Introduction to Key Partners Building Block in BMC
In an interconnected world, leveraging relationships with ecosystem partners has become increasingly important because it allows you to focus on your relative strengths. Think about the four different types of partnerships, including strategic alliances between non-competitors, coopetition (strategic partnerships between competitors), joint ventures to develop new businesses, and buyer-supplier relationships to assure reliable supplies
Key Partners in Business Model Canvas
Once you understand your Value Chains, Key Resources, and Key Partners, it should be relatively easy to identify the key cost drivers and potential Opportunity Spaces for innovation. For any Business Model, managing costs is critical, but some Business Models are designed entirely around low-cost structures, such as “no-frills” airlines. What role do costs play in your Business Model? Are you seeking to simply optimize them, or could they play a more differentiating role?
Key Partners Classification
Key partnerships can be classified in four ways, with each arrangement having its own advantages and disadvantages.
Importantly, no matter the flavor of partnership, these agreements result in the creation of key partners for both business entities, and therefore must be managed, cultivated, and regularly reviewed for its place in each company’s business model.
Strategic Alliances Partnerships
In strategic alliances, both companies agree to undertake a project that is mutually beneficial. While working together, both companies stay independent.
In a competitive environment, a strategic alliance is helpful because both companies share liability exposure.
Franchising, licensing, and affiliate marketing are good examples of strategic partnerships.
Rivals can be partners, too, in the hopes that both entities will receive some form of benefit.
In the case of joint ventures, both companies remain independent but agree to work on a project together. Particular resources are shared.
A joint venture is different from other partnerships in that the companies are working on one project together, not joining two smaller efforts.
Joint ventures are sometimes noteworthy for the conflict they cause between entities, and many business professionals recommend against this kind of key partnership.
Buyer-supplier relationships are commercial agreements for the purchase and supply of goods or services.
Our buyers and our suppliers are some of our most important key partners. Without them, we’d often fail to follow through with our value proposition.
Maintaining a productive buyer-supplier relationship, no matter which end of it your company works, is one of a business’s most important key activities.
Why do we Need Strategic Partnerships?
In a competitive environment characterized by the need for the reduction of risk and uncertainty, strategic partnerships offer the opportunity to build relationships and reduce costs. They reduce risk by diffusing exposure to changing business environments across the two companies.
Many times, strategic partnerships form a powerful building block of a business model by making key resources available at a manageable cost. Partners perform valuable services that would otherwise distract from our main value propositions.
The right partners perform important functions and help us complete our key activities and our customers’ Jobs to Be Done.
The book “How to Create Innovation” speaks to Jobs to be Done in depth. We welcome you to register for a free copy!
How do you Choose Your Key Partners?
Key partners are an important section of the business model canvas and business models as a whole. You should consider cultivating your key partnerships as one of your business’s key activities, which we’ve discussed elsewhere on the Digital Leadership website.
There can be no set rules for choosing your key partners. So much will depend on the specifics of your value proposition, their value proposition, and the overall business model of both companies. We thought about the factors behind successful key partnerships, however, and we think we’ve identified some common characteristics to keep in mind when choosing a key partner.
Factors to Keep in Mind When Choosing Your Partnerships
Only create the key partnerships that your value proposition requires. Forming partnerships should be of necessity.
Is the potential partnership geographically sensible? Your supply chain may have requirements mandated by other key suppliers and partnerships.
A car manufacturer needs particular resources at a certain time. If the supply chain is stretched too far, the company won’t be able to meet its production obligations.
The arrangement must make sense for both companies beyond just the reduction of risk. Are you both stronger against competitors as a result of the partnership?
Business model appropriate
Finally, is this potential new partner appropriate for your overall business model? Do they fit in your business model canvas in a way that makes sense?
New key partners shouldn’t just barely make it into your circle. They should be added because they make your business model work and your business requires them to be successful.
The UNITE Business Model Framework
How to Create Innovation includes a number of canvases that focus on value creation and finding the right business model to meet your customer segment and customer needs. The framework is built to inspire drastic changes that help you find a competitive advantage. Our hope is that your company grows through business model innovation, and so we again encourage you to look deeper into our website and the book.
Here is a summary of the key ingredients of the framework:
The centerpiece is the Business Model Canvas, which covers the six main areas of a Business Model (the Operating, Value, Service, Experience, Cost, and Revenue Models).
A Business Model can be broken out into its numerous aspects. Depending on what challenges you face, you can zoom in on your area of interest using an appropriate tool or canvas:
- Your Business Intention and objectives as well as your Massive Transformative Purpose summarize your drivers and give direction to what you do.
- The Value Proposition Canvas details the central components of your offering (the product or service).
- To dig into your Customer Segments, work with data-driven Personas.
- The JTBD Customer Job Statement and Job Map frame the JTBD of your customers.
- The Business Model Environment puts your Business Model in a market context composed of emerging trends and disruptive forces.
- The Innovation Culture Canvas helps you understand and consciously shape a culture that supports innovation.
- The Innovation team structure enables you to draft a team structure for your innovation initiative.
- Using learning and growth metrics, you can measure progress at the initial stages of development. These metrics help you focus on what really matters instead of creating a detailed business plan that will not really help you. Later on, you can expand the financial aspect of the Revenue and Cost Models with a full business case.
- The Operating Model Canvas helps you think through the Operating Model.