Press Release & Articles
Small Businesses

November 9, 2022

The role of strategic partnership in value creation for business growth
BY: IPINMI AKINKUGBE

Ambition is one thing all companies have, but one thing they do not all have, is the resources to execute and bring to life all the solutions they want to provide. There are business problems that are far too complex and expensive to be undertaken by a single company – one of the reasons why for a business to grow, strategic partnership is essential.

 

In this article, we will look at the role of strategic partnerships, the value it adds to business growth and why no business can be an island. As the saying goes, “if you want to go fast, go alone. If you want to go far, go together”.  

What is value creation?

True value creation involves a business offering compelling and unique products or services to customers that satisfy their needs better than the competition.  

Value can be created through any part of the supply chain – distribution, retailer, manufacturer etc, as long as the activities being done are beneficial to the customer.

What is a strategic partnership?

A strategic partnership or alliance is the agreement between two or more companies to join their resources, products, technologies or tools together for the achievement of a shared goal. It is a long-term agreement that is equally beneficial to the parties involved.

Benefits of strategic partnerships for value creation

If you think about some of your favourite companies developing amazing products and services or some of the world’s largest brands, odds are they are not providing these solutions alone – they have strategic partners.  

Statistics tell us that 57% of companies use partnerships to acquire customers and 44% seek strategic alliances for ideas, insights and innovations. If you are still wondering why you should enter a strategic partnership here are 6 benefits:

Access to more resources & expertise

If you and your partner company (s) are working towards the achievement of a shared objective, you can pool together all your resources – people, finances, technology, tools – in the pursuit of it. This increases your company capacity as well as all the partner companies and affords you all the opportunity to provide as many solutions as you can handle.  

In addition to more resources, strategic partnerships provide access to expertise and allow for shared knowledge. Where your company lacks knowledge or know – how, a partner can step in to fill the gap.  

Shared risks

If you are entering new markets or trying to capture a new customer base and doing it alone, you will undoubtably encounter uncertainty and instability. However, with a strategic partner, these risks can be mitigated. The risks are shared and the possibility of success is increased.  

Access to new markets and sectors

Growth often means diversifying into markets different to the one your company operates in. Partnering with a company in a different industry and market helps you expand your customer base and instead of starting from scratch in a new sector, there is already an established level of trust and credibility provided by the partnering company.

Competitive advantage

Competitive advantage refers to factors that allow a company to produce goods or services better or more cheaply than its rivals. By entering into a strategic partnership with a company that has a global presence, access to resources and technical knowhow, a competitive advantage is almost guaranteed. You are indirectly expanding your production capabilities which is a source of strength when diversifying an existing product line or breaking into new markets.  

Ease of market entry

Value creation can be evaluated by assessing how much more your company's products or services satisfied a customers need compared to a competitor. Competitive advantage is almost assured with a strategic partnership as it enables your company and partner companies, leverage on each other's strengths, improve your weaknesses and go after market opportunities.

With joint capabilities, there are no limitations when it comes to developing product or service offerings or expanding on current capabilities.

Added value for existing customers

It is cheaper to retain existing customers that attracting new ones. Strategic partnerships often mean your business can provide more valuable offerings to existing customers. For example, a wholesaler partnering with a logistics company to expand delivery options and improve delivery time. Added value may eventually lead to development of a competitive advantage.

Factors to consider before entering a strategic partnership

Before entering any type of strategic partnership, you need to do your due diligence and ensure you are making the best decision for your company, product or service offerings and customers. Here are 3 things you should consider:  

Shared values & goals

A partnership is like a relationship, if your values are not aligned, problems are bound to arise. You should have an honest conversation about your company’s visions and long – term goals and once these have been clearly communicated and roles and responsibilities have been divided, a partnership agreement can be drawn up. This way, each parties' interests are protected and the partnership can have a smooth transition.

Strengths & weaknesses

Taking stock of your company’s strengths and weaknesses will help you when deciding which companies to enter strategic partnerships with. Understand how the partnership will strengthen your weaknesses and how you can use your company's strengths to bolster your partner's weaknesses. Remember, a strategic partnership needs to be equally beneficial.  

The scalability

Will the partnership you are considering help your business scale to the level you want? The benefits of a strategic partnership should always outweigh the cons. You do not want to take on dead weight disguised as a beneficial partnership.

Case Study: Sabi & Lidya

Sabi is Africa’s leading provider of digital infrastructure for the distribution of goods and services. We are building a platform that both enables and empowers the most underserved merchants in the world, allowing aggregators, distributors, and retailers expand their capabilities and grow their businesses using our technology rails. These rails provide access to inventory, commodities, logistics, business tools, data insights and financial services.

Lidya is a fintech company that provides access to credit and finance to SMEs across the frontier and emerging markets to help them scale.  

Why was a partnership formed?

We partnered with Lidya to provide qualified merchants in our ecosystem access to credit with competitive interest rates. In Nigeria, less than 5% of SMEs have access to bank loans which this makes it hard for them to operate on a daily basis. Through this strategic partnership, we are one step closer to providing value to our merchants and enabling the expansion and growth of small businesses.  

Should you form a strategic partnership?

More than 75% of CEO’s rate strategic partnerships as impactful or critical to their business. The difference between a successful company and a truly impactful one is the ability to assess the competitive environment and form strategic partnerships that increase scalability and the ability to provide solutions that satisfy consumers needs consistently.  

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