Strategic alliances are a key part of business strategy for companies of all sizes and in every industry. Partnering with other companies, even (and sometimes especially) those you compete with, can enable entrance to new markets, access to new customers, innovative change, and new insights.
Strategic collaboration can be particularly beneficial in manufacturing when companies look to enter new product arenas, enhance efficiency, or increase scale.
Harvard Business Review’s decades-old but still very relevant assessment of strategic business partnerships hits the nail on the head:
“It takes so much money to develop new products and to penetrate new markets that few companies can go it alone in every situation.”
And while business alliances are nothing new, today’s technology allows for it to happen more quickly and on a greater scale than ever before.
Strategic Collaboration: An Overview
The world is more connected than ever, and in business, collaboration is happening everywhere and in many ways. While no two partnerships are alike, there are a few ways to categorize the ways companies collaborate to accomplish goals.
Strategic Alliances – Mutually beneficial arrangement between two or more companies. Strategic alliances can be formal or informal, equity or non-equity.
Joint Ventures – Business partnership that involves shared ownership, governance, and risks.
Licensing Agreements – Companies agree to allow another company to use intellectual property.
Outsourcing – When a company hires another company to handle key activities.
NYU’s Professor Melissa Schilling gives a good overview of the advantages and disadvantages of each as well as real-world examples that include manufacturers:
6 Benefits of Strategic Collaboration for Manufacturing
Any strategic collaboration is made with the idea in mind that there are new insights to be gained for each partner from the other. Learning inevitably occurs as companies look to optimize the partnership by leveraging strengths on both sides. Smart companies look not only to learn within the parameters of the formal partnership agreement, but to identify any new skills, insights, and strategies that can be gained.
This is one of the main reasons companies decide to form strategic collaborations with competitors, and here the old saying “two heads are better than one” applies.
When companies with experience and expertise in similar fields or industries collaborate to jointly solve a problem, develop a new product, create a new process, or innovate in any other way, better solutions are more likely because more minds are at work.
For manufacturers, pooled knowledge and resources can mean streamlined supply chains, the ability to scale up more quickly and efficiently, and quicker production or delivery times.
Better Understanding of New Markets
New technology has created less linear, more complex supply chains and at the same time opened up opportunities for manufacturers to access new markets. This can mean new product markets, additional locations overseas, or alternative customer segments.
In each of these cases, strategic collaboration can be an effective tool for accelerating the new market entry process and making it run more smoothly. Collaboration can occur with other manufacturers (i.e. a company with an established location overseas) or with companies that offer needed resources (like technology companies that can provide software solutions).
Strategic collaborations can provide the ability to enhance products and service offerings. This can help companies both attract new customers and keep existing customers happier.
For manufacturers the idea of enhanced offerings can come in the form of a better customer experience, particularly as it relates to capabilities for production and delivery tracking. Technology companies who have tools that can be used internally to track processes and/or by customers to track order status can serve as a large improvement over in-house capabilities.
High-tech and non high-tech manufacturers can also collaborate to provide integrated products, accelerate adoption, and differentiate themselves in the market.
Partnership-driven capabilities may also enhance offerings by allowing for the production of new products or servicing in new areas. Packaged product lines with shared revenue models can occur as well, which leads to the next benefit of strategic collaboration: access to new audiences.
Access to New Audiences
Access to new audiences is one of the best mutual benefits of strategic collaborations. Every company has their own customer base and parties in a strategic collaboration can gain exposure to an entirely new audience without challenge because they’re also granting access to theirs in exchange.
Even better, customers aren’t the only audiences to which companies can gain exposure. Strategic collaboration can also provide access to your partner’s business network, opening up new opportunities for strategic collaborations in the future.
Ability to Scale
For manufacturers, strategic collaboration is one of the most effective ways to achieve economies of scale. By pooling capital and facilities, manufacturers can scale up quickly at a cost advantage. Partners can accelerate the scaling process by investing together in areas like R&D, marketing, and process enhancement, or simply benefit from the use of each other’s facilities.
Grow Your Collaboration Potential
To successfully collaborate with partners, companies must first assess their own internal processes, capabilities, and goals.