solutions + Honda
LG Energy Solutions, a South Korean company and Honda entered a joint venture to build a battery cell factory in Columbus, Ohio. Battery technology is a critical component enabling the rapidly growing electric vehicle market. The North American market still has relatively low electric vehicle penetration, <15% making it a significant growth opportunity for auto manufacturers. LG has lithium ion battery expertise needed for electric vehicles. Honda has extensive expertise in designing cars and servicing for the North American market.
Using our critieria for when partnerships make sense, LG brings the battery technology expertise. Honda brings the automotive and North American market expertise. Together, the companies hope to complete a facility by the end of 2024 that supports the sale of Honda and Acura electric vehicles into the North American market. By working together, the organizations have an opportunity to de-risk entry into a new market with a new technology. The Ansoff Matrix predicts a 95% failure rate for entering a new market with a new technology. The Ansoff Matrix predicts a failure rate of 50% when entering familiar markets with familiar technologies. By partnering, these organizations significantly de-risk a multi-billion-dollar investment.
Considerations Before Entering a Partnership or JV
You’ve decided to explore partnership. Marriage is a type of partnership and those have a ~50% failure rate with arguments over finances being a top cause of dissolution. So how will you ensure your business partnership survives the odds when love and kids are not involved? I recently had the opportunity to hear Ted Theofrastous, a Corporate, Intellectual and Non-Profit Counsel speak regarding the upfront considerations for entering a Joint Development Agreement.
Below are three considerations Theofrastous was kind enough to share. Be sure to engage your own legal counsel as this article does not constitute legal advice.
Get clear on your why: What are the specific goals that your company hopes to achieve? Could you do it alone? In what time frame? Good projects for joint development projects include new technology development, new market expansions, and new product development.
Know your partner: Do you share similar values? Is the potential partner financially stable? Do they have the resources (technology, time and people) to deliver what they promise? What’s their track record on past collaborations?
Know your assets: What unique differentiators do you bring to the partnership? Do you have patents, technology, special knowledge or processes to share? Are there any licenses you will need from others to make the partnership viable? Do you have the resources (technology, time and people) to deliver what you promise?
Considering a new opportunity where partnership may accelerate and de-risk results? Reach out. We’d love to hear from you.
Do you have an innovation story you want to share? Contact me, I'd love to hear from you.